Claims In A Catastrophe
Last year I wrote an article on how to deal with a claim in a catastrophe for the CPA Journal. It is excerpted below with a final link to the full article.
At the request of the editors of the CPA Journal, insurance expert, Barry Zalma updated his blog for the benefit of our readers. In 2008, he wrote this article to help those faced with catastrophic losses. It is reprint here because of Hurricane Harvey and Irma in hopes it will help those victims of the catastrophes deal with their claims.
Presenting a Claim
If your house was damaged or destroyed by a wildfire, accidental fire, windstorm, flood, hurricane or earthquake, as a result of state declared catastrophes and you had a fire, homeowners, flood insurance, tenant’s homeowners or condominium policy you will be dealing with an insurance adjuster to gain indemnity for your losses. You should recognize that dealing with an insurance adjuster in a catastrophe is usually fairly easy. The adjuster and the insurer are under pressure from local, state and federal governments to quickly resolve the multitude of claims resulting from the catastrophe.
Insurers dealing with a catastrophe will usually be in a very generous mood. They will be seeking good publicity by taking care of victims of the catastrophe quickly and fairly. To make the claims process go easily the insured person must understand that both the insured and the adjuster have duties when damage-caused by fire, windstorm, flood or other insured perils are discovered. The following list outlines the most important of these duties:
- You should be sure there is no unnecessary delay in reporting the fact of the discovery of damage to your insurer as a claim. This can be done directly to the insurer or through your insurance agent or broker.
- You and the adjuster should establish that there is no unnecessary delay in responding to any fire, fire fighting, flood or water-related cause of loss where “mold” may result as a natural result of water, warmth, and existence of mold spores in all building.
- You may be asked to sign a non-waiver agreement.
- You may receive a reservation of rights letter advising you of your duties under the policy, the conditions that apply or might apply, and the exclusions that may apply to the facts of the loss.
- You, as the insured, should readily, and without objection, sign the non-waiver agreement or accept the reservation of rights as an expression of the status quo. You give up nothing by doing so and are only recognizing that the insurer’s investigation of your loss does not waive any of the rights the insurer has under the terms and conditions of the policy.
- The adjuster should remind you, immediately of your duties as the insured, to preserve and protect the damaged property and to mitigate the loss with due diligence and dispatch.
- The adjuster will advise you of the coverages available and the limits of liability of the policy you purchased.
- You can request from the adjuster the identity of respected, competent, and professional contractors experienced in fire reconstruction or the drying out of buildings and the prevention or restriction of further loss including mold growth.
- You should follow up regularly with the adjuster to ensure that he or she is meeting contractual obligations since a catastrophe often makes communications difficult.
- If you have failed to protect the property from further loss, the adjuster must remind you, in writing, of your failure and how that could effect your claim.
- The adjuster will probably consider advance payments to avoid any unnecessary difficulties so that you and your family will have a place to live while your house is being rebuilt.
- You can expect an advance of $10,000 to $20,000 if your house is destroyed to carry you over.
- Even if your house was not damaged you are entitled to additional living expense payments if you were ordered out of your house by the state government, federal government, Homeland Security, or the local fire or police department.
- Remember that additional living expense coverage does not pay all of your post loss expenses, only those over and above your normal expenses.
- Keep receipts and have evidence of all expenses incurred after the loss.
Insurance claims require personal attention to detail by you, the insured. You and the adjuster should meet in person. If the claim is to be resolved expeditiously and fairly, both you and the adjuster should work to establish a personal relationship and to resolve, if coverage is available, the problems caused by the damage to the dwelling or business structure.
Once the rights, obligations, and duties of the insured and the insurer have been stated, and the initial investigation is complete, the insurer is obligated to conduct a prompt analysis of the policy wording and the law to determine whether coverage exists for the damage claimed. Once the investigation is complete and the decision made, it is the adjuster’s obligation to advise you, promptly and in detail, of the decision of the insurer.
If coverage is available, it is also the obligation of the adjuster to advise you of your duties and obligations to obtain complete indemnity from the insurer and to protect the property from further loss.
The Notice of Loss
If you believe that your property was damaged or destroyed by a peril insured by your policy you should call or write the insurance agent, broker or insurer immediately (or as soon as practical after moving yourself and your family to a safe place) to report your claim. Follow up the phone call with a fax, an email, and a letter. If the house was not destroyed but a great deal of fire fighting water or subsequent rain or flood water entered the property try to get a remediation team into the home or business within the first 48 hours to begin drying out the property. If you do not know one ask your insurer’s adjuster for a referral. This is crucial to preventing or containing mold growth and rot.
