The Colorado Division of Insurance (DORA) has requested comments1 on a proposed bulletin about timelines that insurance companies impose upon policyholders to complete repairs and replace damaged property. Here is the proposed bulletin:

Why should insurance companies have any deadlines for policyholders to replace or repair damaged property which impact the amount owed by an insurer unless the insurer is prejudiced? Consider this Arizona Administrative Code rule discussed in Proof of Loss and the “Prejudice” Rule – Arizona Coverage Series:

No insurer shall, except where there is a time limit specified in the policy, make statements, written or otherwise, requiring a claimant to give written notice of loss or proof of loss within a specified time limit and which seek to relieve the company of its obligations if such a time limit is not complied with unless the failure to comply with such time limit prejudices the insurer’s rights.2

These time limits are placed in the policy unilaterally and make no sense unless the insurance company is prejudiced somehow. And then, the only discount should be the amount of prejudice, such as, if a Building Code changes and makes the repair more expensive, or inflation causes the repair or replacement to be higher, could the insurer reduce the amount of the payment or repair.

Otherwise, why should we allow insurers off the hook for their time limits for repair or replacement? Insurers already make money by holding onto the “float,” as discussed in Playing the Float and the Wisdom of Warren Buffett.

Thought For The Day

I love deadlines. I like the whooshing sound they make as they fly by.
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2 A.A.C. R20-6-801 (“Unfair Claims Settlement Practices”) subsection D.4.