People often judge insurance by what happens when a claim is denied.
Before a claim is denied, a policy usually serves as a planning tool. It might satisfy a lender, protect a balance sheet, support a lease, or give a family office peace of mind. But when a carrier denies a claim, the policy becomes a contract being tested.
This was the main focus of the Falcon Forward conversation with Peter Brecht and Mike Tanghe. The episode started with a question about insuring investments, but the key takeaway was how to handle claim denials—how to read them, challenge them, and know when to take things further.
Mike framed the issue plainly: “We sell something that hopefully clients never ever have to use. But if they do, they’re depending on the policy to respond really as they intended.”
That expectation makes sense, but it’s only part of the story. Policies follow their own terms, conditions, exclusions, endorsements, definitions, and the facts of the loss. When a claim is denied, the real question isn’t about fairness—it’s about whether the carrier’s decision matches the contract.
For clients who are experienced, this difference is important.
A Denial Is Not the End of the Conversation
Don’t treat a carrier’s first denial as the final word until you’ve looked into it. Some denials are valid—a coverage might have been declined, a policy could have lapsed, an exclusion might clearly apply, or the contract may never have offered the coverage the client expected.
But sometimes, denials are incomplete, made too soon, or based on a misunderstanding of the facts.
The first thing to do is get the carrier’s denial in writing. A phone call from an adjuster isn’t enough. The letter should identify which parts of the policy the carrier is applying and explain how those rules apply to the facts of the claim.
After you get the letter, the broker and client should check three things:
- Policy language: Does the cited exclusion, condition, or limitation actually apply?
- Endorsements: Did the carrier miss a form that modifies or restores coverage?
- Facts of loss: Did the carrier accurately understand what happened?
This is where an experienced broker really adds value. The goal isn’t to tell the client what they want to hear, but to see if the carrier’s reasoning holds up after a close look at the policy.
Mike highlighted one important principle: “If the policy’s written in an ambiguous manner, it has to be interpreted for the insured’s benefit. They weren’t the ones who drew up the policy.”
This principle doesn’t mean every disputed claim will be covered. It does show why it’s important to review denials before a client accepts the carrier’s decision.
The Broker’s Role Is Advocacy, Not Guesswork
Good claim advocacy takes discipline. Don’t start with anger or by promising the claim will be paid.
A broker should start by talking to the adjuster and asking why the claim was denied. The way you ask matters. It’s best to be direct and stick to the facts: ask for an explanation of the analysis, where the policy supports the denial, and how the wording applies to the facts.
If the carrier’s position is still weak, respond in writing. A good rebuttal should read like a contract argument, not a complaint. It should identify the claim, point to the relevant coverage, address the exclusion or condition the carrier used, correct any mistakes about the facts, and include supporting evidence.
Supporting evidence can make a difference. Things like contractor reports, photos, repair invoices, expert letters, timelines, police reports, and witness statements can change how a claim is viewed. This is especially important when the disagreement is about what caused the loss, not whether coverage exists.
The broker should also help the client understand the limits of the process. A broker can explain policy language, spot weak points in a denial, and push the carrier for a better answer. But a broker can’t promise a certain outcome. This protects the client from false hope and the agency from extra risk.
Keeping good records is essential. The denial letter, calls with the adjuster, client conversations, submitted evidence, rebuttal letters, escalation steps, and coverage advice should all be saved in the agency’s system. The file should show that the broker reviewed the denial, explained the issue, advised the client, and followed up as needed.
For related Falcon West guidance, the same discipline appears in How Claims Reserve Auditing Impacts Your Insurance Premiums and Coordinating Insurance: Avoiding Fractured Coverage With Multiple Brokers. In both cases, the lesson is similar: claim outcomes often depend on the quality of documentation, structure, and follow-through.
When Escalation Becomes Necessary
Escalation should be a careful decision. Not every claim dispute needs to go to a regulator or attorney. But if a carrier doesn’t respond, misstates the policy, ignores evidence, or won’t explain its position, it may be time to escalate.
In Nevada, the legal framework gives clients and brokers useful reference points. NRS 686A.310 identifies several unfair claims settlement practices, including failing to acknowledge and act reasonably promptly on claim communications, failing to adopt reasonable standards for prompt claim investigation and processing, failing to affirm or deny coverage within a reasonable time after proof of loss requirements are completed, and failing to promptly provide a reasonable explanation for a denial based on the policy, claim facts, and applicable law (Nevada Legislature).