If the agent, insurance company, independent adjuster, or restoration company delays the claim, follow up with a fax, an email, and a letter confirming their delay in responding. It would be helpful to send copies of the follow-up letters to the consumer protection unit of the state’s Department of Insurance. Take detailed notes of every conversation, including the name, company, phone number, address, and job title of every insurance adjuster, representative, consultant, and contractor you deal with. Confirm all agreements in writing and insist that appointments and deadlines be honored.
Keep a log of all notes and letters and ask for and keep business cards from everyone involved in your claim.
Immediately after the initial telephone call and all subsequent telephone calls write a letter or e-mail to the broker or agent, with a copy to the insurer, providing the same information. The letter need not be formal. It can be handwritten on any available paper and a photocopy should be kept. If you use e-mail to communicate keep copies of all e-mails and, when possible, print out each e-mail and response.
The notice of loss should include the following information:
- Your full name.
- The location of the property.
- The policy number.
- The effective dates of the policy.
- The date when damage first occurred.
- The type of property damage.
- The cause or causes of the damage.
- How the adjuster can contact you.
- That you need immediate contact from the adjuster.
If your policy has been destroyed by the catastrophe you can obtain the information needed, and obtain the assistance of, the insurance agent or broker who helped you obtain the policy. If the agent or broker is also a victim of the catastrophe the same information can be obtained directly from the insurer.
By providing the information the agent, the broker and/or the insurer will have the information needed to establish that you, as the insured, have fulfilled the first obligation under the policy: to provide immediate notice of loss to the insurer.
If the insurer is working effectively and has a catastrophe team of adjusters in place you should receive contact from an adjuster within 24 hours of the notice. The first call should arrange an appointment to inspect the property. You should arrange for inspection as soon as possible and have the entire property available for the inspection if possible. If emergency efforts are required, you should so advise the adjuster so that he or she can help you take emergency measures to protect against further loss.
If possible, you or the adjuster should arrange to have one or more contractors present at the first meeting to determine the extent of the damage. If the damage is extensive, consider retaining the services of a public insurance adjuster. Public insurance adjusters are licensed by your state and allowed to charge a percentage of recovery for their fee. As a result, if the public insurance adjuster obtains a settlement for the amount necessary to rebuild your house and replace the contents you will need to use your own funds to cover the reduction in your recovery from the insurer that is paid to the public adjuster.
If you determine a public insurance adjuster would be helpful it is appropriate and necessary to seek one who is a member of the National Association of Public Insurance Adjusters (NAPIA), a professional membership organization that seeks to instill professionalism in the trade, or an attorney experienced in representing policyholders in the claims process to represent your interest. The lawyer will usually work on an hourly fee basis while the public insurance adjuster will expect a percentage of the amount paid by the insurer.
You must recognize that the public insurance adjuster will ask for a 10 – 15% negotiable fee. Do not hesitate to negotiate with the public insurance adjuster. Never pay the first fee quoted. Considering the volume of work in a catastrophe, you should be able to negotiate a fee between 3% and 10%.
Insurance Company Response
Your insurer should respond to typical catastrophe claims by written or verbal contact within 24 hours of your notice of the claim. The insurer should share information regarding emergency repairs, additional living expenses, temporary advance payments and prevention of further loss with you.
Your insurer should, and in California is obligated to, advise you of your responsibilities under the policy. Many require their representatives to be at your home within 24 to 72 hours of notice of claim. If you explain that your fire loss is severe, the insurer should attempt to have a representative at your house within 24 hours.
The insurer is obligated by statute, state administrative regulations, or by the terms of the policy to determine whether your claim is covered and provide an initial estimate of damage within seven to 14 days after the insurer’s first on-site visit. This first estimate is subject to change. Within the same time frame, your insurer should attempt to provide you with a written statement confirming or denying coverage.
The statutory and regulatory time limits are usually waived in catastrophes and may be impossible to meet with regard to the Northern California wildfires, Hurricanes Harvey and Irma or any other catastrophic event. You should expect your insurer to return all phone calls within 24 hours. Initial contact may be with your insurance agent or broker or a claims office or the toll-free phone number included in the policy. Because of the volume of claims after a catastrophe like those in the 2017 hurricane season and California wild fire season, this time frame will probably not be feasible.
First Contact with the Adjuster
Your first contact with the adjuster is usually an informative meeting where you discuss the cause of the loss, the type of loss, when the loss was discovered, and make an initial effort to agree on a tentative scope of loss.
You should expect the adjuster to do the following:
- ask for a walk-through inspection of the entire dwelling or building remaining after the catastrophe.
- You should make every effort to point out each item of damage or suspected damage during the walk-through inspection.
