While State Farm May Stay in Florida, Appraisals May Go
Julie Patel, of the Sun Sentinel, reported that Florida officials and State Farm appear to be working towards a mutual solution to keep State Farm selling property insurance in Florida:
Insurance Commissioner Kevin McCarty told the Florida Cabinet Tuesday that State Farm may not leave the state's property insurance market as planned and the state is developing a report card on insurers to help consumers and increase competition.
“We’d like them to be a good neighbor so long as they are a fair neighbor," Gov. Charlie Crist said about McCarty's prediction that State Farm will stay in Florida in a smaller form.
Increasing property insurance capacity in Florida is a significant public objective. Our governmental leaders should encourage this. Given the lack of a true open or free market as a result of limited capacity, many insurers attempt to charge rates which are unfair because there are no, or limited, alternatives to buyers. I disagree that complete rate deregulation of Florida's non-free insurance market, which some legislators and State Farm lobbyists were calling for last year, will cure the problem.
Dan Luby reported in Florida Insurance News that the Florida Office of Insurance Regulation has approved another form policy without the appraisal process.
On 11/16/2009 the Florida Office of Insurance Regulation (OIR) approved the elimination of the Appraisal Clause from the homeowners multi-peril policy for Liberty Mutual Fire Insurance Company (NAIC Company Code 23035) and The First Liberty Insurance Corporation (NAIC Company Code 33588). This change is effective 12/14/2009 for new business and 02/04/2010 for renewals.
This is a definite trend. Some claims executives have confided with me that they feel the process is unfair to them for several reasons.
First, they complain that many public adjusters use appraisal as a means to obtain a split between an outrageously high estimate and a "fair" estimate. They complain the appraisal panel, more often than not, simply splits the differences of the estimates.
Second, they feel that many coverage issues get intertwined with appraisal. Thus, they complain that uncovered causes of loss often wrongly get included into appraisal awards.
Third, the process becomes ripe with gamesmanship involving millions of dollars with larger claims. They complain that the informal nature of the appraisal process does not protect then from improper conduct and activities.
I am not going to comment on these complaints because I am not going to change any insurance company executive's perspective on this issue. From my perspective, policyholder's with professional representation at appraisals are doing much better than a decade ago, when they often went without professionals experienced in the appraisal process. My impression is that these higher awards are why some insurers no longer want to allow appraisal to continue.
The important aspect for the policyholder is that increasingly, there will no longer be a binding alternative dispute resolution process. Public adjusters may have to start preparing their work for litigation rather than appraisal. The exactness required in litigation is much higher than most appraisals because there will usually be greater critical analysis of the damage and coverage issues.
The bottom line is that I expect this trend to continue. Appraisals could become rare as more companies change their forms, removing the clause. Some policyholders may simply "give up" on a claim because litigation is a much more risky and demanding process than an informal appraisal of damages.
Difficult one for Chip to comment on , With no Appraisals who stands to benifit ?
Litigation will be the only way foreward
With morre litigation , more accurate public records and more class action suits against Insurance companys that reguarly Short pay claims ,
Homeowners will benifit in the long run ,
Lawyers will benifit ,
Appraisers stand to loose ,for the same reason the Roman Empire declined !
Hello Chip.
A couple things, you wrote:
"...My impression is that these higher awards
are why some insurers no longer want to allow
appraisal to continue...."
I see, so because they're having to pay the benefits due, they'd rather do it because a jury or Judge tells them they have to in lieu of an Appraisal Panel? Well, if that's the case, then I feel all ins. companies should be in synch (to avoid confusion, discrimination, more time wasting, etc.) and - if a claim cannot be settled - then suit should be filed immediately since that (usually) adds another year to the life of the claim anyway.
And then you list "First," "Second," and "Third" reasons why:
"...Some claims executives have confided...that
they feel the process is unfair to them for several
reasons."
And then you list three reasons why they don't want to play "appraisal," the main reason being (realistically) that they (a) don't want to pay their claims (there's a shocker) and (b) they don't like to lose. Oh well....maybe they should go into the cosmetology business instead then.
Finally, you indicate that:
"....Public adjusters may have to start preparing
their work for litigation rather than appraisal.
The exactness required in litigation is much
higher than most appraisals because...."
Personally, I feel that P.A.'s (or any professional retained by an insured for that matter) should "prepare" their work with "exactness" because it's their job to do it that way (i.e., EXACTLY right) - NO MATTER WHAT - albeit if it's being prepared for litigation, appraisal and/or to send a letter to the claims adjuster.
