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Fire Insurance Coverages & Claim Resolution

The Rodeo-Chediski Fire in east-central Arizona is the worst forest fire in Arizona to date. The City of Show Low, Arizona was in danger, but never did burn. Peter Romero helped individuals with dwellings on private land which were lost in the fire. This fire was especially large, not just because it was the hot dry month of June in Arizona, but because it was actually two Forest Fires which merged. The Rodeo fire and the Chediski fire. One fire was set by an arsonist, the other by a stranded motorist. These two fires converged with perfect fire conditions allowing for flames to reach over 300 feet into the sky.

 

This is a reprint from the "Pine Graphics Weekly" by James Harrles about his opinions and expressions.

 

This is not intended to be a thorough discussion of fire insurance and how it affects our neighbors. These are rather a few informal thoughts, opinions and expressions of things I have learned over the past forty years.

 

First, the process of settling claims is sometimes done by the insurance company adjusters with sympathy, courtesy and fairness. One of my helpers lauds State Farm's representatives for their treatment of her troubles.

 

But the resolution of claims arising from fire losses can be a contentious, adversary type process where the insurance company is trying to "win" by paying the least number of dollars possible and the injured insured is trying to win by extraction the biggest number of dollars possible. Of course there are many situations in between where the homeowner feels that most of the treatment from the insurance company is fair or "O.K." but some points bother the insured.

 

Like with all civil disagreements, the process of resolving the amount of money owed by the insurance company can involve having the disputed issues ruled upon and decided by an arbitrator or by a court.

 

Although it may sound strange coming from me, I believe that only a small percentage of lawyers are competent in the area of fire insurance coverage. To be sure, most lawyers can read and interpret a contract and most lawyers know what evidence to seek and present. But fire insurance loss claims is a fairly special area where general legal skills don't help as much as they do in other controversies.

 

Most fire insurance policies are based upon a model form policy. This allows the ordinary guy to shop the price for insurance premiums without getting too much involved in comparing apples and oranges.

 

There are public adjusters who work on a percentage fee basis for home owners and business owners. Some of these persons are in my humble opinion, more skilled, more knowledgeable and more effective than most lawyers would be.

 

One of the reasons why public adjusters can be the best tool is that simply reading your policy with a good understanding of ordinary English does not clearly or reliably tell you what items are covered and what items are not. Words in the policy acquire in the fire adjusting business unique secondary meanings. Some of the words become "words of art". If you work as an adjuster or as an attorney repeatedly handling claims under fire insurance policies, you learn better more accurate definition of what is owed by the insurance company than you would gather from day to day use of ordinary English. You also learn "customs and usage", i.e. what an insurer will tolerate in a claim and what they will react negatively to.

 

The best public adjusters for handling disputed claims typically say to perspective customers, "You go ahead and get the best figure you can from your insurance company as to what they will voluntarily pay you. Then come to me without setting your claim. I will work for ‘X' percentage of what I am able to get for you that is over and above the offer available to you when I start work. If I can't improve the recovery for you, I don't get paid.

 

I don't have the brass to attempt to give any comprehensive discussion of specifics. But here are a few comments I have been asked "Can I take my fire insurance loss money and not rebuild but rather buy in another location and either build on or buy an existing house." The answer is yes, but the amount of money the insurance company may be willing to pay may be much less that they would pay if you were rebuilding your original home." An insurance agent told me that if the policy requires them to pay "replacement Cost" they will pay the current bid price of the fair market value of labor and materials to restore your home on your site, but if you don't rebuild, they will establish the fair market value of recreating your home and then deduct from that figure both land cost and the percent of replacement cost that represents the portion of the usable life of your house that had been consumed or used up when the fire consumed.

 

A public adjuster told me yesterday that there are four different formulas that can be used to compute "replacement cost" some favoring the insurer, some favoring the insured. This adjuster told me some examples of ways to drive up the insurance settlement if you buy an existing home rather than rebuilding as, for example, if your destroyed structure had amenities that are now found in the replacement home you want to buy you should be able to drive up the settlement figure by taking depreciated replacement number the insurer offers and adding the fair retail value of adding to the replacement home the feature or amenities that you enjoyed in the destroyed home.

 

If the insurance company believes that your home was "underinsured", i.e. that you were buying insurance coverage in a figure substantially less than the true value of the property, the insurance company takes the position that it owes the home owner that fraction of the true loss that is produced by deducting the percentage of the true value of the home that was not declared by the home owner in deciding how much fire insurance coverage to buy.

 

The procedure for presenting and resolving claims are somewhat technical and not something that the ordinary guy should jump into without giving it a lot of thought. For example, the process is based upon filing with the insurer papers called "Proof of Claim" which may be elaborately supported by affidavits, letters, bills, etc., including the testimony of special contractors engaged in applicable skills and perhaps the testimony of a general contractor to establish how the loss figures are arrived at. Once the proof of claim is filed, the insurer has a relatively brief time within which to challenge and counter on specific items of damage. If the proof of claim is no controverted within the brief, specific time provided, the insurer (or the insured) may be bound by the uncontroverted figures and formula proposed by the opposing side.

