375.1007. Improper claims practices. — Any of the following acts by an insurer, if committed in violation of section 375.1005, constitutes an improper claims practice:
(1) Misrepresenting to claimants and insureds relevant facts or policy provisions relating to coverages at issue;
(2) Failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under its policies;
(3) Failing to adopt and implement reasonable standards for the prompt investigation and settlement of claims arising under its policies;
(4) Not attempting in good faith to effectuate prompt, fair and equitable settlement of claims submitted in which liability has become reasonably clear;
(5) Compelling insureds or beneficiaries to institute suits to recover amounts due under its policies by offering substantially less than the amounts ultimately recovered in suits brought by them;
(6) Refusing to pay claims without conducting a reasonable investigation;
(7) Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed and communicated to the insurer;
(8) Attempting to settle a claim for less than the amount to which a reasonable person would believe the insured or beneficiary was entitled by reference to written or printed advertising material accompanying or made part of an application;
(9) Attempting to settle claims on the basis of an application which was materially altered without notice to, or knowledge or consent of, the insured;
(10) Making a claims payment to an insured or beneficiary without indicating the coverage under which each payment is being made;
(11) Unreasonably delaying the investigation or payment of claims by requiring both a formal proof of loss form and subsequent verification that would result in duplication of information and verification appearing in the formal proof of loss form;
(12) Failing in the case of claims denial or offers of a compromise settlement to promptly provide a reasonable and accurate explanation of the basis for such actions;
(13) Failing to provide forms necessary to present claims within fifteen calendar days of a request with reasonable explanations regarding their use;
(14) Failing to adopt and implement reasonable standards to assure that the repairs of a repairer owned by or required to be used by the insurer are performed in a workmanlike manner;
(15) Failing to promptly settle claims where liability has become reasonably clear under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage.
As a licensed public adjuster who has negotiated millions of dollars’ worth of insurance claims on behalf of policyholders who have suffered damage to their homes and commercial buildings, I have overturned many claim denials that were based on reports from engineers hired by insurance companies. Reading and contextually interpreting these reports to assist my clients, and to provide consultation and assistance to attorneys litigating such matters, has become my own specialty within my practice. Not all the errors and omissions that I have uncovered in these reports were acts of fraud, incompetency, or bias; however, many were. A few of those that were have been selected for this essay.
“Plausible deniability” is a strategy used to escape contractual duties that leave little or no evidence of wrongdoing or abuse. As it applies to the claims process, plausible deniability would allow an insurance carrier to hide behind the wrongful act of someone else that would determine on their behalf that a claim should not be paid when, in fact, it should be paid. How might this be done, and how might an engineer’s report play a part in it?
For illustration purposes, let’s say that wind or hail has damaged your roof and you have consulted with a trusted and experienced roofing contractor or other roofing professional before filing your insurance claim. Your contractor has confirmed the presence of storm damage to your roof. Your roofing professional might have decades of practical experience and training working for a century-old roofing company, spending thousands of hours per year inspecting and repairing damaged roofs exactly like yours. He may have worked with identical materials like those on your roof hundreds of times with countless numbers of expert repairs or replacements provided to hundreds of satisfied homeowners who had hail or wind damage identical or similar to yours … but your insurance company decides to ignore your expert and bring in their “expert” to look at your roof, instead.
Your insurance company’s “roofing” expert will probably be a licensed engineer who, if he is like most engineers, has never installed or supervised the installation or repair of a roof. His engineering specialty before becoming employed by the engineering company he now works for may have been geotechnical, water resources, electronics, or any other of the numerous varieties of engineering specialties that have nothing at all to do with building materials in general or roofing materials, in particular. Roofing materials are not structural and are not an engineering specialty.
When high winds or lightning have damaged the structure of the home, a licensed engineer is essential to the insurance carrier and the policyholder to determine and report on the structural integrity of the building and recommend the correct remedy to restore it. But why did your insurance company hire a licensed engineer to simply inspect your shingles?
Your policy covers damage from all perils – except for those that the policy excludes from coverage. In the absence of an exclusion, your insurance provider must pay for your covered loss.
The burden of proving that a policy exclusion applies (such as “wear and tear” or “poor workmanship”, for example) is on your insurance company. When an insurance adjuster can find an exclusion to the policy, he will usually tell you. When the adjuster cannot find an exclusion, rather than pay you, he may recommend to his company that they hire an engineer to “find” one.
