No Such Thing As a “Free” Insurance Claim

From the COLlive Inbox: "I want to discuss something that is deeply concerning and needs to be addressed honestly within our community regarding lawsuits and insurance claims."

By a Crown Heights resident

I want to discuss something that is deeply concerning and needs to be addressed honestly within our community regarding lawsuits and insurance claims.

Many people are being led to believe that when a lawsuit is filed against a neighbor, shul, school, or local business, “nothing happens to the defendant” because insurance will handle everything.

That is simply not accurate.

Recently, an advertisement from a local lawyer stated a line that really stood out:
“Insurance-based claims — 99.9% of cases pursued through insurance, the person or school being sued pays nothing.”

With respect, this is a misleading and incomplete portrayal of how insurance actually works.

While it may be true that a defendant is not personally writing a check at the moment of settlement or judgment, it is not true that “nothing happens” or that there is no cost.

In reality, every claim has consequences:

-Defense costs are incurred immediately
-Insurance reserves are set, affecting future pricing
-Claims are recorded on loss history
-At renewal, premiums often increase significantly
-In some cases, its non-renewed altogether and coverage becomes harder to obtain.

What may look like a “free” claim in the short term can result in tens of thousands of dollars in increased insurance costs over the following years for the defendant — whether it is a shul, school, landlord, or small business.

And ultimately, when claims increase across a community, everyone pays more through higher premiums and reduced availability of coverage.

We are already seeing this firsthand. Insurance costs are rising sharply, coverage is tightening, and carriers are becoming more selective about the risks they are willing to insure in New York.

These trends are directly influenced by overall claims activity and frequency.

So the idea that insurance claims are “cost-free” is not only inaccurate — it can also unintentionally encourage decisions that carry real financial consequences for others.

First Step is to Ask a Rov

This is why it is so important that before any lawsuit is filed against another member or moised of the community, the matter should first be brought to a Rov or Beis Din.

Our halachic system exists precisely to evaluate claims fairly, responsibly, and with sensitivity to all parties involved.

If there is real liability, a Rov will say so — and insurance can properly respond. But the first step must always be thoughtful and responsible.

We must remember: when someone files a claim against a neighbor, shul, school, or local store, they are not dealing with an abstract system. They are impacting real people — often costing them tens of thousands of dollars over time, even when they did nothing intentionally wrong.

There is no such thing as a free insurance payout. And there is no situation where “nobody pays.”

We owe it to each other to be more careful, more honest, and to begin with a Rov.

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