Insurance executives never look more caring than when they appear on national TV after a major weather event such as Hurricane Sandy. They are quickly on the scene to assess damage and offer residents a reassuring hug to let them know that everything will be okay. It’s an essential act that is intended to deliver hope.
The cameras have now been turned off and the reality is about to set in for residents affected by the storm. In the blink of an eye, construction prices will rise and lawyers will start to gather up groups of residents who have discovered that the language in their insurance policy is garbled at best. Lawsuits will be born that will take years to settle.
The sad thing is that this is standard operating procedure in such disastrous events. It’s important to remember, though, that not all insurance claims will result in unhappiness.
With so many people filing claims at the same time, insurance companies find themselves in a position where there are billions of dollars in play to ensure that all their claimants are taken care of. It’s that number that makes policyholders more than a little nervous, at least until their own check clears.
A large portion of the Hurricane Sandy victims know little or nothing about the process of catastrophic insurance claims. The only way to know what type of resistance they will meet is to hear it from the mouths of lawyers and insurance adjusters who have been down this road before.
Here are some of the things policyholders can expect to encounter:
One thing that homeowners need to look out for is the “independent adjuster” who will arrive at their home to assess the damage and give an estimate in repair costs. This is someone who is usually very far from independent, and who in fact has been chosen to represent the insurance company.
The industry nickname for these freelance adjusters is “storm troopers” as they tend to parachute into town en masse after a major disaster. Most insurance companies don’t have the staff or resources to do the work without the help of these mercenaries. It’s not uncommon for freelancers to work hard, long days, but the rewards are rich enough that they can make enough to last for months.
Matthew Tennebaum, a former independent adjuster who now makes a living as a public adjuster in Cherry Hills, New Jersey, spoke about the job of being an independent as a thankless one. He feels that the main problem independent adjuster’s face is how quickly they have to write and deliver estimates. He feels that it’s impossible to compile a thorough report when you know the extra time to do so means potentially missing out on money for reports they had no time to write.
While a good many adjusters are former builders and contractors, the fact remains that they simply may not take the time to inspect every aspect of the damage, and they will most likely not know all the ins and outs of your insurance policy.
J. Robert Hunter, the director of insurance for the Consumer Federation of America, says that while insurance companies do provide adjusters with a manual, not everyone really understands the material inside. He refers to the reading of the manual as nothing more than a crash course in insurance policy.
One thing that policyholders can take heart in is that adjusters are not the ones who make the final call on you claim.
Back at the main offices of the insurance companies, adjusters will be on the lookout for an exclusion that will play a major part in this storm. Floods aren’t usually covered in most policies, which mean that the mild winds of this storm may negate the flood damage.
Most policyholders are completely oblivious to this little nugget, with many failing to purchase or renew their policies to include the federal flood insurance program that would cover them to the tune of up to $250,000. In the days preceding the storm hitting land, researchers from a number of different universities were in contact with people in the path of the storm.
Of the people they spoke with, 46% of those within a block of a body of water had no type of flood insurance. An incredible 58% of those that lived in previously evacuated areas also had no flood insurance to speak of. To make matters even worse, 39% of those who believed they were covered for flooding mistakenly believed that they were covered in their existing homeowner’s insurance policy.
Those without coverage that were affected by the storm surge will likely follow one of two paths. There will be a small minority that will sue, claiming that it was the wind that drove the storm surge to cause the damage, with the argument being that it then cannot be considered a true flood. These types of claims have been met with deaf ears by Judges in the past, but people will continue to try, nonetheless. There may be some assistance available from the Federal Emergency Management Agency.
Many more will try to tie the damage accrued to the wind, which is something covered in most policies. Leslie L. Knox, a public adjuster in Toms River, N.J. says that the problem is actually trying to prove that. If your house is a total loss can you prove that it was blown off the foundation, or show the level of damage prior to the flooding? It’s usually impossible to tell, especially if you evacuated.
If the house sustained damage but is still standing, Mark Boardman, a public adjuster in Maitland, Florida says that it’s time to start looking for clues. Structural twisting is something that insurance companies will claim is caused by flood, but if that damage is on the upper levels and not on the lower, chances are wind was the culprit.
There are usually a number of different clauses to be found in property insurance policies, with the concurrent causation clause one that is likely to be relevant here. This clause basically allows insurance companies to refuse coverage for damage caused by a single factor (wind) when two or more factors (wind and flood) may have been in play at the same time. This clause will be litigated again, but the outcome won’t be known for weeks.
As mentioned earlier, the prices of building materials tends to rise after a disaster of this kind, usually thanks to material shortages. A similar situation arose in Florida a few years ago, with contractors eventually using Chinese drywall that made homeowners sick after repairs were completed.
A closer look at your policy will reveal whether your insurance company will cover materials that are on par with those needing to be replaced or just similar materials. What you need to make sure is that estimates are based on new market prices, so that you don’t end up stuck with inferior building materials, as happened in Florida.
Labor costs also have to be factored in to the total estimate. Insurance company adjusters are armed with software that should have current market prices included, but there is no way to know whether or not your adjuster has taken the time to update that software so that it reflects the ever increasing market prices.
When repairs are done to your home, particularly an older building, they will all have to comply with local building codes. The costs of such repairs should be covered under the “law and ordinance” section of your homeowner’s insurance. Actually getting the insurance company to honor those costs may be a different matter altogether.
It’s fairly common practice for insurance companies to sit back and wait until the money has been spent and the repairs done before demanding to see proof that the local code enforcement office insisted on each and every action. That’s often not enough, with some companies choosing to dispute a number of the claims on the basis that weren’t really necessary in the first place. The homeowner’s cause is not helped by the fact that building departments are likely to be swamped with work in the weeks and months following the storm.
Filing a large claim means committing a large chunk of time in the coming months to sorting out the details and overseeing repairs. If this is your first time filing a claim of this size, you will lively feel as though you are learning a new language.
One option that can ease your burden is to hire a public adjuster to help. The downside is that most of these firms will charge around 10% of your total payout. You really have to weigh the pros and cons before committing to that route.
Many people find that losing a major portion of their home to damage is stressful enough without then having to deal with getting it repaired. It’s that which prompts them to use the services of a public adjuster.
A prime example of this scenario can be found in the story of Scott Golden and his wife. They were somewhat familiar with an adjuster at Goodman-Gable-Gould/Adjusters International and they felt a little professional touch was needed after a branch tore through the roof of the family home in Bethesda, Maryland. The Golden’s really believed that their entire home might collapse, so rather than doing it themselves, they took the $40,000 from the insurance company and let a professional adjuster handle the repairs.