Tag Archives: insurance claim

The Insurance Company’s Adjuster and Your Claim

July 4, 2021 By in Property Insurance Tags: , , , 2 Comments

The insurance company adjuster and your claim

Successfully navigating through the insurance claims process can be challenging for a home or business owner who has suffered loss or damage to their property. Knowing the process and its boundaries and setting reasonable expectations will play a key role in achieving success with the minimum amount of frustration. Knowing what to expect (and what not to expect) from your insurance company’s adjuster is important.

Once an insurance carrier has been notified that a loss has occurred to the property that it insures, the insurer will assign one of its employees or an independent adjuster to investigate and gather information about the claim.

Many policyholders begin this process under the mistaken impression that the adjuster’s job is to assist the policyholder with their claim, but quickly learn that this is not true. It is the burden of the policyholder (not the insurance company’s adjuster) to prove that his loss was caused by a covered peril. The adjuster assigned to the claim is tasked to protect the rights and interests of the insurance carrier and assist the carrier in obtaining and presenting evidence of a policy’s exclusion when it exists.

While it is the burden of the policyholder to prove his loss was caused by a covered peril, it is the burden of the insurance carrier to prove that coverage is excluded under the policy. Presumably, both sides are prepared or preparing to meet their burdens of proof. How does the insurance company’s adjuster go about doing this for his employer?

First, he confirms that the damaged property is the property described in the policy and was at the location described in the policy. If you are claiming an item that you did not insure, or if the insured item was not on the insured property when it was damaged, you might not have a valid claim.

Next, he confirms that the loss occurred during the time period when the policy was in effect. If your roof was damaged by hail and the last hailstorm in your area occurred two months prior to the beginning of your coverage, his job is to discover and record that fact.

He will then determine whether the loss was caused by a peril covered by your policy. There are many causes for damage that are specifically excluded from an insurance policy.

The adjuster will then determine the extent of the ownership interest of the policyholder in the insured property and the extent of the ownership interest of others in the insured property. If the policyholder shares ownership of the property with others, how much of the damage is his loss and how much might be shared with others?

He will investigate to confirm that the policyholder did not commit fraud or material misrepresentation to procure the insurance policy. If the policyholder withheld material information in his application used to determine risk, for example, coverage under the policy may be rescinded.

The adjuster will confirm whether the premises were occupied as permitted or required by the policy. Certain policies negate coverage for loss when the property had been vacant for more than 60 days during the term of the policy.

He will also confirm that, at the time of the loss, there were no conditions that would cause suspension of the coverage.

This is the investigation that the adjuster conducts at the same time he is taking his measurements and photographs of the damage to determine the value of the loss, should it be paid. These are the purposes behind his questions as he conducts his investigation to first determine IF the insurance company will pay before determining how much money the carrier might offer.

It is imperative and required by the insurance contract that the policyholder fully cooperate with this investigation and be precise, accurate, and truthful when responding to these inquiries. Fraud and/or misrepresentation of the smallest degree can result in complete denial of the entire claim.

When the adjuster believes that there is a possibility of the existence of an exclusion to the peril that you have reported a loss from, he is likely to seek the assistance of someone the carrier can use as an expert (should you sue) to support their use of that exclusion. Therefore, the carrier will hire an engineer or other expert to look at the damage. Policyholders who disagree with the carrier’s decision regarding coverage of their claim and do not understand how and why insurance companies use experts will sometimes demand on their own that the insurer pays for an engineer to evaluate the damage that they believe should be paid. In doing so, they are unwittingly providing the carrier with ammunition to use against them instead of meeting their own burden to prove their loss – since the insurance company’s engineer is not going to be paid by the carrier to assist the policyholder to defend against them.

Understand the process, be fully prepared to prove that your loss or damage was caused by a covered peril when you file your claim and seek the advice of an attorney or public adjuster if you are not fully confident in handling the claim on your own or at the first sign of trouble with your insurance carrier.

 

What Is Your Burden of Proof When Filing an Insurance Claim?

July 2, 2021 By in Property Insurance Tags: , , , , 2 Comments

 

Burden of proof with insurance claim

 

      Filing an insurance claim can be much more complicated than it first appears.  To some who have never filed a claim before, there is the assumption that all they must do is notify their insurance carrier of their loss and wait to be paid.  They are unaware that the burden to prove that covered property has been damaged or lost due to a covered peril rests entirely upon them.  Many mistakenly believe that they are entitled to be paid unless the insurance carrier can prove otherwise, which usually results in frustration and misunderstanding.