 

Public adjusters also take on a process to resolution FEMA claims for private parties and businesses.

 

If the dispute is not resolved by compromise agreement, it is my recollections that most policies require arbitration i.e. presentation of the proof to a neutral, qualified third party for that person to make decisions resolving contested points. Ultimately a claim dispute may end up in the court system. I believe that at that point, the issues are whether or not the proofs of claims and the arbitration establish the amount that the insurance company owes. There is no "trial de novo" where a homeowner can start from scratch and simply ask the judge to fix the amount the insurer owes from photographs, testimony, etc. ignoring the proof of claim and arbitration. So what the homeowner does, says, writes, or presents to his insurer becomes the "nuts and bolts" for deciding any lawsuit.

 

I hope these comments are of some help to those of my neighbors who are trying to grapple with insurance coverage problems

 

The above comments are the opinions of James Harrles, Pine Graphics Weekly Friday, July 19, 2002

Properly Handling Your Insurance Claims

Surviving one disaster is enough! Don't let your insurance claim turn into a second disaster. There are many actions needed in order for you to obtain your fullest and fairest legitimate settlements from your Insurers. Hurricanes are unique, and most claims involve two or three different policies and insurers: Flood (FEMA). Wind (TWIA), and your basic commercial or residential policy.

 

Contact all 3 Agencies to carefully review your policy, even now:

 

FEMA 1-800-621-3362

TWIA 1-800-788-8247

Commercial or Residential Insurer (Insurance Company)

Get organized or re-organized properly and completely

 

Gather "documentation" (duplicate receipts, lists, quotes, photos)

 

Claim denied? Formally request a written and detailed denial

 

You get to choose your general contractor, not your insurer

 

Don't Sign a "Sworn Affidavit of Proof of Loss" without review

 

Do Not Sign ANY Full and Final - Unconditional Release--leave it open just in case more damages and/or losses are found later

 

Don't cash checks/drafts with "Full"/"Final Payment" on either side

 

Don't close your claim because you're "worn out" or "stressed out",

consider to Turn It Over To A Professional: They do the work, You make the decisions

 

"Appraisal" ("specialized form of arbitration") can often fully resolve a disagreement over value(s); and is a Required Policy Condition... before filing suit

 

In Texas, most property policies allow 2 years from the DOL (date of the loss), to file suit

Timelines and Statues of Limitations

You've had a catastrophe in your life, and you turn to your property insurance policy. One of the most important items in the claim process is knowing the deadline for submitting the claim; and if necessary, to "demand Appraisal", and then if still necessary, to file any lawsuit. This is called the "Statute of Limitations." One definition is: "A law that sets the time within which parties must take action to enforce their rights." Without meeting the deadlines, your claim could be dead!

 

Statutes of limitations for filing claims can vary from State to State. It usually starts at the day of the disaster, then runs for some period after that. When that period of time expires, all claim submission is ended.

 

As of this writing, there are States that allow property insurance policies to require claims to be settled within 1 year. Some States require policies to allow up to 2 years. In some instances, State legislatures can extend the Statute ofLimitations. There are some cases where an extension to double the statute of limitations time period has been passed.

 

Statues of Limitations also may vary:

 

In length of time

By claim type

Also, there are various activities which have a Statute of Limitations window. For example, Statutes of Limitations for:

 

Filing a claim

Arbitrating a claim

Settling a claim

In general, filing earlier is better. Why is this? In general, the earlier you file, the earlier you can recover. Also, in "Appraisal" (arbitration) or litigation, the cases filed earlier will generally get into the resolution process first.

Replacement Cost Value (RCV)

To maximize your recovery, it is vital to understand Replacement Cost Value and the rights you have regarding Replacement Cost Value. Replacement-cost coverage is a property valuation method that says your policy will pay to replace your home, business and property belongings with items of "like kind and quality" at the current prices, and except for collectible items, will replace them with "new for old."

 

Replacement Cost Value coverage is a policy condition you will need to determine if it was "endorsed" onto your policy. Not all insurance companies offer ReplacementCost Value. Or, if they do, it will likely cost you a little more than Actual Cost Value ("ACV", often called and defined as "depreciated replacement value") policy coverage.

 

Payment based on the ReplacementCost Value of damaged property is usually more favorable than Actual Cost Value since it compensates you for the actual and current cost of replacing, or if reasonable repairing, the damaged property. As an example, if your television is destroyed in a flood, a replacement cost policy will pay you for the full cost of replacing it with a new television of like kind and quality.