- You, or your representative, should assist the adjuster in viewing both the damage and the source of the damage;
- ask you to submit to a recorded statement;
- ask you for the identities of each family member or vendor who can give the adjuster information about the loss;
- ask for the recorded statements of the persons identified;
- ask permission to allow experts retained by the insurer to inspect the property and do minor destructive testing to establish the appropriate methods of reconstruction and repair; and
- ask permission to contact others who know information about the loss and to obtain from those people within your control a detailed recorded statement and documents relating to their knowledge of the loss and the extent of the loss.
First Meeting with the Adjuster
An adjuster is a person professionally trained to assess the damage to your property. He or she will probably visit your home or business before you are asked to complete any forms. The more information you have about your damaged home or business and belongings, the sooner your claim will be settled. Your adjuster generally will come prepared to do a thorough and complete evaluation of the damage to your property. If the adjuster is unable to complete a thorough inspection due to time constraints or the extent of damage, he or she should prepare a scope of the loss report. This is a brief listing of the findings of damage determined at the initial inspection of the damage.
The adjuster should ask you to agree to the scope of loss determined at your first meeting. Agreeing to a scope of loss is not presenting a claim nor are you compelled to the scope of loss. As time passes after the catastrophe it is common to find additional losses and damages.
It is understood by the adjuster that the scope is incomplete and will be added to as new damage is discovered. It is usually supplemented with a second visit after the reports of experts are received to complete the inspection.
The “scope of loss” should include the following:
- degree of damage;
- a description of each location where damage was observed;
- a description of the adjuster’s and your own best estimates of the type of damage observed;
- a list of all personal property damaged or destroyed;
- quality of the materials and workmanship; and
- measurements needed to calculate quantities, including length, width, and height of rooms and the number of “openings” (windows and doors) in each room.
The scope of loss, usually referred to by claims people as the “scope,” differs from the finished estimate in two ways: (1) the scope does not necessarily list any prices, although prices can be used to describe quality and (2) the scope does not list the calculated quantities; it includes just the raw counts and measurements needed to calculate quantities for the estimate.
Protect All Property from Further Damage
Every policy requires that the insured protect the property from further loss. Therefore, you should turn off any water flow to broken appliances or pipes, arrange to have openings in roofs or walls covered to protect from rain damage, and seek help from the adjuster to further protect your property from losses of all types.
You, as the insured, are expected to take any necessary emergency measures to protect the building and personal property from any further damage. Do not throw anything away until permission of the insurance company is obtained in writing and you have documented its condition. You need not keep any damaged property that presents a hazard to the health or safety of you, your family or others.
If the insurer delays or refuses to authorize measures to prevent further loss, confirm the insurer’s delay in a fax, email, and a letter, and take whatever reasonable measures you can afford to protect the property. If your loss is covered, the insurance company should also cover the cost of any reasonable emergency measures you took to protect your property.
It is not unusual for an insurer to deny coverage for damage resulting after the initial claim on the grounds that an insured failed to comply with the policy condition to protect the property from further damage.
Document the Loss
If you were prudent and prepared, before the catastrophe, an inventory of your contents or took pictures of your contents, provide the adjuster with the inventory and photographs or videotape. Photograph, videotape, and inventory all damaged property after the loss. Make sure you record the date of the photos and videotape. It is important to document the source and the extent of damage whether by fire or water intrusion. If your photos or videos are electronic be sure to store the records off site, in the cloud, or with entities like DropBox, Box.com, etc.
In most states, a material misrepresentation, concealment, or omission made in connection with the claim will give the insurer a valid reason to reject the entire claim. For example, claiming that an item was destroyed that really wasn’t or substantially overstating the value of a damaged item is fraud. In most states insurance fraud is a felony that can place you in state prison if convicted.
No catastrophe is so bad as to cause you to attempt to defraud your insurer to make up for uninsured or underinsured losses. You should never exaggerate, speculate, or guess about the loss or value of any particular piece of property. Make it clear to your insurer when recollection may not be accurate, when you are estimating value, and the basis for your estimate. For the value of items you are not sure about on a claim presentation, use the phrase “To Be Determined.” If you do not have receipts to show the price of an item, information can be found in catalogs, statements from retail clerks, bank statements, credit card statements, statements from family members or friends, GOOGLE, Bing.com, Amazon.com or other internet sources.
If all else fails, a formal appraisal can be obtained from a professional personal property appraiser. Save this as a last resort, since the insurer will usually refuse to reimburse you for the costs of hiring an appraiser, but may hire one at no cost to you if asked courteously.
Full article available at the CPA journal, https://www.cpajournal.com/2017/09/26/claims-in-a-catastrophe/
© 2018 – Barry Zalma
This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and email@example.com.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
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