Operating a home building company entails a wide range of responsibilities, with managing risk at the top of the list. From project delays and subcontractor issues to severe weather damage, the right insurance policy forms the foundation of an effective risk management strategy. Resilient businesses must be able to file claims quickly and resolve them efficiently.
Unfortunately, many building companies are surprised when their claims are delayed, reduced, or denied altogether. We’ve compiled the most common reasons claims are denied, along with actionable steps builders can take to reduce their risk of being left without the coverage they thought they had.
Lack of Appropriate Coverage
One of the most common causes of claim denial is simply not having the correct type of coverage. Many home builders assume their general liability or builder’s risk insurance will cover any issue that arises, but that’s not always the case.
Builder’s risk coverage, for example, may provide coverage for theft or fire, but it usually excludes flood damage unless you’ve purchased a separate flood policy.
Review your policy details or speak with your insurance representative to confirm exact coverages. Making assumptions about the details of your coverage could leave you with uncovered losses.
Missed Notification Deadlines
Insurance policies include specific timelines for reporting claims. Missing those deadlines can result in a denied claim, regardless of its legitimacy.
Always report damage to your insurance provider as soon as possible. Even if you’re still gathering information, prompt notification maintains the validity of your claim.
Incomplete or Inaccurate Documentation
Another reason insurance claims are often denied is due to a lack of supporting documentation. If your claim lacks photos, receipts, estimates, consistent reports, or any other necessary supporting documentation, insurers may question its validity or reduce the payout.
To help avoid this, make it your standard practice to:
- Take clear, time-stamped photos and videos after any incident
- Save all repair estimates, receipts, and contractor invoices
- Maintain a chronological log of what happened and when, including witness statements and contact information
Thorough documentation facilitates approval for assistance and a quick payout.
Policy Exclusions and Wear-and-Tear Limitations
Every insurance policy contains exclusions that define situations that aren’t covered. Damage from regular wear and tear, poor workmanship, or design flaws often falls under this category.
The wear-and-tear clause is especially important for builders to understand. Insurers typically view gradual issues, such as corrosion or settling, as maintenance problems rather than insurable losses.
Builders should review their policies carefully with their provider and address any gaps with additional coverage before problems arise.
Misrepresentation or Hidden Information
Failing to fully disclose relevant details when applying for insurance or submitting a claim can have serious consequences. Even unintentional omissions or unclear descriptions of your operations can be seen as misrepresentation by an insurer.
Insurers frequently deny claims if there’s evidence of false or incomplete information on file, especially when it affects the insurer’s decision to provide coverage. Being honest and detailed from the beginning is the best way to prevent this type of claim issue.
Failure to Mitigate Damages
Insurers expect policyholders to take steps to limit further damage after an incident. For example, if your job site becomes exposed after a storm and you don’t secure the area to prevent further water intrusion or theft, your insurer may decline coverage for subsequent damage.
Be sure to document any temporary repairs or mitigation efforts you make. Keep receipts and photos to demonstrate that you acted promptly to prevent further loss.
Disputes Over Liability or Responsibility
In multi-contractor projects, disagreements over who is responsible for the damage can delay or derail a claim. If there’s confusion over whether a subcontractor, vendor, or property owner is responsible, the insurer may hold off on payment or deny the claim.
Protect yourself by using clear contracts that outline the expectations for each party involved.
Lack of Professional Support for Complex Claims
Some claims, especially those involving equipment loss, environmental damage, or major structural failures, are too complex to handle without help. Builders who attempt to manage these claims on their own may overlook important documentation or fail to explain the situation to their insurer properly.
Contractors often see better results when they work with professionals, such as public adjusters or experienced agents, during complex claims. Partnering with a team that understands the intricacies of contractor coverage can reduce stress and improve your chances of a fair outcome.
Let Burton & Company Help You Avoid Insurance Mishaps
Denied insurance claims can delay projects, negatively impact your bottom line, and ruin client relationships. Businesses that take proactive measures and have support from excellent insurance providers can avoid the most common mistakes that result in denials.
Burton & Company has been helping Virginia builders protect their businesses for over 100 years. Our team can review your current policies, explain what’s covered, and assist you in documenting and filing claims effectively. We’ll help you close coverage gaps and develop an insurance strategy customized for your needs and goals.
Request a quote online or call (888) 652-1325 to learn how we can help you avoid delays, denials, and unnecessary risk.
