Insurance Claim Denied or Underpaid in BC? Follow This Checklist Before You Act

What Does It Mean When an Insurance Claim Has a “Shortfall”?

An insurance shortfall happens when your insurer accepts the claim but pays less than the actual value of the loss.

This commonly occurs when:

• Coverage limits are too low
• Certain losses were excluded from the policy
• Additional coverage was never added
• Coinsurance clauses reduce the payout
• Replacement costs exceed insured values
• Debris removal or code upgrade costs were not included

In other situations, the insurer may deny the claim entirely, often citing policy exclusions, alleged non-disclosure, or disputes about coverage terms.

Policy wording, exclusions, deductibles, and coverage limits can significantly affect the outcome of an insurance claim.(Insurance Bureau of Canada (IBC))

A denied or underpaid claim does not automatically mean the insurer, or your broker acted properly.

What Should You Do First After a Claim Denial or Shortfall?

1. Review the Denial or Payment Letter Carefully

The first step is understanding exactly why the insurer reduced or denied the claim.

Look for:

• Specific policy exclusions
• Coverage limitations
• Coinsurance penalties
• Alleged disclosure issues
• Missing endorsements
• Disputed valuations

You should also request a complete copy of your policy if you do not already have one.

Insurance claim disputes frequently turn on the exact wording contained in the policy. The insurer’s explanation often reveals whether the issue relates to the policy itself, the claims process, or how the coverage was arranged.

Should You Contact Your Insurance Broker?

Yes, and often immediately. Your insurance broker may have important information about the coverage that was discussed, the recommendations that were made, whether optional coverage was declined, whether the relevant risks were properly assessed, and what information was disclosed during the application process. At this stage, it is important to gather all relevant documentation and ask direct questions about how the policy was arranged and what coverage options were available.

What Questions Should You Ask Your Broker?

2. Was Coverage for This Type of Loss Available?

If coverage existed but was never offered or discussed, that may raise concerns about whether appropriate advice was provided. In some cases, policyholders later discover they were never advised about important forms of protection such as sewer backup coverage, business interruption insurance, replacement cost coverage, debris removal coverage, or code upgrade coverage. Canadian courts have recognized that insurance brokers may owe duties to properly advise clients about available coverage options depending on the circumstances of the relationship.

Not every uncovered loss is the broker’s fault, but sometimes inadequate advice or administrative errors contribute to the problem.

3. Was the Coverage Properly Explained?

Many disputes arise because policyholders did not fully understand what was, or was not, included in the policy.

Important questions include:

• Were exclusions clearly explained?
• Did you understand the consequences of declining optional coverage?
• Were coverage limits discussed in sufficient detail?
• Did anyone explain coinsurance clauses?

Clear communication between insurance professionals and consumers is considered an important part of the insurance process. (Canadian Insurance Services Regulatory Organizations (CISRO)). Insurance policies can contain technical language that significantly affects claim outcomes.

4. Did the Broker Properly Assess Your Insurance Needs?

Insurance brokers often gather information about the property, business, or operations being insured in order to recommend appropriate coverage. However, policyholders also have responsibilities when applying for insurance and maintaining their policies over time. It is important to consider whether all relevant property details were disclosed, whether renovations or upgrades were reported, whether business activities changed over time, whether property values increased significantly, and whether additional risks emerged after the policy was issued.

Failure to disclose material information can affect insurance coverage rights and claim outcomes. (Insurance Bureau of Canada (IBC)) Both the insured and the broker may play a role in determining whether the coverage was adequate.

Could You Have a Claim Against Your Insurance Broker?

In some situations, yes.

If a broker failed to obtain requested coverage, failed to explain important limitations, or made errors when arranging the policy, there may be grounds for a negligence claim.

Professional negligence claims against insurance brokers often depend on the communications, documentation, and advice exchanged during the policy placement process.

A successful negligence claim may help recover losses that were not covered by the insurance policy itself.

What Evidence Should You Keep?

Preserve All Relevant Documents

Documentation can become extremely important in insurance disputes.

Keep copies of:

1. Insurance policies
2. Emails with your broker or insurer
3. Coverage applications
4. Claim correspondence
5. Photographs of the damage
6. Repair estimates and invoices
7. Notes from meetings or phone calls

You can also request your broker’s file notes and records relating to the placement of the policy.

Maintaining organized records can help clarify what coverage was requested, discussed, and ultimately obtained. (Insurance Bureau of Canada (IBC))

Final Thoughts

Discovering that your insurance coverage is insufficient — or denied entirely — can be financially and emotionally overwhelming. However, many insurance disputes involve more than a simple “yes” or “no” answer. The details of the policy, the advice provided by the broker, the disclosure process, and the handling of the claim itself can all affect your legal rights and options.

Understanding what caused the shortfall or denial is the first step toward determining whether additional recovery may be possible.

At Watson Goepel LLP, our team assists clients with insurance disputes, broker negligence claims, and complex coverage issues. If your claim has been denied or underpaid, obtaining legal guidance early can help you better understand your options and protect your interests.

Disclaimer: This content is provided solely for informational purposes and is not intended for use in any legal proceeding. You should consult a qualified lawyer for advice tailored to your specific circumstances.

Meet the Authors

If you’ve had your insurance claim denied or restricted, don’t hesitate to reach out to Partner Anastase Maragos. With our expertise and commitment to justice, we are here to explore your legal options and help you navigate the complex world of insurance claims. Your financial security and peace of mind are our top priorities so you can move forward with confidence.

Cameron Lineker, is the president at Blue Lion Claim Resolutions Ltd. If you’ve encountered challenges with restricted insurance coverage or a denial of your Property and Casualty (P&C) insurance claims, Cameron Lineker and his team at Blue Lion Claim Resolutions are here to assist you. Operating on a contingency basis in collaboration with the expertise of legal counsel, we strive to ensure that you receive the insurance coverage you deserve. Don’t hesitate to reach out and take the first step toward securing the resolution you need.

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