Ten home inspectors walk into a bar. Each of the 10 inspectors works in a different part of the country, all with different levels of experience and expertise. Hours pass by–the 10 home inspectors enjoying their drinks and chatting about business in their home states. As they’re closing their tabs, a lawyer approaches and hands six of them an envelope. Confused, they open their envelopes, and realization settles in: The six home inspectors have been sued.
Over half of home inspectors will face at least one claim during their inspection careers. While some factors increase your likelihood of facing a claim–like how many inspections you perform and your proficiency at the job–the rest comes down to chance. Clients may seem nice when you first schedule an inspection, but they can turn vindictive and unreasonable when circumstances change: The house was dry as a bone when you inspected it, but leaks abound now that it’s the rainy season. You wore the right shoes for the job, but you still slipped and put your foot through the ceiling.
When claims are so pervasive, it’s important to understand how your insurer deals with allegations. Knowing pertinent definitions and claims handling processes will help you feel more prepared and composed if a claim does arise. And while you may not be able to control whether you’re one of the inspectors walking out of the bar with a lawsuit, you can collaborate with your insurer for a quicker and smoother solution.
Here are seven common insurance claims handling questions and their answers.
What is a claim?
Insurers’ definitions of a claim vary, but you can always find them in your policy. Here at InspectorPro, we define a claim as a written demand for money from you or your business for an alleged mistake or accident. While legal documents are the go-to example of a claim, a written demand doesn’t need to be so formal. The demand could come in the form of an email, a text, or even a sticky note on your desk.
The appeal for money can come in different forms, too. Your claimant could specify a dollar amount, or they could simply say they want you to pay for however much an issue costs to repair. Asking for a refund, too, counts.
When do you report a claim?
Insurance policies dictate how quickly you have to report a claim, but typically your insurer wants to know as soon as you can. So, if you get served in the middle of your son’s graduation, the call can wait until after the ceremony. But if you get a written demand while you’re sitting at your desk, it makes sense to call your insurer immediately.
Have an upset client but not a written demand? While you may not have a claim yet, it’s still smart to tell your insurer. Giving your insurer notice of what could turn into a claim gives them the chance to stifle it before it escalates with pre-claims assistance. It may even qualify you for an early reporting discount.
How do you report a claim?
What is the first step in processing a claim? Gathering all the pertinent information.
To report a claim, contact your insurer by phone, email, or online form. Your broker and their team will forward your complaint to our claims team, who will assign you an adjuster. Adjusters investigate claims, determine how much coverage you have, organize your defense, and aid in resolutions. But to do all that, they first need information from you, including the:
- Inspection report
- Pre-inspection agreement
- Inspection photos
- Written demand
- Description of the complaint
- Email or text correspondence with the claimant
The more you give your adjuster to work with, the better they can help. More importantly, it’s part of your insurance agreement to provide the necessary information for your indemnity and defense. Communicating openly and promptly with your insurer about claims will help you mitigate your risk.
To learn more about your duties as an insured, read this article.
What happens after you report a claim?
Once your claims adjuster has the necessary information, they’ll take the helm. They’ll be in charge of communicating with your claimant and their legal counsel and hiring additional defense for you, where necessary. (So if your claimant or their attorney contacts you, redirect them to your claims team rather than responding yourself.) As they investigate the allegations, they’ll ask you questions when they need additional information. If mediation, arbitration, or a trial take place, they’ll assemble evidence on your behalf and help you prepare if you need to present. Ultimately, your claims adjuster will aid you in resolving the claim. And once that claim ends, you’ll be responsible for paying your deductible or the lesser amount if your adjuster was able to conclude the claim for less.
To learn more about what happens after you report a claim, click here.
How often do claims get settled?
A settlement of a claim in insurance is an agreement between you and the claimant to end the dispute, usually in exchange for an agreed upon lesser amount of money than the claimant originally demanded. Often, home inspectors think settlements are not in their best interest. They fear settling implies their fault and that it results in unnecessary expense on their part.
