Fire or Water Damage: Why Insurance Companies Deny Business Claims
Fire and water damage can cripple a business overnight, from structural destruction in a warehouse blaze to extensive mold growth after a burst pipe in an office building. In Washington State, where wildfires ravaged Eastern Washington in 2024 and heavy rains caused widespread flooding in the Puget Sound region, commercial property owners rely on insurance to rebound. Yet, denials are rampant, leaving businesses to foot repair bills that can exceed millions. The Washington Office of the Insurance Commissioner (OIC) recovered more than $100 million for consumers facing insurance issues in the 2023-2025 biennium, including many denied fire and water damage claims. Under Washington's Insurance Fair Conduct Act (IFCA, RCW 48.30.015), unreasonable denials can lead to bad faith lawsuits, allowing recovery of benefits, treble damages, and attorney fees. As a plaintiffs attorney specializing in denied commercial insurance claims in Washington, we help businesses challenge these denials successfully. This guide explores why insurers deny fire or water damage business claims, signs of bad faith, and your options for recourse.
In 2025, as recovery from recent storms continues, understanding these denial tactics is vital for protecting your enterprise.
Common Reasons Insurers Deny Fire Damage Claims for Businesses
Fire claims for commercial properties often involve high stakes, but insurers deny them for various reasons, some legitimate and others challengeable. Based on industry patterns and Washington cases, here are key causes:
Policy Exclusions or Limitations - Fires from arson, electrical faults, or wildfires may be excluded if not covered by endorsements. In Washington, ambiguous exclusions are interpreted against the insurer, but claims can still be denied if the policy lacks wildfire riders, common in high-risk areas.
Suspicion of Fraud or Arson - If investigators suspect intentional acts or exaggerated losses, denials follow. This is a top reason, with insurers probing for inconsistencies in business records.
Insufficient Documentation or Evidence - Lack of photos, inventories, or proof of loss leads to rejections. For commercial fires, missing financial records proving business interruption losses amplifies this.
Missed Deadlines or Delayed Reporting - Policies require prompt notice; late filings can void claims, especially if damage worsens.
Failure to Maintain Safety Measures - Non-working sprinklers or ignored code violations can lead to denials for negligence.
Policy Lapse or Insufficient Coverage - Unpaid premiums or underinsured properties result in outright denials.
Common Reasons Insurers Deny Water Damage Claims for Businesses
Water damage claims, often from leaks, floods, or storms, face scrutiny due to their gradual nature. In Washington, where atmospheric rivers cause frequent flooding, denials spike. Reasons include:
Gradual Damage or Lack of Maintenance - Insurers deny if damage is seen as ongoing (e.g., slow leaks) rather than sudden, citing neglect like unmaintained pipes.
Policy Exclusions for Floods or Sewer Backups - Standard policies exclude floods; separate coverage is needed, leading to denials without it.
Incorrect or Incomplete Filing - Errors in claims or unreported property upgrades can trigger rejections.
Third-Party Causes - Damage from neighbors or external sources may not be covered, shifting blame.
Insufficient Proof - Without timely documentation, claims falter, especially for mold or secondary damage.
When Denials Constitute Bad Faith in Washington
Not all denials are bad faith, but unreasonable ones are. Under IFCA, signs include delays, inadequate investigations, or misrepresentations without evidence. For fire/water claims, alleging fraud without proof or denying gradual water damage arbitrarily can lead to suits.
What to Do If Your Business Claim Is Denied
Document everything, appeal internally, file with the OIC, and consult a lawyer for IFCA notices before suing.
Fight Back: Contact a Washington Bad Faith Insurance Lawyer Today
Denied fire or water damage claims don't have to end your business. At Hogue Law Firm, we hold insurers accountable under Washington law. Schedule a free consultation—call 509-934-1998 or fill out our online form.