Invoices: A Practice Tip for Policyholder Counsel and Public Insurance Adjusters -- A Warning to Otherwise Honest Policyholders
An insurance company adjuster's request for invoices of personal property items can be a trap for otherwise honest policyholders. I have been thinking about this topic as a result of Corey Harris' post, Notifying the Police in the Case of a Theft Loss, and the weekly highlighted fraud case in Claims Magazine, "Fraud of the Week: Suit Yourself." The basic rule for policyholders to remember is that you are under no obligation to give an insurance company what you do not have and never make up a document because the insurance adjuster says you need it to get paid. For policyholder counsel and public adjusters, protect your client and make certain they are not doing this.
Let's set the stage for how this happens. After a theft or a fire, the insurance company adjuster comes to the loss. One of the items orally requested from the policyholder is a list of all the lost, stolen or destroyed personal property along with all receipts. Exactly what is said becomes a major issue and some of my clients in the past have indicated that they did not make a claim for personal property items because the insurance adjuster said they had to have receipts to verify ownership, value, age, etc. Sometimes, my clients hear the instructions and think they are required to have receipts or they will not get paid.
I have always felt that the proper instruction from an honest insurance adjuster knowing that most people do not keep records or receipts of their covered "stuff" is:
The insurance policy allows us to ask for all the documents you have that help verify the loss. If you have any receipts for the items you are claiming, I would like to see those originals. If I need a copy, I will pay you for the cost of the copy. Please do not think that you have to have a receipt of the purchase of any personal property item you are making claim for, but if you do, I have to see it as soon as possible. Regarding your purchase of replacement items for those that are lost, the policy does require you to keep those documents of purchase and those receipts. You have to keep those post-loss purchase receipts as a condition under the policy to get replacement cost benefits."
(Note: In Florida, a homeowner insured with an admitted carrier gets replacement cost of personal property right away, so that instruction is not entirely accurate in Florida.)
Some insurance adjusters fail to make the highlighted portion clear to the policyholder. Some policyholders fail to hear it. And as a result, invoices are made up or somehow obtained that are not the original but a fabrication. Special Investigative Unit (SIU) adjusters love this game of finding the fraudulent invoice. While I have no problem of them catching frauds, I hate when otherwise honest people are baited into a needless situation of committing a fraudulent act just to get what is already owed to them.
The Claims Magazine article could be such a case or it could be a case of a person trying to justify an intentionally inflated claim:
When Gayland Anthony Oliver suffered a structure fire to his Greensboro, N.C., home in May 2009, he is alleged to have used the opportunity to pad his claim with some pretty fancy duds.
...Oliver claimed that $8,100 in custom-tailored suits had been destroyed in the structure fire. However, State Farm Fire and Casualty Company found the claim suspicious and conducted an investigation. They discovered that the invoices submitted for payment were fraudulent and did not reflect the true cost of the suits.
Oliver was arrested for submitting false claims to his insurance company....
Corey Harris' post was accurate, but there are many of the same traps for the honest policyholder in the theft scenario. The insurance company has many valid reasons to require that the police are notified following a theft loss. Three of those are:
- Theft is not only a crime against the owner, but one against society. Finding thieves and placing them behind bars helps everybody, including insurance companies and their customers.
- The police often recover stolen items. To that extent, the recovery of stolen items mitigates the insurer's loss and if recovered soon enough, the policyholder's loss as well.
- Theft always has a component of a moral risk to the insurer. A few policyholders stage, hide or otherwise claim that a loss occurred as a result of theft caused by a third party when it simply is not true. Unlike a natural disaster, there is always a possibility of fraudulent theft. The requirement to notify the police helps prevent such from occurring, increases the probability of finding it, and therefore reduces the "moral hazard."
The police may ask for a list of what was stolen and the "value" of those items. The important thing for the honest policyholder is to get a revised list to the police if either the items or values change so that the SIU guys do not start asking about discrepancies. They will often check, and they may inquire as to significant differences. If numerous items are stolen, most people will not realize what is missing until they conduct an inventory of what is left and try to remember what may be missing. Sometimes, people simply forget what items they owned or realize that items in another part of their structure were also stolen until they look for them. The important thing is to keep the insurance company and police informed and with the same information about the changes and why the changes are being made.
And always remember, two wrongs never make a right. Never make up an invoice and never claim more than the full value of an item just because the insurance company may threaten not to pay or pay enough. When the insurer does not conduct itself in the right manner, I bet you can guess the type of professional that should be called to do something about that.
I have serveral claims now that the insurer is demanding receipts or they will not pay the contents claim. These were fire losses where the insured stated they do not really keep receipts, and the few they did have, were destroyed in the fire.