Bottom line, as always, it's the INSURED that suffers the most in all of this "stuff."
All too often, what should be a paid claim turns into a Supreme Court (Ex: Kodrin) issue/case.
While it's "business as usual," for the Public Adjusters, the attorney(s) for "each side" involved and the insurance companies, it's the poor little insured who (literally) gets the "shaft." Yeah, hopefully, ONE DAY they'll win and get their benefits paid - of course they won't receive all their benefits because they have to pay the people they were forced to retain to obtain them!
So, instead of whining about the appraisal process, those ins. co. executives sound like they need some bad faith verdicts slapped into their IN BOX.
SHIRLEY HEFLIN
Bill,
I am not so certain that policyholders benefit in the long run.
But the insurers are doing it to lower payments--no matter what the explanation.
Shirley,
You may have a very valid point in that conclusion.
It is amazing how many claims are now resolved throughh appraisal and what will happen as this process is not available.
Here's what Florida's Chief Financial Officer, Alex Sink had to say at the FAPIA Fundraising Event for her 2010 Gubernatorial run:
"What would we do without Public Adjusters? Where would people go when they had nowhere else to turn?"
One more thing regarding the OIR...and this is right off of their site...I guess you could call it their Mission Statement...?
The Florida Office of Insurance Regulation (Office) has primary responsibilities for regulation, compliance and enforcement of statutes relating to the business of insurance and the monitoring of industry markets. The Office pursues its mission of PUBLIC PROTECTION via regulatory oversight of insurance company solvency, POLICY FORMS and rates, market conduct performance and monitioring new company entrants into the Florida market.
This revised language (both the intent and the implication) in the policy form (Exclusion of Appraisal) needs to be brought to the attention of policyholders in the State. I am assuming that the OIR will mandate carriers (as I beleive is requirement) to notify policyholders of this change in language. It has long been an issue that the flow of information, relevant information that directly affects policyholders has never gone down-stream in an appropriate manner...it is usually divulged, discovered or brought to the attention of the policyholder at the most inappropriate time...in this case, at the time of loss.
It's painfully obvious that The State has issues (garnered through the efforts of those lobbying in Tallahassee with the deep-pockets) with the Public Adjusting field...first the 48 Hour Rule and "free speech" and now hitting them blind-side with another shot that does nothing but do ill-harm to policyholders looking for fair and just treatment. The State and the Politicians are attacking policyholders through these ill-defined moves and again will only raise additional discourse in an already troubled industry. People are blindly being led to slaughter...I may be getting a little emotional here and having a hard time finding the right words...but, one word does come to mind: GREED.
yeah,the process becomes ripe with gamesmanship involving millions of dollars with larger claims.
As one of many seasoned general contractors that specialize in insurance claim related work, I believe that the contractor that:
1. Recognizes and understands blatant and hard-to-detect (hail, wind, fire, water) damage to a given structure, and it's individual components, and common latent/residual damage, and -
2. Recognizes and understands safe and thorough deconstruction and reconstruction protocols that actually restores a property to a whole state, and all that that means per structure for the sake of complete architectural and finsh continuity, and -
3. Recognizes and understands a fair market and (profitable) estimation of the reconstruction costs, that can be (line item) justified for the business risk and investment risk involved - Can actually be a valuable ally to their insured clients.
Per 19 eco-catastrophes only three of our clients were "forced" into the appraisal process. All were Safeco covered (residential) properties in the Rio Grande Valley Texas city of Weslaco.
The intense hail/wind/rain storm produced various forms of common external and internal damage to the three clients structures.
Safeco was intent on deflating/denying the actual fair market replacement costs by refusing to fairly calculate general contractor overhead and profit (GC O&P) cost factors towards the roofing components. All other damaged components of the clients structures were estimated with GC O&P towards them, but they did not "allow GC O&P costs on roofing system damage in Texas".
We still have those client files, and many, many other similar files that prove that in the last 10 years many major and minor insurance providers, including Allstate, State Farm, USAA, AAA, Farmers, Farm Bureau, Germania, and other TWIA members, have taken and practiced the same synthetic and unfair replacement cost and construction market position.
All three of those Safeco clients tired of the apraisal process, and adjuster double-speak, and broke contract with us. We felt that that was the actual outcome the insurers/ adjusters were nudging their clients towards. (The legal professionals that analyse this commentary probably see the contractural relationship interference principle, and anti-trust business principles, being perpetuated by insurance providers against Texas construction business owners, and their clients).
