Insurance policies are contracts and, like any contract, both parties—the insurer and the insured—must uphold their contractual obligations. One of the insured's key obligations is to comply with the "Duties After Loss" provision. Failure to meet those duties can create serious legal risks.
1. Denial of Insurance Coverage
The most serious legal risk is the insurer’s right to deny a claim if the insured fails to comply with certain policy duties. Courts often uphold such denials when non-compliance materially impairs the insurer's ability to investigate or adjust the claim. For example, if an insured refuses to submit a sworn proof of loss or fails to provide requested documents, the insurer may argue that it was unable to verify the legitimacy or value of the claim—justifying a denial.
2. Breach of Contract
Failure to comply with the policy’s duties may be considered a breach of contract, giving the insurer legal grounds to withhold payment or cancel coverage. This can trigger litigation where the insurer argues that the insured’s breach voided its obligations under the policy.
3. Loss of Right to Sue
Many courts hold that an insured who fails to comply with post-loss duties may forfeit their right to sue the insurer for a denied claim. Some policies include "conditions precedent," meaning the duties must be satisfied before legal action can be taken.
4. Reduced Claim Settlement
Even if the claim isn’t fully denied, non-compliance can result in a reduced payout. For example, if the insured does not take steps to prevent further damage after a loss, the insurer may pay only for the initial damage and exclude additional preventable losses.
5. Extended Claims Process and Legal Costs
Delays in providing required information or cooperating with the investigation often prolong the claims process. This can lead to additional legal expenses, court proceedings, and protracted negotiations—all of which could have been avoided with timely compliance.
Final Thoughts
To protect your rights, always read your policy carefully, cooperate with your insurer, and consider consulting an insurance attorney. Understanding and fulfilling your duties under the policy is essential to preserving your coverage.
