An integral part of evaluating HomeOwner Insurance Claims are
coverage interpretations, limitations and exclusions. To review these
factors, please go to our HomeOwner
Insurance Coverage page. The subjects discussed in this text are as
outlined above.
By sheer numbers, there are many times more Auto Insurance claims
than HomeOwner's Insurance claims. There are proportionately more auto
body shops attempting to "court" a relationship with insurance companies
than there are home repair contractors attempting to achieve the same
favored relationship. However, the percentage of body shops who put
their own interests ahead of the consumers' is probably the same as the
percentage of home repair contractors who have the same misdirected
priorities. Given these set of factors, it is logical to conclude that
there are fewer home repair contractors upon whom you can rely than
there are auto body shops. This can be a disturbing circumstance when
you realize the home repair contractor will be involved in "restoring"
what may well be your most expensive investment . . . YOUR HOME! We have
intentionally put the word "restoring" in italics because, depending
upon the motivation of the insurance company and the contractor,
"restoration" may be either a reality or a myth! You are far more likely
to be involved in a significant Auto Insurance claims than you are a
significant HomeOwner's Insurance claim. However, if and when you find
yourself involved in a HomeOwner's Insurance claim, the financial,
structural and environmental consequences are potentially far more
severe. The purpose of this text is to make you aware of the various
challenges you may face (and how to deal with those challenges) when you
find yourself involved in a HomeOwner's Insurance claim.
Rights and Obligations - Yours
and Theirs
Believe it or not, the majority of rights belong to the insurance
company, while the majority of obligations belong to the consumer. When
you experience a loss covered by your HomeOwner's Insurance, your
primary obligation is to notify your insurance company of the loss,
prove your loss and make your damaged property available for inspection
by the insurance company. All of the preceding must be done in a timely
manner or the insurance company may have a contractual basis for denying
your claim. Notifying your insurance company in a timely manner
is not usually a problem. If your home burns down to the ground, you
will probably know about it and can usually get to a phone to call your
agent or insurance company. That obligation is usually pretty easy to
meet, as is the obligation to make the damaged property available for
inspection. Where some people seem to get into trouble is being able to
prove their loss in a timely manner. When your home burns to the ground
it is easy to prove that you have had a loss. The problem arises when
you have to prove the $ amount of your loss in a timely manner
(usually 30 days). Insurance companies understand that you are probably
not familiar with current construction methods and costs and/or are not
familiar with current replacement costs of your personal property. For
this reason (and sometimes other less honorable reasons) your insurance
company will assign an adjuster to help you meet this obligation. While
having an adjuster assist the insured in defining a $ amount of the
loss, the insured should not forget that the adjuster is also there to
limit the $ amount of the loss (the insurance phrase for this is called
"Controlling Loss Severity"). Here is where you have the potential for a
problem . . . a BIG PROBLEM!
Depending on the professional ability of the adjuster, the motivation
of the adjuster and/or the motivation of the insurance company, your
legitimate $100,000.00 loss could be valued at either $100,000.00,
$50,000.00, or any variations in between. I think it is important to say
at this point that I have been an adjuster for more than thirty (30)
years and have worked with 100's of other adjusters on many 1,000's of
losses. It has been my experience that the majority of my peers have
been properly motivated. These adjusters have attempted to be respectful
of (and thorough on behalf of) the insures whom we were attempting to
serve. However, these good intentions will often fall far short of the
mark. Whether by circumstance or design, staff adjusters are usually
assigned far more claim files than is reasonable and thus, the adjuster
simply does not have the time necessary to thoroughly assist a
policyholder who has a substantial HomeOwner's claim. There is also an
old proverb that is all but drilled into the head of every adjuster
trainee. That proverb is as follows . . . "It is always easier to say
'No' now and 'Yes' later than it is to say 'Yes' now and 'No' later".
The reasoning behind this approach is as simple as it is insidious. If
an adjuster says no to 100 insured who have a legitimate claim, 90 of
those insured will go away without collecting on their claim. When the
other 10 insured challenge the insurance company . . . the claim is
paid. That is an adjusting technique that is euphemistically referred to
by insurance companies as "Controlling Loss Severity". We will go
further into adjusting techniques later in this text.
