Liability insurance claims

It’s fair to say that when something goes wrong, how well your insurer responds can be the difference between a good result and a nightmare. Here’s some advice to help you achieve the fastest, fairest outcome

Liability policies cover broadly defined risks such as “accidental damage”. It’s impossible to list all the scenarios where accidental damage could occur and certain, often broadly defined, situations are also excluded.
This makes it hard to say whether a particular situation will be a claim without first investigating it. As a result, there are grey areas where something could be a claim depending on a person’s interpretation of the situation and policy wording. This makes the assessment process critical. Consider the following examples:

Example 1
If a builder was installing insulation in a roof space and he accidentally put his foot through the ceiling, is this a public liability claim?
Maybe. It depends on your policy’s wording and insurer’s interpretation of the incident. Was the ceiling the “property being worked on”? Was the house a new build and could therefore be considered “the builder’s product”? If the answer is yes to the above questions (in the insurer’s view) then, depending on the policy in place, a claim could be declined.

Example 2
An excavator preparing the site for a new house damages an underground cable, causing a power outage. Would this be covered by the contract works insurance? No. The underground services are “existing structures” and “third party property”: as such they are not part of the contract works and are therefore outside of the cover under a contract works policy. They may, however, be covered by public liability insurance under an “underground services” extension. In that case, to avoid jeopardising a potential claim, the policy may require that action to locate any existing cables and pipes is undertaken first.

Example 3
A builder putting up a heated towel rail puts a screw through a hidden water pipe. Is this accidental damage?That depends. Should a builder, who ought to know this was a possibility, have checked first? If he didn’t, is it faulty workmanship? What you might consider to be an accident could be interpreted by a claims assessor as defective workmanship and subject to an exclusion or higher excess.

Understand what your policy covers
Probably the most common reason for dissatisfaction with the outcome of a liability claim is because the insured party has assumed the policy will cover something that it is not intended to.
No one expects you to be an expert in the wording of your insurance policy, but it is important that you spend some time getting a handle on the cover it provides.

Read the policy and speak to your insurer or broker when you take it out, and again at renewal. If something happens, at least you’ll be in a better position to assess if it is a prima facie (on the face of it) valid claim or not.

Take due care
This is obvious, but a momentary assumption on site can backfire when it comes to a claim being accepted.

Do not admit liability
Even though it might be obvious to all involved that you were responsible for the damage, if you intend to make an insurance claim then the insurer (and ultimately the courts) decides who is responsible; you cannot make this call on their behalf. Do not promise that your insurer will sort it out, simply say that you will contact your insurance company.

Tell your insurance company ASAP
The quicker you put in a claim, the faster it will be sorted out and the less likely it is that other subsequent actions might jeopardise the claim. In some cases, it may be faster for an owner to claim with their house insurer (or material damage insurer for commercial property), who may then seek to recover their costs from you (via your insurance). Either way, don’t delay making the call to your insurer.

Depending on the type of claim, they will probably appoint an independent assessor to investigate the situation, determine liability, assess the likely cost and recommend a course of action.

Provide all the details
Make sure you complete the claim form in full and with as much supporting evidence as possible. If the insurer has to come back to you for more detail, this will inevitably result in delays.
They will expect:

1. A description of what happened.
2. Date and time of the event.
3. Written correspondence from the third party stating that they are holding you liable for the damage.
4. An estimate of the cost of the damage.
5. Evidence such as photos, invoices, perhaps a copy of your contract, witness statements and other correspondence.

Cooperate fully and be truthful
Claims assessors and loss adjustors are experts at sniffing out inconsistencies and if something doesn’t add up, they’ll keep digging. The best approach is to answer their questions as fully as possible and allow them to make their decision based on all the facts.

A broker is on your side at claim time
If you have a broker, you should expect them to help you prepare the claim and represent you to the insurer. This is where a good broker who is experienced in construction industry claims earns their money.

If your claim falls into one of the grey areas of the policy, then having an expert on board could be the difference between it being accepted or declined. If you deal directly with an insurer or through their agent, it will be up to you to argue the case.

It’s not that insurers decline claims unfairly – in our experience this is not the case in the New Zealand insurance industry. However, when it comes to claims that fall into that grey area, and plenty of liability claims do, which way the decision falls could be down to the claims manager’s interpretation of both the events and the policy wording.

That’s when you need someone with expertise and experience to argue the alternative point of view.

In a nutshell
Liability claims are often not straightforward, and liability policies are open to interpretation. When you’re making a claim, keep the following in mind:

–  Don’t admit liability.
–  Get on to it straight away.
–  Cooperate with the assessor.
–  Supply information fully and frankly.
–  Ideally have someone with expertise on your side.

Keep these in mind to increase your chances of a swift and successful outcome.