We focused on other insured clients inhand, that actually stood up to their insurer/adjuster, so that GC O&P was logically accounted for and properly paid them, and conversely, us. One of those clients was a retired project manager for a large and well known construction company in New York, and was astounded at (Allstate's) attempt to pretend that GC O&P "was not paid on roofing losses in Texas".
We, and other general contractors across Texas, diligently report to the Texas Department of Insurance ANY insurer/adjuster/adjusting firm conduct that smacks of unfair and/or fraudulent business practices.
If the appraisal process is removed as relief for policyholders, I believe that the illegal and unethical business practices and false indemnification tricks that corrupt insurers and adjusters use against the general public will naturally increase, unless, the actors that unconscienably perpetuate unfair/fraudulent claim settlement practices (for their paycheck) are punished appropriately.
Chip Merlin, and others...Thank you for your integrity and focus required for checking and exposing insurers and adjusters conduct that has been, and is, socially, physically, mentally, emotionally, and financially damaging to naive and trusting policyholding claimants.
rogerpoegc@gmail.com
catcontractor.org
The infamous Roger Poe! I've seen your name (and talked with you) numerous times over the years. Great post by the way, accurate and very fair! I used to work for a Pls ins. atty.
Great to "see you around" again....
SHIRLEY HEFLIN
So my idea of taking the Umpire Certification course does not seem like a good one at this time.
Do you believe the elimination of the appraisal clause will become a national phenomena or just a short term consumer SHAFT move?
My opinion is that an insured with a claim of $10,000 or less will find it impossible to obtain a contingency fee based attorney. I hope I am wrong and that a contingency fee based attorney might have a great Bad Faith Claims compensation opportunity.
So, Chip Merlin, am I wasting my time becoming a Certified Umpire and Public Adjuster? Your opinion means a lot to me. I am following your Top 10 Tips on How to Be A Better PA and all I need to do now is pass 1 more exam to get my AIC designation. I am even thinking about getting my Casualty Claims Law Associate designation from Amercian Educational Institute and getting a Paralegal Certificate so I can work as a trail attorney litigation support rep if the PA career goes down the toilet.
John,
Not at all. Some of the very best public adjusters in the business get great results for clients and rarely have to resort to appraisal or litigation.
Appraisal is just one method of resolving claims. And, while I expect it will be found less in Florida, good public insurance adjusters will make a fine living here with or without the clause.
Finally, we have younger attorneys in our firm that would love to represent policyholders unfairly being treated by their insurers on small claims. While I now have several $100m plus resolutions, one of my favorite cases was to represent a little old lady whose claim for hole in the muffler was denied. The cost was less than fifty dollars. The CNA insurer was arrogant and said that I would never sue over such a small amount and refused to pay the lady. I taught CNA a lesson about arrogance and improperly treating an elderly customer.
I did not make much money. But, I felt good about using my talents to prevent a customer from being "nickled and dimed" by a claims adjuster. I am certain there are many other attorneys that get into the law to do the same thing and help provide justice for all.
Chip,
Your desire to provide justice to the common person is why you are my hero. I now have my AIC and AINS designations from the Insurance Institute of America.
I am also Level 3 Certified on Xactimate and have taken IICRC WRT, ASD, FSRT courses.
I will soon start the University of FL paralegal program. It is not an ABA approved program; and it is a non-credit course taught through the CE dept; but it is taught by a practicing FL attny and is 1200 clock hours. NALA only requires completion of a 900 clock hour program to sit for the CP exam.
While I will learn about personal injury, family and criminal law maybe all of that info will help me get a "back up job" if the Public Adjuster route does not pay off for me.
I will then focus on learning as much as I can about commercial and residential construction.
My opinion is that with so many new lawyers with no jobs and many lawyers now getting laid off I believe the insurance industry will "re-think" removing the appraisal clause from the insurance contract.
I look forward to your reply.
John,
Your statement:
"Your desire to provide justice to the common person is why you are my hero,"
humbles me. I don't look at myself as anybody's hero. I am just doing my job.
"My opinion is that with so many new lawyers with no jobs and many lawyers now getting laid off I believe the insurance industry will "re-think" removing the appraisal clause from the insurance contract,"
is not the reason insurers will determine to remove the appraisal clause. The appraisal procedure in ripe with injustice because it has not rules in many states. In some cases, insurers walk over unsuspecting policyholders. In some cases, there is a perception by many insurers that it is being gamed by public adjusters or those that solicit policyholders as "appraisers."
Thanks for your comment and keeep up the great work regardless of the motivation.