Another obligation that falls upon the insured is the
obligation to "protect the damaged property from further loss". Let's
assume, for the moment, that your home sustained partial damage (by
whatever covered peril) and became uninhabitable. Your family spent the
night at a motel and, when you returned in the morning, you found that
your home had also been burglarized. Technically, if you had failed to
"protect your damaged property from further loss", the loss you had
sustained due to the burglary could be denied. It has happened before!
NOTE: The interesting part about your obligation to prove
your loss is that you have a duty to appraise the $ value of your
damages. If you incur an expense in compiling that appraisal, you are
entitled to be reimbursed by the insurance company for that expense. You
would be amazed how many claims adjusters are not aware of YOUR RIGHT to
be reimbursed for this expense. Now, stop and think for a moment. Would
you prefer to have your claim appraised by an overworked (and possibly
unqualified) adjuster or a qualified independent appraiser who takes the
time to be thorough and whose fee will be paid by the insurance company?
FURTHER NOTE: When your insurance company inspects your
damaged property, as they have a right to do, they will certainly
compile their own appraisal of the damage. If you have your own
appraiser compile a separate and independent appraisal, that appraisal
will typically recommend an amount substantially higher than that
compiled by the insurance company. In that event, YOU have the RIGHT to
have the true value of your claim resolved under the terms of the
Appraisal Clause of your policy.
Appraisal Clause: Within your policy contract there is a
clause which sets forth a procedure to follow if and when you and your
insurance company fail to agree as to the $ value of your claim. It is
referred to as the Appraisal Clause and is usually found in the index of
your policy under the title "Appraisal" or (on the "Easy-To-Read"
policies) "When You and We Fail to Agree". In effect, this clause says
that if you and your insurance company fail to agree as to the $ value
of your claim, either you or the company can invoke the Appraisal
Clause, whereby you and your insurance company will each appoint an
independent appraiser to represent their respective interests. Those two
(2) appraisers will then agree upon a third (3rd) appraiser to be
involved in the process. When any two (2) of the three (3) appraisers
reaches an agreement as to the $ value of your claim, the dispute is
resolved. In this event, you would pay the fee of your appraiser (from
the point the Appraisal Clause was invoked), the insurance company pays
the fee of their appraiser and the two of you each pay ½ of the fee
charged by the third (3rd) appraiser. In all my years as an adjuster
working BOTH sides of the street, I have never seen an incident where
the policyholder did not improve their settlement by virtue of the
appraisal process.
What I am about to share with you now is strictly my personal opinion
and is not universally shared by my fellow consumer advocate peers. It
is my opinion that the Appraisal Clause is best utilized in resolving
Contents or Personal Property claims. I say this because structural (or
dwelling) damage $ disputes become mute once the dwelling has been
repaired. Typically, insurance companies will pay based upon the actual
cost incurred to repair the dwelling. If the insurance company still
resists paying on this basis, the Appraisal Clause is still available to
resolve that dispute. In my personal experience, I have NEVER seen an
award come down from the appraisal process where the policyholder was
not awarded recovery of the actual cost of dwelling repairs. KEY:
The key to this success is obvious. Keep the scope of repairs reasonable
and the cost for those repairs consistent with the prevailing rates in
your area. EXAMPLE: If your roof needs to be replaced, and your
damaged roof was 235 tab shingle with laced valleys, do NOT replace with
5/8" red cedar "shake" shingles and copper valleys. Replace damaged
materials with new, comparable materials and you should be fine.
IMPORTANT: The procedure I have recommended above, getting the
dwelling repaired immediately and letting the Appraisal Clause resolve
the claim settlement value after the policyholder is back in their home,
is less stressful on the insured (and family) without diminishing the
potential claim settlement. However, this will only work to the
insured's advantage when the dwelling repairs are performed by an
appropriate home repair contractor. In selecting your contractor (you
do have that right), you should consider the contractor's experience
in dealing with insurance companies, their expertise in analyzing and
repairing damage and (possibly most importantly) the contractors
REPUTATION! If you have the right contractor working for you, ½ of your
problems are already gone.
Go back to the top.
Understanding Adjusting
Techniques
In the above text we already discussed the adjusting technique of
saying "No" now, as well as the effects of having the insurance company
adjuster assist you in assigning a $ value to your claim. Other
techniques are . . .
