I regularly receive calls from policyholders or their contractors saying that an insurance company will not move forward with the claim adjustment or payment process unless they are provided with documentation such as the contractor’s material supplier receipts, employee labor rates, or profit margin details.
Is an insurance company entitled to this third-party documentation?
Many insurance policies contain cooperation clauses that require the insured to provide records and documents requested by the insurer, as long as the request is relevant and made in good faith. For example, financial documents may be requested when the insurer suspects fraud in connection with a claim; in such instances, the insurer needs only a good faith belief that fraud is possible to justify the request. However, the cooperation clause does not automatically extend to documents outside the insured’s possession, custody, or control, unless the insured has a legal right to obtain them from a third party. 1
Understandably and justifiably so, from a business perspective, a contractor does not want to share their proprietary or trade-secret information outside their company. Providing detailed business records could lead to competitive disadvantages or even unfair denials based on an insurance company’s arbitrary pricing thresholds. A contractor’s markups, margins, and supplier agreements are part of their business model and are not subject to third-party audits, especially from a non-client insurance carrier.
So why are some insurance carriers trying to demand this type of proprietary information from contractors?
From the carrier’s perspective, they are obligated to indemnify the insured and avoid overpaying. They may argue that they need proof of “reasonable and necessary” costs under the policy and wish to prevent price gouging, overinflated estimates, or potential fraud. By scrutinizing supplier invoices, labor rates, and profit margins, insurers may believe they can verify that proposed repairs reflect fair market value and industry standards. Some carriers may also point to regulatory requirements or internal auditing pressures that demand thorough documentation for claim payments. While the carrier may have a justifiable argument, it must also be balanced against contractors’ rights to confidentiality and policyholders’ need for prompt, equitable claim resolution.
When insurers delay adjustment or payment because a contractor refuses to disclose internal business data, it is the policyholder, not the contractor, who is harmed. Policyholders want their property fixed by the contractor of their choice, want to be properly indemnified by their insurance policy, and want timely completion. They should not be held hostage over the submission of irrelevant documents.
What is the best way to deal with this situation?
Remain willing to answer clarifying questions that do not breach confidentiality or go beyond legal or contractual requirements. However, you are not required to disclose internal business expenses unless your contract requires it. You can (and should) provide detailed estimates of scope and price, but that’s different from handing over your financial books.
While due diligence is appropriate, demanding proprietary data from third parties may be seen as overreach and bad faith, especially if it results in claim delays. The cooperation clause does not entitle an insurance company to information outside of the policyholder’s possession. If certain documentation is unavailable, accept reasonable alternatives, such as itemized estimates, summaries, or representative invoices—especially when these are supported by industry standards and market rates.
Push back on unnecessary delays. Your insurer’s duty is to you—not to micromanage your contractor’s internal accounting. If your insurer demands third-party documents, require them to identify the precise policy provision or legal basis for their request and to explain why the information is relevant to your claim. If you believe your insurer is asking for information outside your agreement, consider consulting a public adjuster or contacting our office if you face resistance.
Most importantly, while contractors are not beholden to insurance companies, the best outcomes happen when insurance companies, contractors, and policyholders each respect proper boundaries while working together to rebuild lives, not barriers.
1 See, e.g., Safeco Ins. Co. v. Blue Sky Innovation Grp., Inc., 230 N.E.3d 898, 907-08 (Ind. 2024) (holding that contractors and third parties have no duty to preserve or produce evidence for others absent a special relationship or contract, and rejecting broad duties based solely on an insurer request); Templin v. Grange Mut. Cas. Co., 81 Ohio App.3d 572, 577-78 (Ohio Ct. App. 1992) (holding that the insured met the insurance policy’s cooperation clause where he produced all documents in his possession and explained the absence of others not within his control).
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