What to do if your home insurance claim gets denied

By: Luc Rinaldi on October 30, 2024

This article has been updated from a previous version.

Robert’s insurance nightmare began on a stormy day last summer in his downtown Toronto basement apartment. Water surged from the drain cover, soaking his couch, sewing machine, shoes, and book collection. Pretty soon, the water was up to his ankles.

He quickly reached out to his tenant insurance provider, who sent an adjuster the next day to review the damage. As a renter, while Robert wasn’t responsible for structural damage such as the walls and floors, he faced losses of $2,300 in personal items, and needed temporary housing until the situation resolved. The adjuster assured him, both verbally and in writing, that he’d be reimbursed for his contents and living expenses.

Over the next six weeks, Robert spent $6,000 on Airbnbs, depleting his savings.

“It was all the money I had,” he says. By September, he had yet to receive reimbursement and was anxious for October’s rent. Upon re-examining his policy, the adjuster revealed 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 refused to pay for both his items and accommodation.

“I was stunned. I was really in shock,” says Robert, whose name has been changed to avoid blowback from his insurance company.

He had 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.”

Shocked and at a loss, Robert escalated the issue until he finally reached the senior vice president of claims at his insurer’s parent company. Late on a Monday night, at 11 p.m., he sent her an email explaining the situation.

“It was a total shot in the dark,” he says. He remembers thinking, “There’s no way this is going to work.”

Surprisingly, the next morning, she apologized and promised to cover his costs despite his policy inclusions as a measure of good customer service. By that afternoon, a cheque for $8,300 was in the mail, resolving Robert’s insurance saga.

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

Unforeseen situations can happen at any time, but most people, like Robert, trust that it will be taken care of – find themselves feeling surprised and totally in the dark on occasions when it isn’t. If you ever find yourself in a predicament where your insurance claim gets denied, here’s some things to keep in mind.

How to handle home insurance claim disputes

Robert’s do-it-yourself approach isn’t the only way to tackle a home insurance claim dispute. Whether you’re a tenant or a homeowner, there are steps you can take if your insurance company refuses to cover damage caused by flooding, fires, or other accidents.

Gather your policy information

If your claim is denied, or if the payout is insufficient, begin by gathering all relevant information from your insurer, broker, and adjuster.
Request documentation related to your case and policy.
Identify specific legal terms that might be causing the dispute, such as exclusions of certain damages. 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.)

Review and strengthen your claim

Ensure that all necessary evidence of proof of loss, such as an inventory list is submitted to your insurance adjuster. 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 can commission an independent appraisal. Despite the cost, it could 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

If your revised claim gets denied again, file a complaint with your insurance company’s ombudsperson or complaints liaison officer — all insurers are required to have one.

Clearly 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.

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 so that you can escalate it to a third neutral party.

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. The Insurance Bureau of Canada (IBC), a national industry association can provide a neutral opinion and identify any flaws or omissions in your claim that could change your outcome.

If IBC can’t assist further, 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 hold them accountable 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 weigh your options carefully before you head to court.

Before you resort to legal action, 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.