 

Here are some tips to help you recover the most money with your Replacement Cost policy:

  • Find your proof of purchase. Receipts are best, otherwise create a detailed description of model number, date of purchase, and other details to describe the lost item. Photos or videos of the property(both real and personal) are also very helpful as records of your property. You might also have canceled checks or charge card records, or maybe warranty information which describes the property.
  • Take photos of the damaged or destroyed property. Before you discard the damaged property, take photos or video to show its/their destroyed condition.
  • Get written estimates or bids before talking with the adjuster. Go shopping for the item in question. Get proof of pricing and replacement cost values.
  • Prepare a List of Actual Losses. Include furniture, appliances, clothing, paintings, artifacts, food and equipment, regardless of your intent to replace the objects.
  • Prepare Your Claim. Write down the itemized damages on your claim. Be sure to attach photos, contractor estimates (in very complete detail, and detailed descriptions, receipts, and proof of all of your losses.
  • Try to fully recover for your damages. But, don't believe that any settlement is final, or that any settlement is fair. It is common for insurance companies to offer settlements at the lowest range of their payout scale.

Actual Cash Value (ACV)

To maximize your recovery, it is vital to understand Actual Cash Value and the rights you have regardingActual Cash Value. Actual Cash Value coverage is a property valuation method that says your policy will pay to replace your home, business and property belongings with items of "like kind and quality" at current prices, MINUS all of the applicable (and very subjectively-determined) Depreciation.

 

Actual Cash Value coverage is a policy condition you need to determine if you have. Actual Cash Value (depreciated ReplacementCost Value) policy coverage is usually less favorable than Replacement Cost Value coverage, since it compensates you for the replacing/repairing of the damaged real and personal property at a depreciated amount.

 

As an example, if your bedroom furniture is destroyed in a flood, an Actual Cash Value policy will consider the usage and age of the property, and pay you for the depreciated cost of replacing it with like kind and quality.

 

Here are some tips to help you recover the most legitimate payment from your Actual Cash Value policy:

  • Find your proof of purchase. Receipts are best, otherwise create a detailed description of model number, date of purchase, and other details to describe the lost item. Photos or videos of both the real and personal property are also very helpful as records of your lost/damaged property. You might also have canceled checks or charge card records, or maybe warranty information describing them.
  • Take photos of the damaged or destroyed property. Before you discard the damaged property, take photos or video to show the destroyed condition.
  • Get written estimates or bids before talking with the adjuster. Go shopping for the item in question. Get proof of pricing and Replacement Cost Values.
  • Prepare a List of Actual Losses. Include furniture, appliances, clothing, paintings, artifacts, food and equipment, regardless of you intent to replace the objects.
  • Prepare Your Claim. Write down the itemized damages on your claim. Be sure to attach photos, contractor estimates (in extreme) detail, and detailed descriptions, receipts, and proof of your losses.
  • Try to fully recover for your damages. But, don't believe that any settlement is final, or that any settlement is fair. It is common for insurance companies to offer settlements at the lowest range of their payout scale.

Preparing both Real & Personal property inventories

After a firestorm, or other catastrophic event, you are faced with making an inventory to provide to your insurance company. It may be for Commercial or Residential Real and Personal Property.

 

“Real” Property is a category which includes: Structures and Land (which is usually not covered except for: “Trees, Shrubs, & Landscaping” and perhaps “Agricultural” land. “Personal” Property typically includes such items as: Personal and/or Business Inventory and Equipment, and almost anything that you bring to the building and properrty, that is either your home or business... other than almost all motorized vehicles.

Usually, a specific list is not available, unless there was a rider to the insurance policy for something of extreme value, such as some expensive jewelry, coin collection, gun collection or other types of expensive assets.

 

Step 1: Creating the inventory list


So, when you are faced with creating an inventory of assets in order to recover for Personal Property, you are often starting from scratch. Here's what can help:

 

1. List by Location - This listing method is the easiest to use when you're trying to keep your assets in chunks. Simply walk into a room and list everything in it. Don't count anything in another room until you're ready to do that other room.

 

2. Prepare a list by type or by use, for example: what do you wear, what rooms had music, books, and what was the special china you used on holidays. If you or someone in your family has photos taken in your home or business, or videos, these can also help you to build your inventory list.

 

Step 2: Proof and replacement value


1. Now you need to collect, as best you can, proof of ownership and reasonable replacement costs. Visa transactions, photos, or videos can help establish existence of that same Property.

 

2. Finding the prices for the same or if not available, then comparable (“like kind and quality”) items and getting current “Replacement Cost Value” (“RCV”) pricing, including tax can help to “make the case” for the values you are honestly owed.

Should you decide at some point in time to retain a Public Insurance Adjuster, it becomes REAALLY important that you choose a licensed Public Insurance Adjuster who is an experienced "pro", who will truly represent YOUR interest, FULLY and with no conflict (relationship with a general contractor or the like).

REMEMBER... If you are not sure that your claim settlement is complete and paying you fully, or if you become dissatisfied with your insurance settlement or realize that it is or may have been seriously under-paid, or even unsure whether or not it was all-inclusive and paid fully or not, AND EVEN IF you feel that it was properly and completely paid, DO NOT STOP THERE.