When Commercial / Business Insurance Claims Are Unreasonably Denied or Underpaid

What options are there for business owners who have their commercial insurance claims denied or underpaid?

Most small businesses have a number of different types of commercial / business insurance policies to protect their business.

In most situations, as a small business owner, your business and each owner of the business should be listed individually as named insureds on each of your business insurance policies;

  • You should be a named insured
  • Every other owner should be a named insured
  • And your business should be a named insured

If each individual owner is not a named insured, this could result in fewer benefits paid on commercial insurance claims.

Who the named insureds are can also be a significant factor in determining damages in an insurance bad faith lawsuit if the business and its owners end up having to sue their own insurance company.

Types of Commercial Insurance
Protection for Businesses

Some examples of the types of protection businesses may need on their commercial insurance policy may include;

  • Comprehensive general liability insurance (CGL Policy)
  • Business interruption insurance
  • Property damage insurance
  • Theft coverage
  • Completed operations insurance
  • Pollution legal liability insurance
  • Directors and officers liability
  • Employment related practices liability insurance
  • Automobile coverage
  • Workers compensation insurance

The above list is not exhaustive. The types of insurance coverage needed for a particular business depends on the business and other factors.

Business owners have commercial / business insurance to protect their business and their income, which for most small business owners is their life’s blood.  It is how they support themselves and their families.

A large loss in a business from a fire, theft, or if the small business is a party in a serious lawsuit, can present a serious financial impact. Without commercial business insurance, such events can destroy a business.

Unreasonable Commercial Insurance Company Conduct

If businesses have proper commercial / business insurance, the business owners and the business should be protected by their insurance companies.

However, when insurance companies refuse to fully and promptly pay commercial insurance claims, the effect, along with the underlying loss, can be financially disastrous for business owners.

If the financial protection afforded by the purchase of a commercial / business insurance policy is unreasonably withheld, denied, or underpaid, most often the only way for a small business owner to be fully compensated is to pursue insurance bad faith litigation

Commercial / Business Insurance Litigation

When commercial / business insurance claims are denied or underpaid, the legal issues can be complicated.

An example of the legal complexities in commercial business liability insurance litigation can be illustrated by the analysis of coverage on a CGL (comprehensive general liability insurance) policy.

If a business is sued and its CGL insurance carrier unreasonably refuses to defend the business, the legal issues can be broad as well as complex.

The very nature of the underlying lawsuit against the business must be analyzed. This includes a careful analysis of the complaint, each cause of action against the business, and all pertinent facts giving rise to the underlying lawsuit.

The language in the complaint and the underlying facts can trigger coverage.

The law in California generally states that:

  • If there is the mere possibility of a covered claim in the underlying lawsuit, the commercial / business insurance carrier must immediately and fully defend the insured.
  • The insurance carrier must defend even if it is a frivolous lawsuit.
  • If there is only one covered claim amongst a number of uncovered claims in a lawsuit the carrier must defend.

The list of legal issues goes on. The determination of whether coverage for commercial insurance claims has been unreasonably denied (or underpaid) takes a careful analysis by an experienced insurance bad faith trial lawyer who has a solid understanding of California insurance bad faith case law.

Other denials on commercial insurance claims may include, but are not limited to:

  • Property damage claims
  • Inventory loss claims
  • Lost profit claims

Each type of commercial insurance claim and each type of commercial / business insurance policy requires a different analysis and may require the input from experts such as accountants, construction experts, appraisers or other areas of expertise.

When a small business owner is faced with serious accidental losses (or a lawsuit) and its commercial / business insurance carrier refuses to honor the promises stated in its commercial insurance policies, business owners should act quickly to protect their rights.

Contact A Commercial Business Insurance Attorney

If you are a business owner and your commercial / business insurance company is not protecting you or denies (or underpays) your commercial insurance claim according to your policy provisions, contact the offices of Viau and Kwasniewski for more information.

In most cases our California bad faith insurance litigation lawyers will work on a Contingency Fee basis meaning we are paid only if we obtain a recovery for you.

Call Toll Free at 1-833-633-1095 for a free, no-risk initial consultation, email a bad faith insurance trial attorney, or complete our online Contact Us Form.