The inspection of damaged roofing materials is not an engineering practice. If it were, Missouri law would prohibit anyone other than a licensed engineer from doing it, just as it prohibits non-engineers from performing work that requires an engineering license. The cost of paying an engineer (usually between $1,500.00 and $2,500.00) for a report is a large percentage of what a roof on an average size private dwelling would cost to replace. It seems extremely odd that an insurance company would not trust this routine and otherwise inexpensive process to less expensive and more experienced professionals when they are available, such as your expert or even their own adjuster. The decision to pay an engineer to inspect your shingles does not seem to be based on skill requirements or cost-effectiveness, does it?
Anyone is qualified by the State of Missouri to inspect and write a report on the damage found on a roof since the roof covering is not considered to be a part of the structure of the building. It is simply there to shed water and enhance the beauty of the home. But why an engineer? Scroll up a few paragraphs and re-read about “plausible deniability” and it becomes clearer why an engineer report, particularly those that are typically void of science (i.e. terminal velocity calculations, measurement of material impact resistance and relevant ambient factors, etc.) dovetails into a conclusion that supports an exclusion to your coverage and allows for a denial of your claim, could help the insurance company at your expense.
Shooting Yourself in the Foot
Some policyholders will unwisely request on their own, after being told by an adjuster that he does not agree with their expert, that the insurance company hire an engineer to provide what the policyholder mistakenly believes to be an unbiased and qualified opinion about his roof. The requested engineer is then selected, hired, and paid by the insurance company to provide them (not the policyholder) with a report that the policyholder is trusting to be independent and unbiased. Whether requested on their own or at the urging of the policyholder, the engineer is being directed and paid by the insurance company.
Often, the engineer who inspects an insured’s roof will be asked to call the insurance adjuster and provide a “verbal” report before he commits his conclusions in writing. This is because the existence of a written report from the engineer that favors the insured’s claim might prove to be problematic for the insurance adjuster should it be discovered later if the claim is litigated. Verbal reports usually are provided to the insurance adjuster within a couple of weeks and, when the adjuster is confident enough to request a written report, it arrives to him about thirty days after the engineer’s inspection.
Accordingly, the insurance company’s engineer provides a report to the insurance company which contradicts the finding of the experienced roofing contractor, and the insurance company concludes from that report (while ignoring the opinion of the policyholder’s expert and preferring the opinion of their expert) that the hail damage was caused by something other than hail and something that is not covered by the policy – and your claim is denied.
This happens more often than you think and more often than it should. The last thing a policyholder should want to do is encourage his insurance company to hire their own expert with the incorrect assumption that their engineer is unbiased and objective. There are rare exceptions to this like anything else, of course, but they are exceptions … and they are rare. Don’t bet on it.
Follow the Money
Some of these companies that employ licensed engineers to provide these types of reports to insurance companies do not provide any other type of engineering service. Writing these reports for insurance companies is their major (or, in many cases, only) source of business income. Sometimes, as reported by the television news program “60 Minutes” (click here), the company’s managers may change the language in the engineer’s original report to benefit an insurance company at the expense of the homeowner. The financial incentive (usually $1,500 to $2,500 for each report, in Missouri) for future repeated business is what will often drive some of them to find creative ways to “help” the insurance company to determine that your hail (or other property damage) is not covered by the policy. Click HERE for more examples.
Here is an excerpt from a case that reached the Texas Supreme Court that resulted in a ruling against the insurance carrier and was critical of their bias. I have blocked the names of the insurance company and engineer in this essay, but you can read the full case HERE and get the full story. “Some evidence also indicates that (insurance carrier) knew, when it denied the Nicolaus’ claim for the second time, that the (engineer) report did not justify denying the claim. The (rebuttal) report, which the Nicolaus provided to (insurance carrier) after (insurance carrier) initially denied the claim, discussed the moisture content of soil samples taken from four locations within the Nicolaus’ house. (Insurance carrier) referred the (rebuttal) report, which had found that water from the leak had spread throughout the soils underlying the Nicolaus’ foundation, to the same (insurance carrier’s) engineers who had prepared the initial report. There is no indication that the (insurance carrier’s) engineers did any further testing in response to the (rebuttal) report or that (insurance carrier) conducted any further investigation before denying the claim a second time.”
