When a client calls to report that his underground oil tank has leaked, I tell him to promptly make two phone calls. First, call the State or local Environmental Spill Hot Line. And second, call his homeowners insurance policy claim office. Often, homeowners policies will pay for leaking tank and other home related environmental claims. Other policies, including commercial policies, sometimes pay these claims as well.
Indeed, every property owner or homeowner has insurance these days. This is essential because of the heavy potential for being sued by somebody, seemingly at any time. Insurance is designed to minimize one's personal exposure in case somebody or someone gets hurt on your property or from your property. Environmental claims often, but not always, trigger coverage under these policies.
Once a claim is filed, the carrier will process the claim and then make a decision as to whether or not there is coverage. You will either receive a notice that the claim has been approved, or you will receive a claim denial.
If your insurance company denies the claim, it must do so for reasons that relate to the insurance policy. Insurance policies are written contracts between the insurance company, also known as the insurer, and the policyholder, also called the insured. If a claim occurs that is covered under the terms of the insurance policy, the carrier must provide coverage. If it does not honor the claim, it must support its decision based on the actual insurance policy language.
It is always wrong for an insurance company to deny coverage when no reason exists for denying coverage. When you feel that your insurance company has wrongfully denied your claim, you may have to sue your insurance company. This type of lawsuit is called a declaratory judgment action. You are asking the Court to declare that there is coverage and to order the carrier to pay all necessary costs.
In certain instances, if an insurance company really misbehaves, Courts will allow cases to proceed seeking punitive damages against the insurer even when it ultimately is determined that there is no right to coverage. In these cases, Courts have generally held that insurance companies have a duty to deal with their insureds fairly and in good faith.
This duty of good faith and fair dealing comes from a recognition that insurance companies have a special relationship with their policyholders. Policyholders purchase insurance so that they know that in a time of need, an insurance carrier will be standing next to them. When an insurance company intentionally avoids its obligations by acting in bad faith, this leaves the policyholder in an even worse situation then he/she should be in.
It is incumbent upon the insurance carrier to act fairly and in good faith. The carrier must make a decision based on the language in the contract and the carrier needs to remember that it enjoys a special relationship with the policyholder, one based on trust, and sold on this notion of trust. We all know that we are told that we are in "good hands" with one insurance company and another acts like a "good neighbor.
In fact, many insurance companies are responsible and will treat you fairly. Some insurance companies have reputations for acting fairly - some have very bad reputations. When policyholders are mistreated, they need to remember that a statute of limitations may require that litigation be filed by a certain date or the right will be lost. In such cases, policyholders should promptly seek out the services of experienced legal counsel.
Insurance companies have many lawyers who work for them and protect them. More often than not, they treat their policyholders fairly and with dignity. But in the rare instance when a carrier act badly, you should even the sides by retaining competent professional assistance.