- Cash Outs: This is usually the first utilized settlement
technique. Often times the insured is the least qualified to put a
reasonable cost of repairs on the damages they have sustained. When
the adjuster comes out to inspect the damaged property, they may be
inclined to minimize the scope of the damage. Phrases like "A little
bit of paint . . . A little soap & water, and you should be fine",
followed by an old salesman's closing phrase like "Is that fair
enough?" and then the adjuster calculates the cost of those repairs
and offers to make their claim settlement check payable directly to
the insured (which is improper if the dwelling has a mortgage). This
technique plays on the financial need of some insured's who may
already be mentally spending that money on a VCR or a new set of
tires for the car. In the majority of these Cash Out cases, the
insured will usually postpone the repairs until such time as they
incorporate those repairs into another larger repair activity and
the insured will never realize the insufficiency of their claim
settlement. On those rare occasions when the insured actually
accepts the check and then calls in a professional to make the
needed repairs the insured finds out that there insurance settlement
was insufficient. About 20% of those insured will actually call
their insurance company to complain. When that happens, the adjuster
may well tell the insured they had been overcharged by their repair
people and the insurance company would not pay the difference. Not
all Cash Outs are bad for the insured. However, before accepting a
Cash Out settlement, get a separate independent appraisal of the
damage from a qualified home repair contractor (remember, the cost
of that appraisal or estimate is covered by your policy). Then, if
the adjuster offers to Cash Out the settlement, you are relatively
assured that the settlement you receive is consistent with the
damage.
- Handyman: Most HomeOwner Claim Damages involve multiple
trade disciplines (plumber, electrician, painter, floor covering,
etc.) Which usually means the involvement of a general contractor
for whom these sub-contractors do their respective jobs. When a
general contractor is involved, the general contractor is entitled
to overhead and profit allowances which can add 20% - 30% to the
cost of the overall cost of repairs. Also, licensed trades people
usually charge more than the typical handyman who may involve
themselves in all facets of the repair. Handyman rates are usually
what is figured when a Cash Out settlement is offered and the
adjuster will tell the insured the name of a contractor (that is
actually a handyman) that the insured can call to have the repairs
done. The cost savings to the insurance company notwithstanding, I
am opposed to having insurance companies push the use of a handyman
to get involved in trades that require licenses. There is no such
thing as a "natural born plumber" any more than there are "natural
born doctors". Stop and think for a moment: would you like having a
"natural born doctor" "adlib'n" through your abdomen, or would you
prefer they be trained? When it comes to the single, largest
investment I have, my HOME, I would prefer repairs be performed by
people who know what they are doing. The benefit of using a handyman
and handyman rates is completely one-sided. The insurance company
SAVES MONEY! Quality of repairs is not even an issue.
- "Comp" Estimates: Occasionally, when an adjuster
attempts to close a claim on a Cash Out basis, the insured will
respond with something to the effect of "I can't get that damage
fixed for this price". While this may be true, the adjuster believes
the insured will not be fixing the damage and wants to hold fast to
the $ settlement they had calculated. In this event, the adjuster
will offer to send out a contractor (in truth - a handyman) to check
out the damage and give a price for repairs. Then, the adjuster will
contact their favorite handyman and will instruct the handyman to
provide the insured with a repair estimate in an amount at or less
than that which the adjuster came up with. This will be an attempt
to force an insufficient Cash Out settlement on the insured. In this
instance, there will be an implied understanding between the
adjuster and the handyman. If the insured calls the adjuster's bluff
and actually has the damage repaired by that handyman, the adjuster
will make a supplemental payment to that handyman to cover the
actual cost of repairs or the adjuster will "hang it on the wall",
which is claims adjuster lingo for "I'll make it up to you on the
next job you actually do for us". Again, the way to avoid getting
short changed by this technique is to get an independent estimate
from an appropriate contractor or general contractor (if multiple
trades are involved).
- Minimize scope of damages: The best way to explain this
technique is to cite a hypothetical loss example. Let us assume that
you sustained some water damage to your ceiling during a rain storm.
The only damage visible is a water stain to your ceiling. When the
adjuster comes out they will probably go up onto the roof where they
will find some shingles or they won't. As most HomeOwner Policies
are currently of the "H/O III" variety, we will assume that missing
shingles is a non-factor. If there are shingles missing, there will
be an allowance made to replace them. Now then, about the ceiling.
