What do insurers do with two incidents of negligence?

October 26, 2014 4:57 PM

Let's assume that you caused one fire due to negligence in your home, and then less than five years later you caused another fire due to negligence at the business you own? How would your insurance companies treat/investigate this? Let's also assume this is the second time around for the liability company.
posted by zagyzebra to Law & Government (8 answers total)

Might you want to make this anonymous?
posted by If only I had a penguin... at 4:57 PM on October 26, 2014 [1 favorite]

Response by poster: Nah...this is strictly for hypothetical research having zilch to do with me personally.
posted by zagyzebra at 5:02 PM on October 26, 2014

I'm not sure what the question is here. Most homeowners and general business liability insurance policies cover negligence. As a result, the insurer would likely pay for the damages associated with the fire. It is likely that you will have to pay quite a bit for the business liability policy due to a previous claim out of negligence. Like any significant claim, the insurance company would investigate the claim. It is also distinctly possible that the insurance company would cancel the policies either after the first claim or the second claim.
posted by saeculorum at 5:28 PM on October 26, 2014

I just asked Mr. Jungle because this is his field and he said, "If the policies are linked they are likely to cancel your policies after they pay your claim. If they aren't linked then they'll pay the claims and leave your policy intact. " He also said to be more careful with fire.
posted by julie_of_the_jungle at 5:45 PM on October 26, 2014 [1 favorite]

Two fires in 5 years would probably render you just about un-insurable. The company I worked for as an analyst in Canada wouldn't renew you even after 1 total property loss. They would also check and see if the broker that sold your policy had too many policy with claims (suggesting a problematic customer base).

It is pretty standard for the applications to require you to disclose all previous claims.
posted by srboisvert at 6:16 PM on October 26, 2014 [1 favorite]

Depending on the insurance company, the second claim would possibly be more thoroughly investigated, and the claim may be denied. Two fires in five years is a big red flag. If it went to a full-blown investigation, the insurance company would get one of their lawyers involved (I used to work for one of these lawyers), and an Examination Under Oath (much like a deposition) would be scheduled. The attorney would also do a lot of independent investigation, especially into the claimant's financials, to see if there is a financial motive for arson. The attorney would also look into the first fire to see what happened with that. The policy would also likely be cancelled by the insurance company. (Then again, I have seen an insurance company pay for three fires within something like seven years, so it really depends on the company, on the caliber of the adjusters, and on the caliber of attorney.)
posted by coast99 at 6:27 PM on October 26, 2014

My parents had three comparatively minor insurance claims over 4ish years (none of them were their fault or even negligence) and were rendered all but uninsurable afterwards. (Had they thought about it, they wouldn't've made a claim for the last one, a tree falling and breaking lawn furniture.)
posted by jeather at 7:49 PM on October 26, 2014 [1 favorite]

The important thing to know about home and commercial insurance is that it is nowhere near as regulated as car insurance.

You have no right to home or commercial insurance like you do to car insurance (where you can always get insurance - you just pay a lot for it). This is why home and business insurance should really only be used for catastrophic losses rather than smaller incidental claims like jeather's parent's lawn furniture.

Inability to get home insurance can destroy your ability to get a mortgage as well.

Practically speaking a policy that covers more than catastrophic loses is really a ripoff since you will have you policy cancelled if you make a few claims and you will likely pay in more than you ever take out. So the smart move is to get high deductible insurance so you don't make a foolish claim and get your insurance cancelled. If you have a fancy credit card many of the things you buy with them are insured for a couple of years through the card company and this is a much better route for incidental issues.

Also, review your home insurance every year or two to see if you can get a more competitive rate. Insurance companies have no loyalty to you and they will quite happily continue charging you a higher than market rate even if the market changes. Home insurance is a pretty big money spinner for the companies because people don't tend to pay attention to it.
posted by srboisvert at 9:12 AM on October 27, 2014