How do I challenge the request for receipts?
You are dead on with this one...as usual!
Its funny, just last week I finished an appraisal of a commercial risk. Through out the entire appraisal, the carrier's appraiser would not stop requesting every single receipt that the insured was claiming.
Almost every single email sent from him to myself and/or the umpire was requesting receipts. He spent all his time requesting receipts and did not even submit an independent estimate; his entire presentation consisted of the restoration estimate provided by a third party (but during examination, ended up being the adjuster's friend), (10) photos and constant requests for receipts.
Even at the very end, after 6 months of appraisal, he was still asking for receipts:
"Tom -- let me know when your done, at this time I would request another meeting at the loss to go over all your disputes, at which time, I will again request that you provide all the receipts for the claimed property."
Now, going back to an earlier email just as we submitted our differences to the Umpire, I responded to some of his "requests" in this email:
(Statements made in "quotes" were written by the carrier's appraiser; statements with "*" inserted are the most relevant to your blog posting)
Dear Carrier Appraiser:
As per your last email, you have made several statements that eluded to the fact of many issues pertaining to this dispute. Many of these issues were not communicated to me, until now. With consideration of the issues and their influence on our appraisal of loss, please expand on your statements, as per my requests below.
"The insured was claiming most of the items on your list were under 2 years old and would not and still have not provided bills for the items."
As the age of the items would only have an influence on ACV and not RCV, I only see that having a factor in the latter aspect of this appraisal. In addition, *where in the policy does it require the insured to provide "bills" to be become whole? Can you please specify this, as I would want to honor any legitimate aspect of this dispute.*
"PA was claiming everything in the entire shop as a total loss and I did not agree and the company wanted to see the loss and brought in a cleaner to get an opinion and cost of cleaning of the contents"
Ok, so according to your statement, the public adjuster claimed that all items were subject to an extent of damage that deemed said items to warrant a replacement? As you state that you disagree, what methods were used to determine said items were to respond to restoration to regain their pre-loss condition? Was their a diminution of value of said items established once restoration/cleaning process is complete?
"After this meeting it was agreed that the cleaner would work up a cleaning estimate and that would be the offer."
Who was the restoration company? What were the names of the individuals that were onsite conducting this cleaning? What qualifications did each cleaning specialist hold to ensure that their evaluation and determination of smoke and water damage was, and its extent of damage to each line item?
"There are issues with the file, such as the insured claiming items were thrown out after the fire and that the items i inspected during my 2nd inspection were items that had been replaced from the time of my first and 2 inspection yet they wont provide bills"
Interesting, so you are saying that during your second inspection, items that you determined undamaged were allegedly already replaced by insured? And if so, what extent of time was between you first visit and your second? Did the insured need to replaced damaged items to resume business to be in compliance with policy terms and conditions? Or were these items replaced pre-mature, and should the business have been shut down into proper evaluation of said items were made and determined? As per your statement, it leads me to believe that you are of the opinion that said items were not replaced, and may have been the original items. As this is a serious accusation, and deserves attention, may you provide any supporting documentation to substantiate this statement? I am more then interested to investigate this claim, as I dedicated to finding the true value of this loss, and will do my due diligence to determine all aspects of this dispute.
*Again, you state that the insured did not provide bills; for what reason is this required to settle a claim? As it is definitely a helpful form of documentation to determine damages, it is not required, and any interruption or delay in claim payments would be wholly with out merit. Please provide me information on these requests and what terms of the policy that said requests would satisfy.
"I can outline all these issues when we meet at the loss"
As per your comments prior, it is of my opinion that most issues pertaining to this dispute may have incurred many months ago, and may prove impossible to determine by visiting the loss site, when, and I quote, "items were thrown out after the fire", how would our visit on site allow us to determine extent of damages if items have been removed from premises? An on site visit may be necessary, but I am not sure how much information we will be able to determine. We may be better off determining value of loss, and allowing the courts determine other aspects of this dispute, as it may prove above and beyond the confines of the appraisal clause.
As you have proved to be of the utmost professional caliber up until now, I am confident that you will invest the required time to answer my questions, and shed light on some of these issues we must evaluate to ensure that the insured becomes whole, not more and not less.
I await your feed back.
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Chip, by the way, in case you were wondering, the Umpire signed the appraisal award for:
OFFER
Insurance Carrier offer: $31,509.05
APPRAISAL AWARD
Umpire has determined that the loss value is as follows:
Replacement Cost Value: $85,964.20
Actual Cash Value: $79,390.14
Net Increase on ACV basis
$79,390.14 - $31,509.05 = $47,881.09 Increase
Thomas V. Di Sieno
Contents Appraisers and Inventory Specialists