The majority of homes built within the past twenty (20) years have
what is referred to as a "popcorn" texture on their ceilings. This
is a very coarse texture that is designed to provide acoustic
qualities. This is a very thick and thus a very heavy form of
coating. Once moisture has penetrated through the ceiling sheetrock
to the point where a water stain is left on the ceiling texture, the
bond between the sheetrock and the texture has been compromised and
the affected portion of the texture is going to come down. This is
not rocket science. Most adjusters are aware of this phenomenon.
However, an adjuster will probably just make an allowance to repaint
the ceiling and may even make an allowance to repaint the walls,
even though the walls were not damaged. Sounds generous . . . right?
WRONG ! ! ! In all probability the ceiling sheetrock itself has been
compromised. The damaged sheetrock should be replaced. The "popcorn"
texture of the entire ceiling should be scrapped off and replaced.
Depending upon how old the house is, that texture coating could
include asbestos. That brings in environmental considerations. While
we are on the subject of environmental considerations, what about
the attic insulation that may have been compromised by the water?
What if the water was able to get into the duct work where mold,
mildew and spores could develop? Would your family be experiencing
unusual allergy symptoms within the next year and have no idea why?
You bet!
As you can see, a simple water stain in the ceiling may not actually
be as simple as it sounds. I promise you that most adjusters are aware
of these potential additional damages, all of which are covered by your
typical HomeOwner Insurance Policy. However, very few adjusters will
factor in these additional damages when they make a Cash Out settlement
offer. Minimizing the scope of damage sounds unfair. That's why
insurance companies refer to this, as well as the other techniques, as
"Controlling Loss Severity". With this technique, just as with the other
adjusting techniques, your best defense against being short changed is
getting an independent appraisal of the damage from an appropriate
contractor.
Go back to the top.
Include Frequently Missed
Damages
In the above topic we discussed minimizing the scope of damages,
which is a natural segway into our present topic. In the above paragraph
we gave an example involving a water stain to a ceiling. This was a
perfect example because it involved mold, mildew and spores developing
from a water loss, as well as another environmental consideration . . .
the removal of controlled materials such as asbestos and/or leaded
paint. Any time water is allowed to "stand" for a period of time there
is a high potential for missed damages. When water spreads throughout
the floor of a dwelling, especially if the dwelling is built on a slab,
that water is gong to get into the wall cavities where mold, mildew
and/or spores are going to develop. If water is allowed to stand while
the central air conditioning is operating, there is also a possibility
of this same problem developing within the duct work system. Rarely will
an insurance adjuster voluntarily make an allowance to address these
factors.
In the case of water damage to a floor (perhaps a water heater
leaked), where there was enough water to stain the baseboards, water
clearly got into the wall cavity. Rather than just paint the baseboards,
the walls need to be opened up to address the environmental damages
developing inside them. If the problem has developed beyond the point
where simply spraying chemicals in the wall through an access hole will
not work, the sheetrock needs to be removed along the lower portion of
the walls to allow access to implement more appropriate corrective
measures. That usually means about 2' up from the floor on at least one
side (if not both sides) of any given wall. When that sheetrock is
replaced, the texture from the remaining portion of that wall should be
sanded off and the new texture applied to the entire wall (so as to
avoid a "patch" seam).
In the "Old Days" when there was water damaged carpet, insurance
companies used to simply pay to have the carpet shampooed or steamed in
place. Consumers had to fight to get the carpet pulled up and the pad
replaced. To make matters worse, those were the days of hemp carpet
pads. If that damaged pad were allowed to stay down, the dwelling began
to smell like dirty socks within weeks. Now, insurance companies
typically pay to have water damaged carpet removed, chemically cleaned
and reinstalled over a new pad. I cite this historic example because
insurance companies are currently resisting payment of claims to address
mold, mildew and/or spore damage. However, when this type of damage is
properly diagnosed, insurance companies will pay for appropriate
remedial action. If, after your damages are properly documented, your
insurance company is still not willing to make an appropriate payment,
you have gone as far as you can on your own. It's time to Seek
Professional Help from a Good Public Adjuster !
Go back to the top.
When do I seek Professional
Help ?
If your insurance company refuses to pay for . . . waste removal, . .
. or the higher cost of hazardous waste removal, . . . or priming
repaired walls before painting, . . . or mold, mildew and/or spore
problems, . . . or replacing damaged cabinets whose finish cannot be
restored and matched, . . . or in any way pay to restore (that's the key
word - restore) the structural integrity, environmental safety or
cosmetic quality of your damaged dwelling, Seek Professional Help
from a Good Public Adjuster !