As most public adjusters know from the numerous engineering reports that we read and discuss with insurance companies, many of them are simple boilerplate templates with only the beginning and ending pages unique to the applicable home, and many of them lack merit or fact that would actually support a denial of an insurance claim. Unfortunately, policyholders do not have the expertise and experience of reading enough of these reports to recognize the numerous errors, omissions, and contradictions contained within many of them and will mistakenly believe that an engineering report cannot be successfully disputed by anyone other than another engineer.
One Plus One Equals Zero
Because they don’t know better, many policyholders who have been stung by a biased, incomplete, or errant engineer’s report (or simply one they do not agree with) will insist that their insurance company “send out another engineer“. Understanding that the engineer was hired to write the controversial report in the first place, and at a considerable sum, the insurance carrier has no incentive at all to argue with itself. A second engineer’s report that differs at all from the first simply puts the disputed question in a “tie” – one for you and one against you. The second report is not definitive simply because it disagrees with the first. Requests from policyholders for the insurer to send out a second engineer for a second opinion go nowhere and even if the carrier should decide to pay for a second report, it is highly unlikely to result in the policyholder’s favor, even if the second engineer disagrees with the insurance company.
Where’s The Science?
When you read them, you will find most reports written by engineers for damaged roofing materials are devoid of science and engineering, with the possible exception of boilerplate language that has been prewritten to describe commonalities that may or may not be relevant to the damage being claimed. The part of the report that is unique to your roof will represent as much as a third of the actual report and will typically include nothing more than a record of the engineer’s reported observations (as did the adjuster before him).
You may see an opinion about how the hailstones that fell on your roof lacked speed, velocity, or density to cause damage — but you will find no calculations or references to how that speed, velocity, or density of the long-ago melted hailstone was calculated. The use of these terms may sound impressive since it is intended to sound impressive – but is it true? Don’t ask the engineer who wrote it. He doesn’t really know, himself. Often, this narrative is cut and pasted into the same engineer’s roof reports on a routine basis – which would be known only to those who read several of them – like the insurance companies that hire him (and the public adjuster who has represented multiple clients who opposed him).
Examples of Bias, Fraud, and Incompetence
An engineer’s report that I received from one of these companies specified how the engineer closely examined the “clay tiles” that were chipped and found the damage to be attributed to something other than hail. He then provided a lengthy and generic boilerplate description of how “clay tiles” are made and the scientific studies of the effects of hail that strikes them. What he failed to observe was the fact that the roof was covered with eighty-year-old concrete tiles and not clay tiles. He not only missed the hail damage but incorrectly identified the material.
Another engineer’s report for a client that was used to deny an insurance claim for a church with a wind-damaged roof incorrectly described a tongue-in-groove roof covering as plywood sheathing, identified the wrong date (and the wrong windstorm) when he incorrectly reported low wind speeds and failed to identify and record the fact that the steeple had been lifted and moved by a 100-mph wind. This report was written by an engineer from a company commonly used by insurance carriers in several states to support their claim denials. Whether his errors and omissions were caused by his negligence or bias is not important since his licensing board prohibits both. When the errors that I found in the report were brought to the insurance carrier’s attention, the adjuster’s manager promptly and apologetically paid the claim to replace the steeple.
In another recent case, a different engineer from the same company went as far as to attempt to interpret the insurance policy’s coverage for the insurance carrier in his engineer report and presented that, while copper roofing material had clearly been dented by a recent hailstorm, the damage “could not be seen from the ground” and was not, in his professional opinion, “damage“. The insurance company that wrote the insurance policy and knows it better than any of its policyholders conveniently and improperly allowed this errant interpretation of coverage by the engineer to stand – knowing fully that the policy had no such exclusion for hail damage that “could not be seen from the ground“. The insurer denied payment to the policyholder, an elderly widow, for more than two years and I was hired to intercede on her behalf. I immediately challenged their action and reopened the claim. My investigation revealed that the engineering company had contracted a full-time real estate salesman with an engineer’s license to perform their inspection, which explained his unusual conclusion that damage not viewed from the ground was not worthy of coverage. The insurance company, after that disclosure from my investigation, agreed to pay the policyholder over $232,000.00 to restore the roof to its pre-damaged condition. The engineer has returned to his full-time job of selling real estate.
