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Though the specific permutations can be virtually limitless, most insurance disputes between a policyholder and an underwriter can be distilled down to one or more of a few core issues.
Some of the most common causes of commercial insurance disputes—provided by Richard Morgan, senior vp of property claims for Zurich North America in Chicago; Finley Harckham, a shareholder at Anderson Kill and Olick P.C. in New York; and Kevin McCarthy, practice leader for Marsh Risk Consulting's Forensic Accounting and Claim Services in Chicago—are:
COVERAGE LIMITS AND EXCLUSIONS: Conflicting interpretations of contract wording, including scope of insured perils, entities or individuals, per-occurrence and aggregate limits, and other terms and conditions.
LOSS ASSESSMENTS: Differing valuations for projected or incurred losses. In property cases, this can include assessments of structural damage, repair and remediation costs, and projected profit losses. In liability cases, it can include legal and investigation costs, fines and penalties, and reputational damage.
DUTY TO DEFEND: Disagreements over the insurer's duty to provide legal defense for a policyholder in a lawsuit. Typically, issues arise when a complaint against a policyholder includes covered and noncovered charges.
COMMUNICATION DEFICIENCIES: Poor or infrequent communication between a policyholder and its insurer can lead to an insufficient understanding of the policyholder's risk profile and/or insurance portfolio. Regular communication at multiple stages of an insurance contract's lifespan—from the initial purchase to renewals to any claim adjustments—is vital to avoiding disputes.
UNREASONABLE EXPECTATIONS: Preconceived, hardline positions as to the scope and valuation of a particular claim—and the extent to which the losses are actually covered—not only prolong a claim's processing, they can cause significant and often permanent damage to the business relationship between a policyholder and an underwriter.
When policyholders and underwriters find themselves at odds over an insurance matter, attorneys and insurance experts agree that alternative forms of dispute resolution can yield better results for all involved parties than traditional litigation.