In ALL cases, we suggest you get your own licensed contractor (or
general contractor if more than one trade is involved) to inspect your
damage, Define an appropriate "scope of damage" and establish an
appropriate cost to repair your damage. Only in this way will you have a
benchmark to determine whether you are being treated fairly and whether
you may need additional professional help.
Remember, any reasonable expense you incur to define the scope of
your damage and establish an appropriate cost to repair your damage is
an expense incurred to help you prove your loss and, as such, should be
reimbursed to you by your insurance company. If your insurance company
refuses to reimburse this expense . . . Seek Professional Help
from a Good Public Adjuster or Bad Faith Attorney !
Go back to the top.
How do I pick a Contractor ?
This portion of the text will probably not include any new
revelations. The way to select a good contractor is the same as you
would go about selecting any other good professional, with one possible
exception: we may have already done your homework for you! By "your
homework" we mean interview potential contractors . . . check references
. . . check with prior clients . . . check with the Better Business
Bureau . . . verify license with registrar of contractors . . . and
check with friends for recommendations.
Go back to the top.
What are Public Adjusters ?
A public adjuster is simply an independent insurance claims adjuster
that is licensed by the State Department of Insurance to represent your
interests in a claim you may have pending with your own insurance
company. A public adjuster is at least as well qualified (and often
better qualified) to handle the intricacies and subtleties of your
HomeOwner's Claim than is the adjuster working for the insurance
company. A public adjuster will take all the time necessary to be
completely thorough in defining a $ value of your claim. A public
adjuster can work for you on an hourly fee basis or a contingency fee
basis, or a combination thereof, as best suits your needs. A public
adjuster can also act as an independent appraiser (or retain an
independent appraiser on your behalf) to define a realistic claim
settlement value for you. Independent appraisers usually work on an
hourly fee basis and their fee should be reimbursed to you by your
insurance company as their fee is a cost you will have incurred to meet
your duty to prove your loss.
Finding a public adjuster is relatively simple . . . just check the
Yellow Pages under "Adjusters". However, like any group of
professionals, some public adjusters are better than others.
Go back to the top.
Bad Faith Conduct
Over the past thirty (20) years of working in this field I have seen
occasions where insurance companies have ignored (either intentionally
or unintentionally) or outright trampled upon the rights of their
insured. Having the help of a good contractor or public adjuster (or
both) can help avoid some of this abuse. Good insurance companies will
correct their mistakes when someone knowledgeable challenges their
decisions. However, there are some insurance companies that intend to
abuse their insured and are blatant, sometimes even arrogant, about
their attitude. That's when it may be time to introduce a new phrase
into your vocabulary . . . "BAD FAITH"! Though insurance companies seem
to have most of the RIGHTS, they also have OBLIGATIONS! Paramount among
those obligations is their duty to deal with their insured in good
faith. If an insurance company flagrantly abuses your rights (in effect,
trying to cheat you) they have breached their duty of dealing in good
faith. This breach may constitute "Bad Faith". In order to seek relief
from your insurance company's conduct, and even seek compensation for
the abuse you have had to endure, it may be necessary to bring your case
before the Civil Division of Superior Court.
To do this you will need the assistance of an attorney experienced in
"Bad Faith" litigation. In order to prevail in court, your attorney will
need to submit a great deal of evidence documenting the conduct of your
insurance company. A good public adjuster is the perfect knowledgeable,
independent entity that will clearly document what your insurance
company did, said, and when. A good public adjuster will not attempt to
entrap an insurance company into "Bad Faith" conduct, but will rather
attempt to lead an insurance company toward "good faith" dealings and
then document their actual conduct.
There have been several 100's of "Bad Faith" cases tried around the
country over the past several years. Some of these cases have even been
covered by the general media when courts have awarded several millions
of dollars to policyholders who have been abused by their insurance
companies.
While we do not wish to dwell on this aspect of insurance claims, we
would be remiss if we did not make you aware of your ultimate right of
recourse against an abusive insurance company. If you find yourself in
the unfortunate circumstance of being abused by your insurance company,
you may wish to review your options with a qualified "Bad Faith"
attorney.
Go back to the top.