On a commercial roof, the insurance carrier’s engineer attempted to save the insurance carrier from the cost of replacing an entire roof by recommending an inexpensive repair that the local code officials rejected. He argued that his repair was proper, and the insurance company foolishly stood behind a repair recommendation they knew to be unlawful., simply because it was provided to them by a licensed engineer and in direct defiance with the code officials. We had to get some attorneys involved with this one but, in the end, we reached a settlement for $1,000,000.00 – without filing a lawsuit.
As you can see from just these three recent examples, not all engineer reports reflect accuracy, competency, or non-bias, and insurance companies that use these reports to deny claims are not always acting in good faith, according to the courts who have ruled against them. There are times when withholding money from you based upon reports that they know to be inaccurate have been considered vexatious and, through litigation in a federal or state court, have entitled policyholders to punitive damages in addition to the money owed to them. Your attorney can provide more details in this area.
Also worthy of note are the instances in which the engineer’s report is, by design or negligence, written in an ambiguous manner that allows facts about the damage that could benefit the policyholder’s claim to be manipulated in favor of the insurance company. Most policyholders are not trained or able to fully screen and comprehend detailed engineering reports. In one recent claim in 2019, for example, an engineer report that accurately described and reported damage to a commercial building was wrongfully interpreted by the insurance company to deny a claim that, after I reopened it and challenged their interpretation, resulted in a check to my client for over $692,000.00. Prudent policyholders will arrange to have their insurance denial letters and accompanying engineer reports reviewed by a public adjuster or attorney before walking away from their claim.
Sometimes, what the engineer actually reported was not correctly communicated to the policyholder by his insurance adjuster. In one case, the insurance company denied coverage to a church for interior damage caused by water entering from a roof damaged by hail. The adjuster told the church that the engineer concluded that the interior damage was from “wear and tear” and not subsequent to the hail damage. The people at the church hired me to assist them.
Several weeks after demanding a copy of the report so that I could review it myself, the insurance carrier reluctantly complied with my request. The report did NOT say what they told the policyholder it said. Though the engineer did his best to present the facts in such a way to support the insurance company’s denial, his ambiguity and double-talk did not fully discount the hail damage as a source of water to the interior. The insurance company finally agreed to pay the church $59,000.00 to cover the water damage to the interior of their building.
There are many more stories that I can share but I think, by now, you get the point. There are times when neither the insurance carrier nor the engineer writing a report should have the final word.
What can you do if you are working the claim on your own?
While some state Departments of Insurance may not find biased, ambiguous, or erroneous engineer reports to be something they wish to handle or spend political capital, there are often other departments within state government that are able to act to preserve the integrity of the engineering profession and, in turn, protect the public from licensed engineers who are acting in an incompetent or biased manner.
Licensed professional engineers in Missouri are accountable for their acts of bias and/or negligence to the state board that issues their licenses. Accordingly, home insurance policyholders that believe they are victims of an improper relationship between their insurance company and an engineering company may have recourse through the Missouri Board for Architects, Professional Engineers, Professional Land Surveyors, and Professional Landscape Architects.
Formal complaints from homeowners that have merit will be investigated by the board, and action can be taken against the engineer when it is appropriate. Engineers who draft reports for insurance companies to use to deny claims that contain incorrect, partial, or biased information will have to justify their actions (if they can) to their respective licensing boards that monitor and enforce competency and impartiality. Their actions, if found to be due to incompetence or partiality, could result in sanctions up to and including fines and forfeiture of their licenses and these findings can be used by homeowners to address their denial or underpayment through the proper channels available to them … through their policies or judicial means.
Enough enforcement actions taken against licensed engineers that participate in the practice of routinely providing insurance companies with undue “plausible deniability” used in their refusal to pay legitimate claims could effectively reduce this threat to policyholders seeking to be indemnified for their losses.
[Note: Policyholders should also take care to ensure that the engineer report was actually written by a state-licensed engineer. In some cases, these damage inspections are conducted by contractors, consultants, home inspectors, and others who are not licensed engineers and the reports that they compose are subsequently sent to engineers to sign and affix their seal before forwarding them to an insurance company for their use. When you find the inevitable errors or omissions in these reports resulting from the unprofessional inspection or observation and report them to the insurance company, be certain that the insurance company is not responding to you with advice from the same unlicensed consultant rather than a licensed engineer. I have communicated with some insurance adjusters who, themselves, weree not aware of the difference.]