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How long can an insured wait to file a homeowner’s claim with the insurance company? This question is not asked often, but it can have serious financial consequences if you don’t understand the implications of timely claim reporting.

Throughout my insurance career I have reminded people that it is extremely important to read their insurance contracts. It’s not nearly as interesting as a good mystery novel, but it is critical to do before a loss occurs. In addition to understanding what is covered, you should also determine what requirements the contract places on you, the insured.

Why is this an important topic? If your insurance company proves that you are not in compliance with a condition in your homeowner insurance policy (a legal contract), your claim may be denied.

Before I delve into specific examples of late claim reporting, let’s briefly review a homeowner’s insurance contract - the standard Insurance Services Office (ISO) Homeowners 3 – Special Form policy. For ease, I will use “HO-3” to reference the homeowner insurance contract. Please remember that individual insurance companies will use slightly different language for their loss reporting requirements, so be sure to read your policy or ask your insurance agent for clarification.

The ISO HO-3 has a subsection entitled, “Duties After Loss.” Older homeowner contracts use may “Duties after Occurrence.” They are similar, but not identical. Let’s review the first requirement of “Duties After Loss,” which is located in the Conditions section of our HO-3 homeowners policy. Regarding the timing for filing a claim, the underlined sentence below is crucial.

Duties After Loss

In case of a loss to covered property, we have no duty to provide coverage under this policy if the failure to comply with the following duties is prejudicial to us. These duties must be performed either by you, an "insured" seeking coverage, or a representative of either:

1. Give prompt notice to us or our agent

In our policy the requirement is to “Give prompt notice to us or our agent.” In other homeowner contacts you may have seen similarly worded requirements such as:

• “Give written notice to us or our agent as soon as is practical”
• “Give written notice to us or our agent as soon as practicable”
• “Give immediate notice to us or our agent”
• “Give prompt written notice to us of the facts relating to the claim”

Each of these phrases can be - and have been - interpreted in various ways by insurance companies and by courts during litigation.

For our HO-3, what does “prompt” mean? The Oxford Dictionary states;

Prompt (adj)
Done without delay; immediate. (Of a person) acting without delay
Synonyms:
Quick, swift, rapid, speedy, fast, direct, immediate, instant, expeditious, early, punctual, in good time, on time, timely

For the most part, this seems like a fairly simple concept. If you have a loss you must advise your insurance company or agent “promptly.” Typically this is not a problem. As an example, if after a severe thunderstorm, you see that a large tree branch has fallen onto and damaged your porch, you call the insurer and report the claim. Easy.

But what if a loss isn’t quite as clear-cut? Here are several examples.

1. During a wild and windy thunderstorm, the large oak tree right next to your house snapped and blew down. From all the noise you believe the falling tree may have struck the house. The next morning, after the storm, you inspect the house and fallen tree. Luckily you do not discover any damage to the house. That noise must have been the snapping of the tree trunk. As a result you have no reason to call your insurance company.
2. Your daughter Mary is celebrating her 7^th She invited a small group of her friends and their parents over for a party. While playing tag in the backyard, Mary’s friend Ann trips, falls and hits her head on the picnic table. Although Ann has a shallow cut and big bump, Ann’s mom tells Mary’s mom, “It’s not a big deal and Ann will be just fine.” You see no reason to contact your insurance company.
3. Your dog Pal, a 65-pound Golden Retriever, nips your neighbor’s 11-year-old son, Joey, when he taunts the dog with some food. You see the incident and immediately take Joey to his parent’s house. Joey’s dad listens to your story, looks at his son’s hand and then says, “Don’t worry about it – it’s just a scratch. He knows better than to tease the dog.” You don’t see any reason to report the incident to your insurance company.

The Homeowner’s contract claim reporting requirements are in place to protect both the insurance company and the insured. By providing prompt notice, the insurance company can determine whether any additional investigation or follow-ups are necessary or warranted.

At first glance it seems reasonable not to report these three claims to the insurance company. But let’s dig a bit deeper.

1. Although you could not see any falling tree damage to your house, you did think you heard something unusual during the storm. And indeed there was damage on the roof, but not in sight from the ground. Six weeks after the first storm there was another. This time there was very little wind but there was torrential rain, which lasted several hours. During this second storm you notice your second floor bedroom ceiling and wall are totally drenched, with water dripping and pooling on the hardwood floors. You immediately call your insurance company. They send a repair crew to find and stop the leak and to complete initial water cleanup and mitigation, including removal of wall and ceiling drywall to prevent mold. The crew supervisor advises you that there was a two-inch diameter oak branch driven through the roof and that was what allowed the rain to flow in.
2. Several weeks after Ann’s fall her dad notices that the bump and cut are not healing and, in fact, look significantly worse. Ann’s parents bring her to the Emergency Room to have the injury treated. The ER doctor determined there were several large splinters imbedded in the wound and it had become seriously infected. The ER doctor was able to remove the wood fragments, but he needed to perform several significant incisions to do so. He sutured the cuts as best he could. Ann’s mom & dad were horrified that Ann may now have a large scar on her forehead - for life. The doctor suggests that Ann’s parents schedule Ann for an appointment with a plastic surgeon. Eight weeks later Ann’s parents present you with large medical bills from the hospital and from the plastic surgeon. You call your insurance company.
3. Two months have passed since Pal bit your neighbor, Joey. Surprisingly, you have not seen Joey or his parents during that time. Then in the mail you receive an envelope from a local law firm, with notice of a lawsuit against you. The suit, filed by Joey’s parents on his behalf, alleges that since the dog bite incident Joey has been afraid of all dogs and is frightened to go outside by himself. You are being sued for medical bills and damages for pain, mental anxiety, permanent scarring, and punitive damages. You immediately call your homeowner’s insurance company.

These three seemingly innocuous incidents have now exposed you to potentially large financial loss. If the occurrences had been reported to the insurance company immediately, they would very likely be covered by your homeowner’s insurance. But because nothing was initially reported to the insurer, there is now potential for coverage to be denied.

There is a reasonable chance that your insurance company will cover the roof damage and subsequent water damage, even though the roof damage was not promptly reported. This is because you could not know or see that the falling tree branch went through your roof unless you climbed up on the second story roof, which you cannot practically be expected to do. However, by not reporting and/or inspecting after the first storm, a simple roof repair turned into a significantly more expensive home remodeling and restoration claim.

The two injury claim examples may or may not be covered by your policy. It is dependent upon the insurance company’s interpretation of prompt notice of loss. Unlike the hidden roof damage in the first example, you were immediately aware of the injuries sustained by Ann and by Joey.  Even though both of the children’s parents said that everything was OK, that does not absolve you, the homeowner, from liability. In each of these cases, had they been reported to your insurer immediately, the company would have followed up to ensure the children were OK or would have gotten them additional medical care as necessary. Now there are many more bills and a lawsuit to contend with.

So, how long can you wait to file a homeowner’s claim? Or, asked differently, should you wait to file a claim? Most people do not want to file an insurance claim. It can be a hassle and it may even cause your future insurance rates to rise. However, at the end of the day the reason for homeowner’s insurance is to protect you and your family from catastrophic financial loss.  This insurance professional will tell you that there is simply too much risk for anyone to delay or wait to file a homeowner’s claim.  Promptly means promptly, so when in doubt, file the claim immediately.

Jonathan Farris is a retired insurance executive and president of InsuranceRescue Services, LLC, a property & casualty insurance consulting firm based in Madison, Wisconsin. Mr. Farris can be reached at jon@insurancerescue.com.