     Before deciding to file an insurance claim, a policyholder should understand two important points:

     1. It is always the burden of the policyholder to prove that a covered peril caused damage to their covered property.

     2. It is always the burden of the insurance provider to prove that an excluded peril caused the loss.

     Often (actually, too often) a policyholder will note a symptom of damage – such as a leak in the ceiling – and file an insurance claim for damage to their roof.  Without knowing the cause of the leak or whether that cause was due to a peril covered under their policy, they will ask their insurance carrier to send out an adjuster to pay their claim.

     The insurance company’s adjuster, whose duty is to protect the interests of the insurance company he works for, does NOT have the duty to prove that a covered peril caused the loss.  Instead, he is there to collect information and evidence to support (if necessary) his burden to prove that an excluded peril caused the loss if, indeed, it did.  When he is uncertain about his observations and the possibility of an exclusion under the policy to apply to the loss, he may seek the assistance of a third party (such as an engineer, architect, or consultant) to assist him.

     After his investigation, unlike the typical policyholder who has not prepared his case to prove that a covered peril caused damage to their covered property, the insurance carrier is fully prepared to argue against coverage with any proof that an excluded peril caused the loss that the adjuster may have found.

     Thus – knowing that they must first prove that their covered property was damaged by a covered peril – the prudent policyholder will investigate their own claim BEFORE inviting the carrier to begin their investigation of it.  This is what I usually recommend:

     1. Know, as best as you can, exactly what is damaged and what caused it.  If you are unable to determine this on your own, seek the advice of a trusted professional skilled in the material(s) that is damaged.  If your roof is leaking, for example, have a roofer find the source of the leak and the cause of that source.

     2. Collect physical and/or photographic evidence of the damage and proof of its origin.  Obtain a bid from a trusted contractor for the cost to restore the damage to its condition prior to the loss. (Avoid allowing your contractor to negotiate directly with the carrier.  A contractor’s lack of knowledge of your coverage and his interest in profiting from the work provides the adjuster with ease in exploiting and manipulating him.)

     3. Learn if that damage is covered under your policy.  Read your policy, speak to your agent, or consult with your attorney or public adjuster for assistance if you are confused about your policy’s language.  Sometimes, it’s tricky.

     4. Provide copies of your evidence to the insurance company when you file the claim or, if more convenient when the adjuster visits to inspect the property.  (If you are not confident or comfortable in doing this, hire a public adjuster to represent you with this process.)

     5. If your insurance carrier does not cooperate with you after providing proof of your loss and coverage, seek the assistance of an attorney or a public adjuster.

 

 

Missouri Law and Your Insurance Company

May 16, 2021 By in Home Owner Insurance Issues, Property Insurance Tags: , , , , Leave a comment

Not everything that is unethical is illegal.  There are ways of stepping right up to the line without crossing it and no one can do it better than some insurance companies with their vast financial resources and lobby power at the state government level.

But how far is too far? 

This is how the statute reads …

Universal Citation: MO Rev Stat § 375.1007.

Improper claims practices.

375.1007. 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.

 

Missouri Homeowners/Business Insurance and the Roof

April 29, 2021 By in General Home Issues, Home Owner Insurance Issues, Home Repairs Tags: , , , , , , Leave a comment

 

Insurance

     There are two kinds of roofs on Missouri homes and business structures.  There are those that have storm damage and those that will have storm damage.  Understandably, the various insurance companies from all over the country that sell policies in our state will offer a wide variety of coverage options that are not always fully understood by the property owners before disaster strikes.  

     Learning after the roof has been damaged that you have been saving pennies per year by NOT including coverage to match replacement shingles or siding, or learning that hail dents that destroy the appearance of your metal roof is not considered “damage” by your insurance company, can result in costly out of pocket expenses that you thought were covered by insurance.  

     The Missouri Department of Insurance has created an informational and interactive website that helps you to understand your roofing coverage for each insurance carrier.  While I recommend that you visit their site, I urge you to take the time to read and understand your insurance policy, as well.  Have your agent clearly explain to you, when necessary, what it does and does not provide and ask lots of questions.

     Considering that when an insurance company’s claims department is on its absolute best behavior, its job is the same as any corporation that is run by a board of directors.  That job is to put the monetary interests of their shareholders (not their policyholders) at the top of their priority list.  Their duty to you, as a policyholder, is not fiduciary (as it is with their shareholders) but contractual.  Thus, even when you are dealing with a fair and reasonable adjuster, you need to know what your contract with them says.  That contract is your insurance policy.

