‘Better Late Than Never?’ Not So Fast.

A general contractor hired a company to place a dumpster at a job site. However, the company put the dumpster in the street and a motorist struck it, damaging his vehicle. Of course, he has no physical damage coverage, the dumpster company denies liability, and the motorist now wants to file a claim on the general contractor’s policy.

The general contractor’s agent emailed me asking whether she should turn in the claim since she doesn’t think the insured is legally liable. My response was to ask what the policy says about reporting claims. A delay in reporting a claim can sometimes result in a coverage denial for violating that policy condition.

For example, the ISO CGL policy says, “You must see to it that we are notified as soon as practicable of an ‘occurrence’ or an offense which may result in a claim.” What “as soon as practicable” means is a question of fact that may depend on the circumstances but, in this case, there appears to be no reason for any reporting delay. The CGL policy goes on to describe what kind of information should be gathered promptly and reported.

A couple of years ago, I consulted on a claim involving a pollution incident at a marina. Initially, it did not appear to be anything more than a minor remediation job, so a claim was not reported. Subsequently, though, the bills began to mount up until they exceeded $20,000 and finally a claim was made a year after the incident. The carrier denied the claim and refused to budge on the denial because the delay was material to the insurer’s ability to investigate the claim and their financial obligation to pay for remediation and damages.

On a more personal note, a number of years ago, my wife rear-ended a vehicle on an exit ramp. She lightly tapped the rear bumper and she and the other driver exchanged contact information. There was no visible damage to either vehicle, so she didn’t think we needed to report the accident. I insisted that we do and, sure enough, within a week she received a call from the other party who said a repair shop told her husband that the frame was damaged but that they were willing to settle for $500 cash. We referred them to our insurer and never heard anything more about the claim.

The moral of these stories is, if there is the possibility that an occurrence involving potential legal liability “may result in a claim,” it should be reported promptly. End of discussion.

Hail Damage Claims

It may be more complicated, though, when a potential claim involves possible first-party property damage only, without any liability for a third-party claim. Nothing illustrates that better than hail damage claims to roofs.

The week following a strong storm where I live, an out-of-state roofing company stopped by my house while I was out of town. They advised my wife that there had been extensive hail damage to many roofs in our neighborhood and could inspect our roof for free. My wife allowed them to proceed then, of course, they reported serious hail damage. When I returned home, I had the roofer we had used for many years inspect the roof and he said we had zero hail damage.

This past spring, we experienced another storm and two friends about a half mile from us got new roofs from their insurance companies, both from the same local roofer. My wife insisted we have them inspect our roof and, again, extensive hail damage was reported. To confirm this diagnosis, I had our regular roofer come again, as well as two other roofing companies, both of which had been in business locally for over 40 years. None of these three roofers found any hail damage. They did find some individual shingle windstorm damage and we paid $350 to have that repaired.

The moral of these personal stories is to beware of “storm chasers,” especially those that are not local and/or those that have not been in business long. According to our regular roofer, given the widespread increase in strong storms in recent years, no reputable roofer has to go door to door looking for work. Most roofers have jobs scheduled weeks in advance and it can potentially take months following major storms.

Our roof is approaching 15 years old and, sure, I’d love to get a “free” new roof, but only if there is actual damage. Insurers catch a lot of flack for denying hail damage claims, refusing to “match” shingles, apply “cosmetic” damage limitations, etc. But I suspect that sometimes insurers pay claims of questionable authenticity, especially following widespread storms where claims personnel are stretched.

What Is Prompt?

This brings me to one final point involving hail damage that is related to the prompt reporting issue that opened this discussion.

We all know that sometimes we do have roof damage that is not obvious until the roof starts to leak. So, what happens when the leak is reported and it’s discovered that the damage that resulted in the leak likely took place in a storm that came through two or three years ago? What is prompt or “as soon as practicable” in reporting such claims? Is or should it be based on when the damage likely occurred or when the damage was discovered? What is reasonable and fair?

Policy provisions, state laws, and case law vary significantly on this issue.

A policy may require property claims to be reported within a year of the date of loss or damage, something difficult to do if damage is not readily apparent. Do insurers really want their claims personnel physically inspecting every roof they insure following every storm on a “just in case” basis?

My suggestion in the case of possible hail or windstorm damage, especially given that almost all roofing companies provide free inspections, is that whenever a significant wind or hailstorm comes through, have at least two to three roofing contractors inspect the roof, gutters, siding, etc. If two or more concur as to damage, report it to the carrier and let the games begin.