What to do if your home insurance claim gets denied

Robert’s insurance nightmare began on a stormy day last summer. He was sitting inside his basement apartment in downtown Toronto when water suddenly started spewing out of the drain cover in the middle of his floor. It oozed outward, slowly drenching his couch, sewing machine, shoes, and book collection. Pretty soon, the water was up to his ankles.

Robert called his tenant insurance provider, who sent an adjuster the next day to survey the flooding. As a renter, Robert wasn’t on the hook for damage to the floor or walls, but he estimated he’d lost about $2,300 worth of personal items, and would need to move out until the water was cleared and the problem was fixed. The adjuster assured him several times, both in person and in writing, that he’d be reimbursed for his contents and his accommodations.

Over the next six weeks, Robert spent $6,000 on Airbnbs. “It was all the money I had,” he says. Yet when he moved back into his apartment in September, he still hadn’t seen a penny from his insurance provider. Nervous about making October’s rent, he wrote the company again, asking when he’d be reimbursed. The adjuster called him to deliver some bad news: looking over Robert’s insurance policy again, he realized it excluded damage caused by “the backing up or escape of water from a sewer, sump or septic tank.” In other words, the insurance company would pay for neither his items nor his accommodations.

“I was stunned. I was really in shock,” says Robert, who requested his real name not be used to avoid blowback from his insurance company. He’d never filed an insurance claim before. Up until that point, he’d simply trusted his insurance company to take care of the situation. When they balked, he says, “I had no idea how to deal with this.” 

It was stressful. To this day, I still don’t fully understand how it all works

Robert called his adjuster’s manager, who only doubled down on the decision. So he went higher. With the help of a friend and a bit of internet sleuthing, he found the email address of the senior vice president of claims at the multinational insurance company that owned Robert’s insurance provider. At 11 p.m. on a Monday night, he sent her an email explaining the situation. “It was a total shot in the dark,” he says. “There’s no way this is going to work.”

The next morning, however, Robert was surprised to wake up to a response from the executive. She apologized and promised to look into it. A few hours later, she wrote again and agreed to cover his costs. While Robert’s policy did in fact exclude damage caused by sewer backup, she decided to foot his bill for the sake of good customer service; after all, he’d been promised several times that he’d be reimbursed. By that afternoon, a cheque for $8,300 was in the mail. Robert’s insurance saga was finally over. “It was stressful,” he says. “To this day, I still don’t fully understand how it all works.”

How to handle home insurance claim disputes

Robert’s do-it-yourself solution isn’t the only way to resolve a home insurance claim dispute. Whether you’re a tenant or a homeowner, you often have recourse against an insurance company that refuses to cover damage caused by flooding, fires, or other accidents.

If your homeowner's insurance claim is denied, or if the payout is less than satisfactory, begin by gathering all the information you can from your insurance company, your broker, and your adjuster. Ask for any documentation related to your case and policy, and try to pinpoint the legal wording that’s at the heart of your dispute — for example, in Robert’s case, the exclusion of coverage was for damage caused by sewer backup. (This type of coverage usually needs to be purchased as an endorsement, or add-on, to an existing policy.) This might help you understand why your claim was denied.

Next, examine your claim: did you submit all the evidence necessary to prove your loss? Consider adding extra materials — photos, videos, service receipts, written promises from your adjuster — that could change your insurance provider’s mind. Depending on the extent of the damage, you might also commission an independent appraisal, which may set you back a few hundred dollars but help recoup thousands more in the long run. Armed with this new information, submit a new claim to your insurance company.

How to dispute a home insurance claim denial

Of course, there’s a chance your new claim will meet the same fate as your initial one. In that case, file a complaint with your insurance company’s ombudsperson or complaints liaison officer — they are all required to have one. Be sure to state the facts clearly and express your desired outcome. Pass along all the information you’ve gathered to date — as well as any additional details they may ask for — and keep a record of all your correspondence.

At this point, you’ve done everything you can as an individual. It’s time to involve a third party

Allow time for the complaints liaison officer to investigate the situation; they’ll need to examine all the documentation and may speak with your adjuster and their manager. If they side with you, they’ll pay your claim and your dispute is over. If not, ask for a final position letter that states the insurance company’s conclusive decision on your situation.

How to appeal a homeowners insurance decision

At this point, you’ve done everything you can as an individual. It’s time to involve a third party. First, contact the Insurance Bureau of Canada, a national industry association. They’ll provide a neutral opinion on your case, and they may spot flaws or omissions in your claim that could change your outcome.

If the Insurance Bureau of Canada has no further advice, they may direct you to the General Insurance Ombudservice, an independent body that tries to find a “mutually agreeable solution in a confidential, non-confrontational, and cost-effective manner” that pleases all parties. At no cost, the Ombudservice will assign you a consumer service officer who can negotiate with your insurance company on your behalf. They may arrange adjudication sessions with your provider, but all of their recommendations are non-binding — nothing they say or do can force an insurance company to pay up.

If the Ombudservice fails to change anything, contact the insurance regulator responsible for your province or territory — for example, the Financial Services Regulatory Authority in Ontario (FSRA) or the BC Financial Services Authority (BCFSA) in British Columbia. They can help resolve complaints, confirm that your insurance provider is licensed, and punish them if they’re acting contrary to regulations.

If that still doesn’t solve it, your last recourse is to take legal action, likely in small claims court. If a judge rules in your favour, the insurance company is required to pay your claim and a portion of your legal fees. But filing a lawsuit is likely to cost you more — possibly much more — than $10,000, so think carefully before you head to court. Before you pull the trigger, you could always try, like Robert, to send a Hail Mary email to a higher-up at your insurance company. It might not work, but it’s worth a shot.