     Your insurance company is prepared and well-practiced to fight and defend their rights under that contract.  How prepared are you?  Don’t let the first large claim be the first time you read it.  Caveat emptor.

Why Missouri Contractors Cannot Negotiate Your Insurance Claim.

April 18, 2021 By in Home Owner Insurance Issues, Home Repairs, Property Insurance Tags: , , , , , , , , , 2 Comments

missouri contractors cannot represent your claim

Missouri contractors cannot negotiate your insurance claim on your behalf with your insurance company.  On August 28, 2011, the Governor of Missouri signed into law Senate Bill 101, which prohibits home exterior contractors from representing a policyholder or negotiating with their insurance company for exterior work on their home as a part of an insurance claim.

Here is a link to the law:   It is obvious.  

So why do insurance companies continue negotiating with residential contractors despite this law?  Perhaps it is because, when they do, they can get away with underpaying your claim.

An insurance adjuster can say things to your contractor that he cannot tell you, your Missouri attorney or your Missouri licensed public adjuster because, unlike you (and those who lawfully represent you), the contractor is not a party to the agreement (the policy) between you and the insurance company. 

Insurance adjusters will often withhold certain information from the contractor, misrepresent or not fully disclose your coverage to the contractor, and say things to your contractor such as, “We are not paying that much for that building material … Your estimate is too high for labor, and you need to revise that … We are not going to pay more than such and such dollars for this claim … We won’t pay your overhead and profit” … and so forth because they are not communicating with you or anyone lawfully representing you.

It would be an act of bad faith, and perhaps a vexatious act carrying severe penalties, for the adjuster to say such things to you or your lawful representative.  Why?  Because certain communications and actions between insurance companies, their policyholders, and their lawful representatives are regulated by the Missouri Department of Insurance. Such regulations, however, do not necessarily extend to their relationships with contractors and other vendors.  In their opinion, your contractor represents his interests and not yours. 

For example, when an insurance adjuster makes a statement of fact regarding your coverage to you or your lawful representative, he must respond with supporting language from your policy upon demand.  Not so, however, when your contractor makes the same demand.  Since the contractor is not a party to the agreement or lawfully representing anyone who is, he is not entitled to know all of the critical information the policy contains.  Withholding this information about your specific coverage from your contractor puts him in the dark and the insurance company’s adjuster in complete control. 

Some contractors mistakenly believe that since they have worked with certain insurance companies or adjusters in the past, all policyholders with that company have the same or similar coverage – which is not true.  The same insurance carrier can insure three or four neighbors living side by side on the same street and have different policies with different coverage. Some contractors quote what they believe to be “state law” regarding what an insurance company must pay for, which is also untrue.  In Missouri, state laws do not govern or control all of the information contained in an insurance policy, and policy interpretation disputes are settled in civil court and are generally not legislated.

I hold skilled and experienced exterior contractors in very high regard. They are essential advisors for you and your lawful representatives in settling a claim.  Their skillful and experienced input in determining the full scope of the damage and what they charge for restoration of that damage is often vital in settling your claim.  It is when they extend beyond their valuable construction skills and expertise and go beyond the “low hanging fruit” that the adjuster would pay anyway and (as some contractors advertise) “push” the adjuster toward a larger settlement, complete documentation, communicate with the carrier on your behalf and settle your claim, those and similar actions may not be in accord with the law and their results may not produce all of the money that you are entitled to.

On your own, reflect as to how an independent roofing contractor negotiating a claim for hail damage to shingles is likely to overlook and omit hail damage to windows, siding, screens, wood trim, decks, and HVAC equipment from his estimate as he argues with an insurance company’s adjuster for a complete roof replacement.  Then consider why an insurance adjuster would be willing to negotiate with him even though the law forbids it.  It could be a bargain for the insurance company at your expense.

Most damaging is the harm some do to your claim before you finally bring in qualified and lawful representatives, such as your attorney or licensed public adjuster, to assist you.  While their lack of ability to correctly interpret your coverage or communicate your rights under the policy may have limited their ability to help you fully resolve your claim, what they spoke to the insurance company (correctly or incorrectly) can interfere with a fair resolution and must be identified and resolved before progress can be made.

