2.3 Virginia Property Insurance Claims

Virginia Claims-Handling Timeframes (14 VAC 5-400)

Virginia's fair-claims regulation, 14 VAC 5-400 (Rules Governing Unfair Claim Settlement Practices), sets the deadlines property adjusters must meet. The numbers are calendar days, and they are a frequent state-section question.

Correction / common trap: Some study sheets state "10 working days to acknowledge" and "45 days to deny." Those are not Virginia's property numbers — they describe model-act or other-state rules. Virginia's regulation uses 15 calendar days for acknowledgment, for forms, and for affirming/denying after proof of loss. Memorize 15 / 15 / 15 calendar days.

Unfair Claim Settlement Practices (38.2-510)

Code of Virginia 38.2-510 lists the prohibited claim practices. A single error is rarely a violation — the statute targets conduct committed "with such frequency as to indicate a general business practice."

Prohibited acts include:

• Misrepresenting pertinent facts or policy provisions.
• Failing to acknowledge and act reasonably promptly on communications.
• Failing to adopt reasonable standards for prompt investigation.
• Refusing to pay claims without conducting a reasonable investigation.
• Not attempting in good faith to settle claims where liability is reasonably clear.
• Compelling insureds to litigate by offering substantially less than amounts ultimately recovered.
• Failing to promptly provide a reasonable explanation for a denial.

Penalties: The SCC may impose administrative penalties, order restitution, and suspend or revoke a license. Separately, Virginia recognizes a narrow bad-faith remedy: under 38.2-209, if an insurer denies a claim in bad faith a court may award the insured reasonable attorney's fees plus interest.

The Appraisal Clause

When the insurer and insured agree there is coverage but disagree on the dollar amount of the loss, the standard property appraisal clause provides a binding resolution short of a lawsuit:

1. Demand — either party may demand appraisal in writing.
2. Appraisers — each party selects and pays its own competent, impartial appraiser.
3. Umpire — the two appraisers select an umpire (if they cannot agree, a court appoints one); the parties split the umpire's cost.
4. Award — agreement by any two of the three (two appraisers, or one appraiser and the umpire) sets the amount of loss and is binding.

Critical limit: Appraisal decides how much, never whether the policy covers the loss. Coverage and causation disputes go to the courts, not to appraisal. This "amount vs. coverage" distinction is a favorite exam question.

Public Adjusters

A public adjuster represents the policyholder (not the insurer) for a fee. Virginia regulates them tightly:

Proof of Loss

Most Virginia property policies require a signed, sworn proof of loss, usually within 60 days of the insurer's request, showing: the date and cause of loss; the insured's and others' interest in the property; the ACV or replacement cost; and an inventory of damaged property with supporting documents (receipts, photos, estimates). Failing to submit a required proof of loss can jeopardize or delay the claim, though insurers often grant reasonable extensions.

Recovery and Subrogation

After the insurer pays a covered loss, it acquires subrogation rights — it "steps into the shoes" of the insured to recover from the at-fault third party.

• The insured must cooperate and not impair the insurer's recovery rights (e.g., must not sign a release of the responsible party).
• Net recoveries reduce the insurer's loss and, under "made-whole" principles, can return any excess to the insured.
• Subrogation prevents the insured from double recovery (collecting from both the insurer and the wrongdoer for the same loss).

Other Insurance and Loss Settlement

When more than one policy covers the same property loss, Virginia property forms apply the standard pro rata other-insurance condition: each insurer pays its proportionate share of the loss based on the ratio of its limit to the total of all applicable limits.

Worked example: A $100,000 loss is covered by Policy A ($200,000 limit) and Policy B ($300,000 limit), total $500,000. Policy A pays 200,000 / 500,000 = 40% = $40,000; Policy B pays 60% = $60,000. Neither insurer pays the full loss alone.

Settlement also depends on the coinsurance condition common on commercial property. If the insured carries less than the required percentage (often 80%) of replacement value, a penalty applies using: amount paid = (carried ÷ required) × loss − deductible, capped at the policy limit.

Exam tip: Pair the 15/15/15-day timeline with the 38.2-510 "general business practice" standard — a single late acknowledgment is bad service, but a pattern of late acknowledgments is the unfair-practice violation.