Business insurance can protect companies from product recall expenses, premises liability lawsuits or even operational disruption. Companies often pay high premiums for robust insurance to mitigate the most serious risks they face. Insurance companies are subject to a legal obligation to act in good faith when responding to policyholder claims. Unfortunately, manipulative tactics intended to deter claims and diminish the final payout on claims are relatively common.
Demanding that a business making a claim pay a higher deductible than the deductible included in its current policy is one way to prevent a business from following through with a claim or limit an insurance provider’s losses. Is changing a deductible mid-claim legal?
Deductibles persist for as long as the policy
The rate that a business pays for business interruption insurance, premises liability coverage and other key forms of insurance depends in part on the agreed-upon deductible. The higher the deductible, the lower the overall premium. The insured must pay the deductible before coverage applies, reducing the exposure of the insurance company.
When a company has paid a premium based on a specific deductible, the insurance company has a legal obligation to honor the policy. Insurance providers can increase premiums or alter the range of deductibles available after a large claim when the business renews its policy in the future.
However, a deductible cannot change in the middle of a claim. Even if the renewal date arrives while the claim is underway, the deductible from the previous policy is the one that should apply to the claim.
Business leaders facing manipulative insurance tactics may need assistance evaluating policy documents and responding to the insurance company. Working with an insurance dispute attorney can help to address the risk of bad faith tactics affecting the outcome of a large claim.