I work with many exterior contractors and help them operate within the boundaries outlined in Senate Bill 101, allowing them to focus on their areas of skill and expertise to serve their customers’ construction needs fully.  Their customers can recover from their insurers what they require to restore their home to its pre-damaged condition, and the contractor makes what he bids for the needed work.  When done correctly, all parties are served in a win-win position.  However, when done improperly, some or all come out on the losing end.

Not all claims require an attorney or a public adjuster to handle them.  Most can be taken directly by the policyholder with no representation if they understand their rights under their contract with the insurance company and have a skilled contractor they trust to inform them of their damage correctly and what must be done to restore their property to its pre-loss condition.

No one but you, your Missouri attorney, or your Missouri licensed public adjuster should be communicating with your insurance company on your behalf and remember that a “no” from the insurance adjuster to your exterior contractor is not the final word on your claim for damage.

 

 

 

This Blog/Website is made available by James H. Bushart, Public Adjuster LLC, for educational purposes only and to give you general information and a general understanding of the work of a public adjuster, not to provide specific legal advice. The authors and site manager make no representations as to the accuracy, completeness, currentness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Using this blog site lets you understand there is no public adjuster/client relationship between you and James H. Bushart, Public Adjuster.  The Blog/Website should not be used as a substitute for competent legal advice from a licensed professional attorney or for capable maintenance or repair advice from a qualified contractor licensed to perform work in your state.

The Need for a Personal Contents Inventory

April 18, 2021 By in Property Insurance Tags: , , , , ,
Need for a personal content inventory

Sifting through the ashes to write an inventory of personal contents to provide to your insurance company can be stressful.

 

The most cumbersome task required of a homeowner by their insurance company when filing a claim after a catastrophic fire or tornado loss is the preparation of a personal contents inventory. 

Test yourself right now.  Close your eyes and make a mental list of everything in the room you are in … then open your eyes and marvel at all you failed to include in your list. Think of doing this for every item in your home after a fire, tornado, or other tragic events then add to this overwhelming task your insurance carrier’s request that you also add to each item on your list the date you purchased it, its manufacturer, price, and more.

It’s hard.  It’s expensive to be wrong.  It seems unfair.  It will make you angry to be required to perform this task and it will upset you to be forced to revisit your loss and relive this tragedy each time you return to the task.  I’ve seen many of my clients experience this anguish repeatedly.

There is something you can do TODAY, however, that will help you to minimize this daunting effort should you ever be faced with such loss.  That something is to create and maintain your inventory right NOW.  Remembering all of your items can make the difference of thousands of dollars in your insurance claim.  Imagine being paid a thousand dollars per minute to file your claim.

The Missouri Department of Insurance provides a handy booklet you can download to get started, but I recommend that any written list of your belongings you create be supplemented with a gallery of photographs and videos.  When photographing your items for your inventory, including photographs of the data plates that record the serial numbers, manufacturer, and manufacturing date.  A digital recording of a slow span of a room, a drawer, a box of mementos, tools, and cupboards will assist you and your insurance company, as well.  There is also a phone app. 

It is important to keep your inventory and video/photographic record of your belongings in a safe place other than in your home where they could be destroyed along with the recorded belongings.  Keep it up to date when items are added or removed from the home … and may you never, ever have to use it.

For more information, contact James H. Bushart, Missouri Licensed Public Adjuster.

 

 

This Blog/Web Site is made available by James H. Bushart, Public Adjuster LLC for educational purposes only as well as to give you general information and a general understanding of the work of a public adjuster, not to provide specific legal advice. The authors and/or site manager make no representations as to accuracy, completeness, currentness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. By using this blog site you understand that there is no public adjuster/client relationship between you and James H. Bushart, Public Adjuster.  The Blog/Web Site should not be used as a substitute for competent legal advice from a licensed professional attorney in your state, nor should it be used as a substitute for competent maintenance or repair advice from a qualified contractor licensed to perform work in your state.

Engineer Speak – “Functional” v. “Cosmetic” Damage

April 18, 2021 By in Home Owner Insurance Issues, Home Repairs, Property Insurance Tags: , , , , , ,

 

Photo by Laker on Pexels.com

Here is a story about how an engineer might record the functional damage versus cosmetic damage in a fictional situation, first.

Once there was a maintenance man who worked in a famous art museum and was directed by his supervisor to touch up the white paint on the wall of a certain gallery within the museum.  As he was ascending his ladder he accidentally tipped over his gallon of white paint and it splashed across the surface of a 550-year-old painting from a world famous artist that hung in the gallery.

