Sometimes the delayed decision by an insurance company as to whether to pay a claim reaches a threshold of actually denying it. Some insurance claims are complicated and require extensive analysis of the cause and damage associated with the loss. Others do not as the cause of the damage is patent and the extent of the damage easily calculated. In these latter scenarios, extensive delays in responding to the insured may reach a sufficient threshold of breaching the contract and potentially even resulting in bad faith insurance claims.
New Rules Governing When Insurance Companies Must Act
The Florida legislature recently enacted new rules regarding the timing of insurance claims and the length of time it should take to make a coverage decision. This legislation was enacted in direct response to lengthy delays that occurred in Florida during the active storm season of 2005. Prior to the enactment of this statute, there was no bright line timeframe for a particular response from an insurance company once a claim was submitted, and some claims were taking months and sometimes even years to resolve. In essence, legal arguments were crafted to suggest that while the insurance company may have intended to provide benefits under their policy, the length of time taken to make such a decision was tantamount to a denial of the claim.
Under Section 726.70131, the insured is entitled to a claims decision, under particular circumstances, within 90-days, or the insurer must pay interest on the claim. Specifically:
“(5)(a) Within 90 days after an insurer receives notice of a property insurance claim from a policyholder, the insurer shall pay or deny such claim or a portion of the claim unless the failure to pay such claim or a portion of the claim is caused by factors beyond the control of the insurer which reasonably prevent such payment. Any payment of a claim or portion of a claim paid 90 days after the insurer receives notice of the claim, or paid more than 15 days after there are no longer factors beyond the control of the insurer which reasonably prevented such payment, whichever is later, shall bear interest at the rate set forth in Section 55.03.”
Factors Beyond Control
First, the delay will be excusable if it is caused by “factors beyond the control of the insurer.” An example would be the time necessary for an engineering firm to conduct a sinkhole investigation, which often takes weeks and sometimes even months to complete. Under most circumstances, these delays are beyond the scope of control available by the insurance company.
The other key expression relates to whether the factors "reasonably prevent" such payment on the claim. The importance of this language is that it prevents an insurance company from creating internal guidelines and then later use these as a basis to delay payment to their insureds. As with all cases, the terms and conditions of the policy drive the manner in which the claim is to be handled, not other, unrelated company procedures. Thus, if the delay is the result of actions taken by the company, which are not reasonable, the insured may be entitled to interest once the claim is paid.
Overall, the industry is reporting a limited amount of exposure to interest under this particular statute. This could be attributed either to loose enforcement by the insured's community, or a deterrent impact of the statute on insurance company practices. The best manner in which to avoid conflict on this particular statute, regardless of whether you are an insured or an insurer is to provide open dialogue and to properly define expectations. It is through positive communication that insureds and insurers can resolve these matters without the need for legal counsel or litigation.
To learn more about delays in insurance claims being paid, please contact Corless Barfield Trial Group at 813-498-1623 or, toll free: 877-517-5595.