The Nevada Administrative Code also provides practical timing standards. Insurers generally must reply to pertinent claimant communications within 20 working days, begin claim investigation procedures within 20 working days of receiving notice of a claim, complete claim investigations within 30 days unless they cannot reasonably be completed in that time, and advise first-party claimants of acceptance or denial within 30 working days after receiving properly executed proofs of loss (Nevada Legislature).
These timelines don’t replace the policy or guarantee coverage, but they do give you a way to track if the carrier is handling things properly.
The steps for escalation are usually clear:
- Confirm the timeline: Date of loss, date reported, date proof of loss was submitted, dates of communications, and date of denial.
- Request supervisor review: Escalate beyond the adjuster when the written position is unsupported, or the adjuster becomes unresponsive.
- Submit a policy-based rebuttal: Address the denial with contract language, endorsements, and evidence.
- Consider regulatory involvement: If the carrier remains unresponsive, the client may consider a complaint with the Nevada Division of Insurance.
- Consider coverage counsel: If the disputed amount is material, the client should consult an attorney experienced in insurance coverage or bad-faith matters.
As Mike said in the episode, getting legal counsel or filing a complaint to the Department of Insurance can be a “nuclear option.” That doesn’t mean it’s wrong—it just means it should be used carefully.
Can Investments Be Insured?
The episode’s second question, from Falcon West Academy, was: Can investments be insured?
Peter’s initial response captured the issue well: “My first thought was no, you know, you can’t insure against an investment. Then the other part of me was saying, well, you kind of can.”
The usual insurance answer starts by looking at the difference between pure risk and speculative risk.
Pure risk involves the possibility of loss or no loss, but not gain. A house may burn down, or it may not. A vehicle may be damaged, or it may not. IRMI defines pure risk as a situation with “the opportunity for loss but no opportunity for gain,” and notes that pure risks are generally insurable while speculative risks generally are not (IRMI).
Speculative risk is different. It includes the possibility of loss, no change, or gain. Investments fall into this category because investors accept downside risk in exchange for potential upside. IRMI defines speculative risk as uncertainty that could produce either profit or loss, such as a business venture or gambling transaction (IRMI).
This difference explains why traditional insurers usually don’t cover investment portfolios against market losses. A carrier can insure many homes because house fires don’t happen to everyone at once. But market losses often happen to many portfolios at the same time.
There is also a moral hazard issue. If investors could insure against losses but keep all the gains, they’d be tempted to take bigger risks. They could chase risky assets, keep the profits, and pass losses to the insurer. This setup is hard to price and runs counter to the idea of insurance, which is meant to make you whole, not to help you profit. It does not mean no one has ever created insurance-like protection for investment losses.
Mike pointed to AIG and the 2008 financial crisis. AIG’s Financial Products unit sold credit default swaps tied to mortgage-related securities. Those contracts functioned, in economic terms, like protection against deterioration in certain debt instruments.
Mike put it this way: “Like any good insurance answer, it’s kind of say it depends.” In AIG’s case, it depended on scale and correlation. When rating downgrades hit AIG in September 2008, those downgrades triggered collateral calls the company could not meet, and the Federal Reserve authorized the New York Fed to extend an initial secured revolving credit facility of up to $85 billion to AIG in exchange for a 79.9% equity interest (Federal Reserve Bank of New York).
The rescue later included other facilities, a Treasury purchase of $40 billion in AIG preferred shares under TARP, and the creation of Maiden Lane II and Maiden Lane III to address mortgage-backed securities and collateralized debt obligations (Federal Reserve Bank of New York).
The point isn’t that investment risk can never be hedged—it can. Tools such as options, derivatives, guarantees, credit support, and structured products can help manage certain investment risks. But these aren’t the same as regular insurance, and they can fail if the risk is misunderstood, underfunded, or affects the whole financial system.
The Practical Takeaway
For private clients and business owners, both topics share one key idea: promises should be examined closely, both before and after they’re put to the test.
Before a loss, the client should understand what the policy is designed to do, what it excludes, and where financial or investment risk sits outside traditional insurance. After a loss, the client should expect the broker to test the carrier’s position against the contract rather than simply pass along a denial.
As Mike said, a denied claim is a moment that can “make or break the relationship with that client.” That’s because, at this point, the client isn’t just buying access, pricing, or a summary of coverage—they’re relying on the broker’s judgment.
For more Falcon Forward conversations and insurance insights, visit the Falcon Forward podcast hub or check out Falcon West’s other Insurance Insights.