Of course, the painting was insured and the curator immediately filed a claim.  The insurance adjuster took a few photos and shared them with his boss who said “We need to send out an engineer.“

The engineer arrived to examine the painting and noted that the framed canvas was designed and intended to hold paint of various colors.  Since the canvas and frame were still intact and obviously able to retain paint, he recorded that the painting was still “functional”.  The painted surface had white paint splashed across the smiling face of a woman named “Lisa” or something, but he reported the damage was only “cosmetic” in that it did not interfere with the “function” of the canvas to hold paint.  It was, after all, paint on a painting … and the gallery was filled with various paintings with random splashes and colors.  He concluded that there was no “functional” damage and the insurance company denied the claim.

This story is fictional, of course … but the actions described are quite common.

Let’s look at the shingles on your roof, for example.  The manufacturer of your shingles produces them in a wide variety of colors, shapes, and styles.  When you selected them (or selected a house that already had them), you noted their color and design in context with the features of the rest of the structure, didn’t you?  Of course, their designed purpose is to protect the roof from wear and water intrusion but they also were carefully and creatively designed to enhance the beauty of the home.

When a sudden Missouri storm erupts and pounds them with hail, along with the metal appurtenances, gutters, downspouts, and other surrounding materials, they will often be damaged.  When they are damaged, you might contact your insurance carrier to file a claim for direct physical damage or loss to your roofing materials.  The insurance adjuster will arrive, take a few photographs, and return to speak to his boss.  When the boss does not want to pay you for your damage, he might send an engineer.

The engineer will often look at your shingles and the surrounding metals for holes.  Finding none, he declares that the shingles and metals are still shedding water as they were designed to do, and the damage to them is not “functional” but merely “cosmetic”.  Based on this report, the manager may deny the claim, depending upon the language in your policy.

Denying the claim because of an engineer’s definitions of “functional” or “Cosmetic” damage rather than the insurance policy’s definitions of damage can be improper.  Try as some might, engineers neither write nor interpret Missouri insurance policies and, when they attempt to do so, they are often incorrect. Some insurance companies have been successfully sued for such actions when it happens, as in the case of North-Shore Co-Owner’s Association versus Nationwide Mutual Insurance Company.

When you believe that your insurance carrier is trying harder to deny your claim than pay your claim, you may be the victim of improper claim handling, bad faith, or vexatious actions on the part of your carrier.  When this happens, seek the advice of your Missouri attorney or a Missouri licensed public adjuster. 

 

 

This Blog/Web Site is made available by James H. Bushart, Public Adjuster LLC for educational purposes only as well as to give you general information and a general understanding of the work of a public adjuster, not to provide specific legal advice. The authors and/or site manager make no representations as to accuracy, completeness, currentness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. By using this blog site you understand that there is no public adjuster/client relationship between you and James H. Bushart, Public Adjuster LLC.  The Blog/Web Site should not be used as a substitute for competent legal advice from a licensed professional attorney in your state, nor should it be used as a substitute for competent maintenance or repair advice from a qualified contractor licensed to perform work in your state.

Warning – War Exclusion Being Used to Deny Business Claims for Cyber Attacks

April 1, 2021 By in Property Insurance Tags: , , ,
War Exclusion

Photo by Yan Krukov on Pexels.com

I received the following news in my email this morning from Joel A. Appelbaum, Executive Vice President & Chief Content Officer of International Risk Management Institute, Inc.  I thought it was important enough to share.

Dear Jim,

Insurers have recently invoked the “war exclusion” to deny coverage for a cyber-security incident that caused policyholders significant damage. Specifically, Merck & Co., Inc., one of the largest pharmaceutical companies in the world, said its insurers denied claims related to the NotPetya cyber-security incident under commercial property insurance policies. Some of Merck’s insurers denied coverage principally based on the war exclusion.

Whether insurers will routinely invoke the war exclusion to deny coverage for cyber-security incidents comparable to NotPetya is essential—especially since these cyber attacks will likely become increasingly prevalent. Indeed, NotPetya reportedly affected companies such as conglomerate Maersk, FedEx’s European subsidiary TNT Express, French construction company Saint-Gobain, and British consumer goods company Reckitt Benckiser. Other companies with substantial international operations, such as Roche, Marriott, and Lion Air, also confirmed that they were targeted.

Policyholders should take the steps necessary before being affected by cyber incidents to preempt a denial of coverage based on the war exclusion. To enhance the predictability of how the insurer will attempt to use the exclusion, carefully review the exclusion in proposed policy forms and inquire how the insurer intends to apply the exclusion before buying the policy. This proactive approach will also serve to define the scope the parties understand the exclusion to have.

