What Is the Large Loss Principle in Insurance?

When disaster strikes, most property owners are not qualified to assess the damage alone. Navigating the whirlwind that is post-loss after a disaster has struck is a full-time job, and this is where a large loss attorney can help. Depending on the extent of the damage, you may find yourself with a large loss claim on your hands. But like many others, you may be thinking, “what is a large loss?” 

What Is a Large Loss?

Generally speaking, “large loss” refers to substantial damage or destruction of land, buildings, personal property, and in the case of people, debilitating injury or even death. Examples of large loss events include: the complete destruction of a home by a storm or fire, damage from flooding, and catastrophic personal injury such as being unable to work. Claims made to insurance companies for large losses can run from hundreds of thousands to millions of dollars. 

Although something like a weather disaster that has destroyed multiple homes, communities, or even a large portion of a city is often accepted as a large loss event, there is no one set rule or formula in the insurance world for determining large loss. This is why the assistance of a skilled insurance attorney in Houston — as your investigator, reporter, and advocate — can be crucial during the large loss claims process. 

Our Definition 

When there is a large or significant amount of property damage experienced by the tragic effects of storms related issues or significant structural damage, there can be a case for a large loss if the damage is extensive. 

“A large loss is more of a function of the size of your business and what you think is large. Everyone is different,” said Attorney and Founding Partner

While Director of Marketing, Pate Smith, says “a residential loss at $300k or any loss at seven figures is a large loss.”

Take a deeper dive into this topic by viewing an episode of the Large Loss Lounge!


While money is a significant factor in determining large loss cases, it’s not the only variable; it varies per case. Since the line is not always clear, the team at McClenny Moseley, and Associates can help identify the elements that determine if you have a large loss claim on your hands. Once identified, the steps to getting through a large loss can be tedious. But with help from the large loss attorneys at MMA, the process can be seamless. Explore the navigation process of large loss claims here and find out if you have a large loss case on your hands. 

Understanding the Large Loss Principle

The large loss principle explains how the insurance marketplace essentially functions: individuals and businesses purchase insurance policies for considerably big risks while putting smaller risks on the back burner. Big ticket insurance products like life insurance, homeowners insurance, property insurance, and commercial large loss insurance all follow this principle. 

According to the large loss principle, smaller losses (such as damage to a home television or office copy machine) are best covered by dipping into the affected entity’s financial resources rather than through an insurance policy. Put another way, individuals and businesses consider these types of smaller losses ‘manageable’ or ‘acceptable risks,’ which don’t warrant paying higher premiums for more coverage. For this reason, these types of occurrences and losses are generally outside of large loss insurance claims, with large losses focused more on repairing and replacing damaged or destroyed items, which would be so costly they could cause financial ruin. 

Damage Examples and Previous Large Loss Scenarios 

With storm seasons being unpredictable year after year, we have seen our fair share of large loss claims. Below are some examples of damage we have seen and large loss scenarios we have experienced in recent Houston natural disasters.

Insurance Companies and Large Loss

As we have explained so far, insurance companies provide policies to cover large loss events. But it is essential to know every corner of your insurance policy to ensure the policy meets your needs when choosing it and delivers when you file a claim.  

Insurance policies are contracts, which is where the services of an attorney can become invaluable.

The contracts will often include and exclude certain large loss events from coverage. For example, most insurance policies will pay to rebuild or repair your property if it is damaged by lightning, fire, or hurricane. However, some policies might exclude damage or destruction from flooding. Knowing this ahead of time and having clarity on what is included in your coverage could save you a massive headache if you ever need to file a large loss claim.

We suggest you review your policy in full as you renew each year. This will allow you to be ahead of the game regarding coverage, which is great for pre-damage situations. We also suggest signing a managed service agreement with MMA to have extra eyes looking out for you and your commercial property year-round to help assess your damage post-loss and help mitigate your losses. 

Recommendations on Large Loss Policies

When searching for insurance coverage, carefully review the policies you are considering purchasing to ensure that they cover the costs of clean-up, repair, and replacement from natural disasters – specifically the types of natural disasters that threaten your property. In addition, the policies should also cover the cost of bringing your buildings and structures up to code compliance; a requirement often triggered during the repair/replacement stage.  

More comprehensive policies may also cover additional living or working expenses when you are forced out of your primary location, for example, while having to live in an extended stay or utilize a remote workspace. So, although there will always be cost-benefit considerations, remember that greater protection can be a worthwhile investment in the long run. 

What to Expect When Filing a Large Loss Claim

After a large property loss, insurance companies will most likely send an adjuster to the location of the damaged or destroyed property to determine the amount of compensation you should receive. Still, these findings may not always be sufficient to cover your loss. Working with an experienced attorney offers the following key services: 

  • Setting up an action plan that meets your insurance policy’s requirements 
  • Helping you understand your policy and its coverages
  • Spotting co-insurance requirements, deadlines, and penalties
  • Guiding you through the claims process
  • Checking to see if buildings are up to code or need updating 
  • Carefully documenting all of your losses in a formatted large loss report 

Get Legal Help with Large Loss Today

While navigating your potential large loss case, it’s essential to have the right people on your side. Your insurance company should protect you as the policyholder, but that is not always the case. When working with the large loss team of attorneys at MMA, you have the confidence to know that the process of recovery is managed with excellent care.

At McClenny Moseley & Associates, our primary goal is to protect the rights of policyholders while maintaining the highest ethical standards. In addition, we recognize the importance of customer satisfaction and handle all cases with determination and respect. Our fearless attorneys go above and beyond to help you fight for what you deserve.

Contact us today to learn more.