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HomeOwner Insurance Claims - General

Frequently Asked Questions and Nationally-Generic Answers
By J. D. Howard

Insurance Consumer Advocate Network, LLC, Schools - Business & Vocational, Springfield, MO

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Rights and Obligations - Yours and Theirs   Understanding Adjusting Techniques
Include Frequently Missed Damages   When do I seek Professional Help ?
What are Public Adjusters ?   Bad Faith Conduct
More Info . . . Specific to My State

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.
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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 . . .

  1. 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.

  2. 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.

  3. "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).

  4. 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.
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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.
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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.
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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.

We believe the public adjusters we have accepted into "I-CAN" are the "best of the best". With over thirty (30) years experience in this field, we have learned who the "good guys" are. To see whom we have accepted into the "I-CAN" family, visit the Good Public Adjuster page.
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Bad Faith Conduct

Over the past thirty (30) years of working in this field I have seen 100's of 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.
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More Info . . . Specific to My State

The Free Information shared with you here is general in nature and has been provided in the hopes of making you a more informed consumer . . . and a better negotiator. If you would like to discuss your claim in greater detail we suggest you contact local help, or contact us directly. Though we will not provide legal advice, we may have some additional general information that could be helpful.


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