Joel’s warning is a resounding “caveat emptor” to a business reviewing its coverage or considering a new policy.  Consider discussing this with your agent the next time you meet.  Before then, however, visit IRMI.com to find more about IRMI and the valuable insurance risk information they provide.

 

 

 

 

This Blog/Web Site is made available by James H. Bushart, Public Adjuster LLC for educational purposes only as well as to give you general information and a general understanding of the work of a public adjuster, not to provide specific legal advice. The authors and/or site manager make no representations as to accuracy, completeness, currentness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. By using this blog site you understand that there is no public adjuster/client relationship between you and James H. Bushart, Public Adjuster LLC.  The Blog/Web Site should not be used as a substitute for competent legal advice from a licensed professional attorney in your state, nor should it be used as a substitute for competent maintenance or repair advice from a qualified contractor licensed to perform work in your state.

Computer Generated Estimates from Insurance Adjusters

March 15, 2019 By in Property Insurance Tags: , , , , Leave a comment

computer generated estimates

 

It may surprise you that the overwhelming majority of insurance adjusters, no matter which insurance company they work for, use the same computer software to generate estimates from which they pay insurance claims.  The corporation that owns and manages the software that creates the computer-generated estimate that your adjuster is using to settle your claim is called Verisk Analytics, Inc.

When you visit this page of the website for Verisk Analytics, Inc., you will see something very interesting about its managers and Board of Directors.  Most of them, including the director who bears the title of “Lead Director,” are from the insurance industry and/or have professional backgrounds in the very closely associated financial investment industry.  Very few, if any, have backgrounds or practical experience in the industries or trades related to performing the restoration work or providing the materials represented in these computer-generated estimates.

This could lead a reasonable person to question whether the computer-generated estimate provided by the insurance adjuster represents the financial interests of the insurance industry managing and producing it … or the interests of the policyholder who is presumably expected to have enough money to fully restore his property from the amount estimated by the software program.

Prudent policyholders, however, will carefully read their policies and discover that their payments from their insurance companies are to be based upon the actual … and not the “estimated” … restoration cost.  They will know that they are not limited to receiving only the insurance adjuster’s home-grown estimate generated by his own industry’s managed computer software program but are entitled, instead, to the amounts that it will actually cost to replace or restore the destroyed or damaged property.

If they don’t know this and settle for what the computer-generated estimate guesses that their payment should be, they are likely to be underpaid for their loss.

The Improper Use of Engineers to Deny Insurance Claims

March 9, 2017 By in Home Owner Insurance Issues, Property Insurance Tags: , , , , , , , 22 Comments

 

If you have filed an insurance claim that your insurance company does not want to pay, they will probably hire an engineer to inspect the damage for them.  

As Chip Merlin of Merlin Law Group recently explained, “A multibillion-dollar industry has developed around insurance company claims vendors. Engineering and consulting firms working for the insurance industry are now their own big-dollar industry. There is plenty of competition among these “consultants” willing to please and keep insurance company accounts. While the insurance adjusters and insurance companies are subject to regulation, most of these vendors answer to nobody other than the insurance claims departments. Those claims departments now depend upon them for reports and opinions about every aspect of a property insurance loss.“

While most insurance company consultants are indeed autonomous, I do not agree that engineers “answer to nobody,” however. 

Like the insurance company’s own adjusters, states do not license many consultants hired by insurance companies but rely totally upon their academic or technical training credentials and answer strictly to the insurance company’s claims department, as stated earlier by Mr. Merlin. However, the state requires engineers working for insurance companies to be licensed. When they go beyond what is correct and fair to accommodate an insurance company’s desire to deny an insurance claim unfairly by acting incompetently or with bias, the engineer must answer to the policyholder and his licensing board for his prejudice and error. I will say more on this later and show how to hold errant and biased engineers accountable.

This article distinguishes between professional engineers who provide services to the public in various engineering capacities and those engineers hired by insurance companies to act as insurance adjusters to defend against insurance claims. These adjusters, who have engineering degrees, seek reasons to deny insurance claims.

Reading and contextually interpreting these reports to assist my clients and to provide consultation and assistance to attorneys litigating such matters has become a specialty for me within my practice. Not all the errors and omissions I have uncovered in engineer reports were intentional acts of fraud, incompetency, or bias; however, many were. I have chosen a few of these errors and omissions to be included in this essay.

