I usually obtain calls from policyholders or their contractors saying that an insurance coverage firm is not going to transfer ahead with the declare adjustment or cost course of except they’re supplied with documentation such because the contractor’s materials provider receipts, worker labor charges, or revenue margin particulars.
Is an insurance coverage firm entitled to this third-party documentation?
Many insurance coverage insurance policies comprise cooperation clauses that require the insured to supply information and paperwork requested by the insurer, so long as the request is related and made in good religion. For instance, monetary paperwork could also be requested when the insurer suspects fraud in reference to a declare; in such situations, the insurer wants solely an excellent religion perception that fraud is feasible to justify the request. Nonetheless, the cooperation clause doesn’t robotically lengthen to paperwork exterior the insured’s possession, custody, or management, except the insured has a authorized proper to acquire them from a 3rd get together. 1
Understandably and justifiably so, from a enterprise perspective, a contractor doesn’t need to share their proprietary or trade-secret info exterior their firm. Offering detailed enterprise information may result in aggressive disadvantages and even unfair denials primarily based on an insurance coverage firm’s arbitrary pricing thresholds. A contractor’s markups, margins, and provider agreements are a part of their enterprise mannequin and usually are not topic to third-party audits, particularly from a non-client insurance coverage service.
So why are some insurance coverage carriers making an attempt to demand the sort of proprietary info from contractors?
From the service’s perspective, they’re obligated to indemnify the insured and keep away from overpaying. They could argue that they want proof of “affordable and vital” prices underneath the coverage and want to stop worth gouging, overinflated estimates, or potential fraud. By scrutinizing provider invoices, labor charges, and revenue margins, insurers could consider they’ll confirm that proposed repairs replicate truthful market worth and business requirements. Some carriers may additionally level to regulatory necessities or inner auditing pressures that demand thorough documentation for declare funds. Whereas the service could have a justifiable argument, it should even be balanced in opposition to contractors’ rights to confidentiality and policyholders’ want for immediate, equitable declare decision.
When insurers delay adjustment or cost as a result of a contractor refuses to reveal inner enterprise information, it’s the policyholder, not the contractor, who’s harmed. Policyholders need their property fastened by the contractor of their selection, need to be correctly indemnified by their insurance coverage coverage, and need well timed completion. They shouldn’t be held hostage over the submission of irrelevant paperwork.
What’s one of the simplest ways to take care of this case?
Stay prepared to reply clarifying questions that don’t breach confidentiality or transcend authorized or contractual necessities. Nonetheless, you aren’t required to reveal inner enterprise bills except your contract requires it. You may (and may) present detailed estimates of scope and worth, however that’s totally different from handing over your monetary books.
Whereas due diligence is acceptable, demanding proprietary information from third events could also be seen as overreach and dangerous religion, particularly if it leads to declare delays. The cooperation clause doesn’t entitle an insurance coverage firm to info exterior of the policyholder’s possession. If sure documentation is unavailable, settle for affordable options, akin to itemized estimates, summaries, or consultant invoices—particularly when these are supported by business requirements and market charges.
Push again on pointless delays. Your insurer’s responsibility is to you—to not micromanage your contractor’s inner accounting. In case your insurer calls for third-party paperwork, require them to establish the exact coverage provision or authorized foundation for his or her request and to elucidate why the data is related to your declare. Should you consider your insurer is asking for info exterior your settlement, contemplate consulting a public adjuster or contacting our workplace if you happen to face resistance.
Most significantly, whereas contractors usually are not beholden to insurance coverage firms, the most effective outcomes occur when insurance coverage firms, contractors, and policyholders every respect correct boundaries whereas working collectively to rebuild lives, not boundaries.
1 See, e.g., Safeco Ins. Co. v. Blue Sky Innovation Grp., Inc., 230 N.E.3d 898, 907-08 (Ind. 2024) (holding that contractors and third events haven’t any responsibility to protect or produce proof for others absent a particular relationship or contract, and rejecting broad duties primarily based solely on an insurer request); Templin v. Grange Mut. Cas. Co., 81 Ohio App.3d 572, 577-78 (Ohio Ct. App. 1992) (holding that the insured met the insurance coverage coverage’s cooperation clause the place he produced all paperwork in his possession and defined the absence of others not inside his management).