Contrary to popular belief, insurance companies don’t always offer a settlement. If there’s good evidence you weren’t at fault, your insurer will likely try to dismiss the claim without payment first. But sometimes, it makes sense to settle even if the claim is meritless. Some reasons it may be good to settle include:
- Your Future Insurability. A common misconception is that it only costs the insurance company money to fight your claim. Not so. While you may only pay your deductible to resolve the claim itself, the claim can cost you money later. Underwriters, who calculate your insurance premium, may consider open or unresolved claims bigger risks because their final cost is undetermined.You may fight a claim and “win” by reducing or eliminating your payment to the claimant only to “lose” by incurring high defense costs. While you don’t pay those defense costs upfront, underwriters will consider them later when they see the large dollar amount on your loss run and may consider your business riskier to insure.To protect the insurer from potentially large losses from an open claim or a large resolved claim, like the ones just described, underwriters may increase your premium to compensate for a worse case scenario. If a perceived risk is big enough, an underwriter may refuse to write an inspector altogether, leaving the inspector to find another carrier. Settling can avoid being priced out of insurance or being non-renewed by a carrier.
- Risk of Higher Payout. Claims are never as black-and-white as they appear. What may seem like an open-and-shut case to you may not be to a jury of your peers. It’s impossible to predict how mediation, arbitration, and especially trials will shake out. Even if you’re not at fault, dispute resolution may result in you being mandated to pay damages to your claimant. Especially when the demands are higher, settling before having to appear may mitigate the risk of a higher payout.
Keep in mind a better pre-inspection agreement almost always leads to a better outcome. When handling insurance claims, your insurer will look to your contract first to determine how they can dismiss the claim or limit your liability. Having a properly executed agreement–particularly one signed before you start inspecting–with the proper provisions can be a game-changer. Your contract can be the difference between a low or high settlement. More importantly, your agreement can negate the need to settle at all. To learn more, read our 2020 ASHI Reporter series on pre-inspection agreements. Find the first article here.
How much will you pay to resolve a claim?
Regardless of how much it costs to resolve your claim, the most you’ll pay is your deductible. If your claim costs less than your deductible, you will pay the lesser amount so long as you have a simple deductible and not a self-insured retention (SIR). To learn more, check out our article on deductibles in the last issue.
How can you tell if your insurance claims handling is good?
Now that you understand the processing of insurance claims, how can you tell if your insurer is doing a good job? What are the best practices in insurance claims handling? More importantly, how can you know if your insurer is good at resolving claims before you have one?
Here are a few things to look for in your claims team:
- Expertise in the inspection industry. Imagine if you were a home inspector three days a week, a dental hygienist twice a week, and a waiter on the weekends.You’d have a lot of experience. But because your experience was across multiple disciplines, and because you were constantly changing your attention from one job to the next, you’d be less proficient at all of them. The same is true in insurance. If your insurer is working with a home inspector one minute and an accountant the next, they are less likely to have an in-depth knowledge of the industry and your needs. Look for insurance providers that specialize in and, better yet, work exclusively with home inspectors.
- A high success rate. While there’s too much variability in claims for insurers to categorize them neatly into wins and losses, pre-claims are a different story. Pre-claims are complaints that lack a written demand for money. To measure how successful an insurer’s pre-claims program is, simply ask them how often they’re able to stop a pre-claim from turning into a claim. With InspectorPro, we have an 85 percent success rate, and the 15 percent we don’t stifle can get an early reporting discount.
- Inspector advocacy. Your insurer should support you. You want your claims team to be professional and committed. Look for dedicated and attentive staff ready to help you, regardless of the question or the covered cause of the claim.
Processing of Insurance Claims for Home Inspectors
No one wants to get a claim at the bar–or anywhere for that matter. But when you do get one, you want a good team to back you up. Here at InspectorPro, we strive for excellence in our claims handling and coverage. Learn more about InspectorPro with the ASHI Advantage on the ASHI website.