 

Engineer assisting your insurance company with their denial of your claim.

 

Plausible Deniability

“Plausible deniability” is a strategy to escape contractual duties that leave little or no evidence of wrongdoing or abuse.  An insurance carrier can use plausible deniability to blame someone else for denying a claim they should pay. How might this be done, and how might an engineer’s report play a part in it?

The Set-Up

Let’s say that wind or hail has damaged your roof, and you have consulted with a trusted and experienced roofing contractor or other professional before filing your insurance claim, and he has confirmed 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 precisely 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 ignores 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, like most engineers, has no experience installing or supervising the installation or repair of roofs. Before becoming employed by the engineering company he now works for, his engineering specialty may have been geotechnical, water resources, electronics, or any other engineering specialties that have nothing to do with general building or roofing materials. Roofing materials are not structural and are not an engineering specialty.

When high winds or lightning have damaged the home’s structure, 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 inspect something as nontechnical as your roof covering materials? 

Your policy covers damage from all perils except those that it specifically excludes from coverage. Without such an exclusion, your insurance provider must pay for your covered loss.

Your insurance company must prove that a policy exclusion applies (such as “wear and tear” or “poor workmanship,” for example). 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 paying you, he may recommend to his company that they hire an engineer to help “find” one.  

The State of Missouri allows anyone to inspect and report on damage found on a roof, because the roof covering is not considered part of the building’s structure. It is simply there to shed water and enhance the home’s beauty.  But why an engineer? Scroll up a few paragraphs and read again the description of “plausible deniability.” It becomes more apparent 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

After an adjuster tells them he disagrees with their expert, some policyholders will unwisely demand 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 insurance company selects, hires, and pays the requested engineer to provide them (not the policyholder) with a report that the policyholder incorrectly trusts to be independent and unbiased.  In some claims I have worked on, the insurance adjusters hand-picked their favorite engineer from previous claims. 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 insurance adjuster will ask the engineer inspecting an insured’s roof to call and provide a “verbal” report before submitting his conclusions in writing. During litigation, discovering a written report from the engineer supporting the insured’s claim could cause problems for the insurance adjuster.  The engineer typically gives verbal reports to the insurance adjuster within a couple of weeks. When the adjuster is confident enough to request a written report, it arrives with him about thirty days after the engineer’s inspection.

The insurance company’s engineer provides a report contradicting the finding of the experienced roofing contractor. The insurance company, relying on the report from their engineer, rejects your claim, claiming the hail damage was caused by something other than hail, something not covered by the policy. They disregard the opinion of the policyholder’s expert.

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, assuming incorrectly that their engineer is unbiased and objective. Of course, there are rare exceptions to this, but they are exceptions—and they are rare. Don’t bet on it.

Who pays for the services of the “hired gun”?

Follow the Money

Some companies that employ licensed engineers to provide these reports to insurance companies do not offer any other engineering services. Writing these reports for insurance companies is their primary (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 homeowner’s expense.  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 the policy does not cover your hail (or other property damage). 

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 case HERE and get the whole 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 Nicolaus provided to (insurance carrier) after (insurance carrier) initially denied the claim, discussed the moisture content of soil samples taken from four locations within Nicolaus’ house. (Insurance carrier) referred to the (rebuttal) report, which 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 many engineering reports 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 support a denial of an insurance claim. Unfortunately, policyholders do not have the expertise and experience to read enough of these reports to recognize the numerous errors, omissions, and contradictions in many of them. They will mistakenly believe that anyone other than another engineer can not successfully dispute an engineering report.

One Plus One Equals Zero

Many policyholders, unaware of better options, who have been negatively affected by a biased, incomplete, or inaccurate engineer’s report (or simply one they disagree with) will ask their insurance company to send another engineer.  A second engineer’s report that differs from the first 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 isn’t very likely 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 that most reports written by engineers for damaged roofing materials are devoid of science and engineering, except for boilerplate language pre-written to describe commonalities that may or may not be relevant to the damage being claimed.  The part of the report unique to your roof will represent as much as a third of the report. It will typically include 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.  These terms may sound impressive since they are intended to sound impressive, but is it true? Don’t ask the engineer who wrote it. He doesn’t know, for he never computed those calculations or made that analysis. He just copied and pasted the same phrases he often uses in his damaged roof reports, phrases that only those who read many of his reports would be familiar with – like the insurance companies that hire him (and the public adjuster who has represented multiple clients who opposed him). 

