Understanding a premium audit request

Last updated on: May 24, 2022

Many businesses such as restaurants, hotels, nightclubs, and like businesses have commercial general liability insurance policies that allow the insurance company to audit its insured’s books to determine whether the insurance premium charged was appropriate. Receiving an audit request by an insurance company could mean a lengthy, complex and nerve-wrecking situation. Such audit requests present an unexpected and unwelcome detailed examination of your books and records and often result in a costly additional insurance premium bill. The payment of such an audit premium, which could significantly affect your finances and operations, is never a given and will depend upon the specific language of the insurance policy. Accordingly premium audit requests as well as audit premium invoices should always be carefully reviewed by an experienced audit premium attorney before any payment is tendered.

A recent New York Supreme Court case, Scottsdale Ins. Co. v. Shaira Constr. Corp. 2014 NY Slip Op 30631 – NY: Supreme Court 2014, highlights the importance of understanding audit premium insurance contract provisions and how businesses can best manage premium audit requests from their commercial insurance carriers. The recent case makes it clear that it is crucial for policyholders to understand the language of the insurance contract being purchased.

Although in this case the Court found that the insurance contract language was sufficient, that is not always the case, particularly where the language specifying how the audit premium is to be calculated is either vague or absent. The Scottsdale Ins. Co. case reaffirms that the insurance policy language controls and must specifically allow for and provide the method by which the audit premium to be assessed before the Court will permit the collection of such a premium.

If an audit request is made, an individual should be aware of the different forms these audits could take. The three forms are a self-audit, a phone audit and a physical audit. Each requires different actions by the policyholder, have different timeframes, and could have various results.

If an insurance company requests a premium audit, the policyholder should understand all possible options and potential outcomes such a request presents. Seeking timely guidance from experienced audit premium attorney is a crucial component to a successful financial outcome. Whether an audit is required or additional premium can be charged depends on the language of the insurance policy. Even if the insurance policy includes audit premium language, such provisions often do not sufficiently specify how the audit premium amount is to be calculated.

When handling a premium audit request or an audit premium invoice or collection demand, our Board Certified Florida Trial partner will carefully evaluate your insurance policy and premium audit. At Charlip Law Group, LC our attorneys will represent you with the full consideration and respect you deserve. The lawyers at our firm bring many years of training and experience to the practice of law. Our multi-lingual staff will deal with your issues promptly. We are conveniently located in Miami-Dade County. Our South Florida location allows us to serve our clients in Miami-Dade, Broward and Palm Beach Counties; as well as throughout Florida and the United States. Contact Charlip Law Group, LC at our Aventura, Florida offices toll-free at 1(800) 773-1955 or (305) 354-9313. You can also send us a confidential email at Inquiries@Charliplawgroup.com.

Source: Scottsdale Ins. Co. v. Shaira Constr. Corp. 2014 NY Slip Op 30631 – NY: Supreme Court 2014


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