A family left their Lake Michigan cottage for winter and returned in the summer to discover damage to the cottage caused in part by bats.Upon discovering the damage, the homeowners attempted to make an insurance claim, but did not submit a sworn proof of loss within 60 days of the loss as required by their policy.When their insurance company denied their claim, the homeowners filed suit and attempted to excuse their failure to submit the sworn proof of loss on the basis of substantial compliance and waiver/estoppel.
Substantial compliance can excuse minor deviations from requirements under a contract. Under the doctrine, “[a] contract is substantially performed when all the essentials necessary to the full accomplishment of the purposes for which the thing contracted has been performed with such approximation that a party obtains substantially what is called for by the contract.” Gibson v Group Ins Co of Michigan, 142 Mich App 271, 275; 369 NW2d 484 (1985). Unfortunately for the cottage owners, the court did not find substantial compliance.Instead, the court found that not submitting a proof of loss is a major defect and as such, substantial compliance did not occur.
The cottage owners also argued that the insurance company failed to mention the proof of loss requirement in its first denial letter and therefore they waived or should be estopped from asserting the lack of a proof of loss as a defense. Again, the court disagreed with the cottage owners, finding that the insurance company’s first letter was not a denial letter, but was actually a coverage position letter. Also hurting the cottage owners case was the fact that the insurance company sent a later letter captioned ”Request for Proof of Loss” which included the forms necessary to complete the proof of loss as attachments to the letter.
The case is Aleksov v Auto Owners Insurance Company, unpublished decision of the Court of Appeals, Case Number 338264 (Decided May 15, 2018).
If you (or someone you know) must make an insurance claim, here are some general steps that should help you prove your claim and avoid some possible problems in the insurance claims process. These steps could help make for a better result in your insurance claim:
- Document your losses immediately. Take photographs and video of your property damages and losses. Be thorough and act quickly, ideally before repair and clean-up work is completed. If you wait until after the damage is “cleaned up,” you will not be able to document the extent of the damage as effectively. Also, gather and keep good records of your expenses, including invoices and estimates for repairs, records of any lost rents or income, and any incidental expenses.
- Report the loss to your agent and insurer: Call your agent and report the loss immediately. Make a written claim report (and keep a copy) documenting your report of the damage claim and asking your agent: (1) if there are any timelines you need to be aware of; and (2) if there are any other documents or forms needed by the insurer to process your claim (there very likely will be – many insurers require a “sworn proof of loss” giving much more detail than an initial accident/loss report to be submitted within 60 days).Ask if the insurance adjuster wants to inspect the property themselves and if you can go ahead with repairs and clean-up. Do not be pressured into stating your “total losses” before you have had a chance to get estimates from qualified construction experts – i.e. do not “guess” dollar amounts that you do not have the expertise or knowledge to state with certainty, or before you have a chance to have experts estimate the damages for you.
- Locate your complete insurance policy and file: Find your complete insurance policy. This should include in most cases multiple parts often remembered by the acronym: “DICEE”
- Declarations
- Insuring agreement
- Conditions
- Endorsements and
- Exclusions
Insurers often mail out new and additional “change endorsements” over the years, so you may have a file full of “endorsements” that may be quite difficult to assemble into one, coherent “insurance policy” in some circumstances. You may have to ask your agent for a complete copy of your policy.
- Consider retaining experts: If you have a substantial loss or your insurer is uncooperative or unhelpful, you may need to retain an attorney to help you. You may not receive a fair claims settlement, without an advocate on your side. You may also need the assistance of other experts in construction, architecture, landscaping, electricity, plumbing and other fields. You may need an economist or CPA in cases of business losses, lost rents or profits.
Every insurance claim and case is unique. They cannot all be handled in precisely the same way, but these are some good early steps to take to set the stage for a successful insurance claims process.
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