Because of a complaint I filed with the engineer’s licensing board regarding one engineer’s report used by the insurance company to deny a claim, the state engineering board placed his entire company on probation for one full year for concluding that no hail of significant size struck the insured property by relying upon nothing more than a commercially available weather data report rather than applying engineering skill and science.  

 

Examples of Bias, Fraud, and Incompetence

(For a narrative of a recent case in which an engineer fabricated and included false information in his report used by an insurance company to deny an insurance claim, CLICK HERE.)

An engineer’s report that I received from another one of these companies specified how the engineer inspected 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 how hail affects them.  He failed to notice that the roof was covered in eighty-year-old concrete tiles, not clay tiles. Not only did he miss the hail damage, but he also 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. An engineer from a company commonly used by insurance carriers in several states to support their claim denials wrote this report. Whether his negligence or bias caused his errors and omissions are not essential since his licensing board prohibits both. When I pointed out the errors in the report, the adjuster’s manager at the insurance carrier promptly and apologetically paid the claim to replace the steeple.

In another recent case, a different engineer from the same company attempted to interpret the insurance policy’s coverage for the insurance carrier in his engineer report. He presented that, while a recent hailstorm had dented copper roofing material, the damage “could not be seen from the ground” and was not, in his professional opinion, “damage.” 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. After that disclosure from my investigation, the insurance company 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. It was simply because it was provided to them by a licensed engineer and in direct defiance of the code officials. We had to get some attorneys involved, but ultimately, we settled for $1,000,000.00 – without suing.

As you can see from these few 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 has been considered vexatious and, through litigation in a federal or state court, has 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. Detailed engineering reports are beyond the understanding and scrutiny of most policyholders.  In one recent claim in 2019, for example, an engineer accurately described and reported damage to a commercial building in their report, but the insurance company wrongfully interpreted it to deny the claim. I reopened the claim and challenged their interpretation, which resulted in a check for over $692,000.00 for my client.  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, the insurance adjuster cannot communicate the engineer’s report correctly to the policyholder. In one case, the insurance company denied coverage to a church for interior damage caused by water entering from a hail-damaged roof. The adjuster told the church that the engineer concluded the interior damage was from “wear and tear” and not after 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. Though the engineer did his best to present the facts in such a way as to support the insurance company’s denial, his ambiguity and double-talk did not entirely 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.

In another instance, the insurance company denied a claim and stated that their engineer did not find any of the reported hail damage on the roof of a commercial building.  I requested and received a copy of that report, which contained photographs and narrative descriptions of the damage the insurance adjuster said the report did not have. After pointing this out to the insurance adjuster, I received an apology and payment of $500,000.00.  Did the adjuster accidentally miss that in the report? I’ll let you decide.  However, for the sake of this discussion, it’s crucial to remember that we shouldn’t blindly trust the alliance between insurance companies and their engineers. We need to carefully examine their denial letters and their corresponding reports. 

There are many more stories that I can share, but I think, by now, you get the point. Sometimes, neither the insurance carrier nor the engineer writing a report should have the final word.

What can you do if you are working on the claim by yourself?

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 can act to preserve the integrity of the engineering profession and protect the public from licensed engineers who are operating in an incompetent or biased manner.

Licensed professional engineers in Missouri are accountable to the state board that issues their licenses for their acts of bias and negligence.  Accordingly, home insurance policyholders who 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.

The board will investigate formal complaints from homeowners with merit, and they may discipline the engineer when 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 because of 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 against licensed engineers who routinely provide 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.

Last but not least, if you are an engineer who wrote an accurate report that favored the policyholder but had your report changed or modified by someone you work for who provides different conclusions than yours that are incorrect, do the right thing and report that action to your state licensing board.

 

Senior Claim Law Associate

James H. Bushart, Senior Claim Law Associate

Learn more about the Senior Claim Law Associate (SCLA) designation.

[Note:  Policyholders should also ensure that a state-licensed engineer wrote the engineer report.  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 sure 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, were not aware of the difference.]

(c) James H. Bushart, 2017

 

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This Blog/Website is made available by James H. Bushart, Public Adjuster LLC, for educational purposes only and to give you general information and a general understanding of the work of a public adjuster, not to provide specific legal advice. The authors and site manager make no representations as to the accuracy, completeness, currentness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. By using this blog site, you understand there is no public adjuster/client relationship between you and James H. Bushart, Public Adjuster.  The Blog/Website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state, nor should it be used as a substitute for capable maintenance or repair advice from a qualified contractor licensed to perform work in your state.