Property Insurance Coverage Law Blog : Florida Insurance Lawyer & Attorney : Merlin Law Group Law Firm : Tampa, Houston, Coral Gables, Gulfport

Stan got his start in the insurance industry in 1950 when he was only 20 years old. He was a college student on scholarship, working weekends scoping auto claims for his uncle, a well known insurance broker in New Jersey. Stan was known as a “runner” – he was paid five dollars for every claim he worked. On a given weekend, he could make twenty to thirty five dollars evaluating the automobiles, taking photos, and summarizing the damages.

Stan graduated from St. Paul College and went on to become an insurance agent. He was quickly promoted to managing agent. In 1956, Stan became a public insurance adjuster, starting first in New Jersey, and then expanding his business to five states --80 public adjusters strong.

Stan Kaufman worked approximately 30,000 claims on the East Coast before expanding to California. Stan was challenged in California. Back East, business was done with a handshake. Stan and other public adjusters built solid reputations and were respected by many insurance company representatives. Stan was known in the community for helping people navigate the muddy waters of insurance coverage. But after moving west, Stan encountered resistance when he was adjusting claims. Insurance companies and police and fire departments did not understand his role. The communities weren’t as familiar with the good work of public adjusters. Stan explained that in the beginning of his career in California, the competition between public adjusters was intense and caused a divide between policyholder representatives. Seeing an opportunity to improve the industry, Stan started gathering the troops.

Stan formed the California Association of Public Insurance Adjusters in 1976. CAPIA held monthly Saturday morning meetings. At every CAPIA event, Stan said he has pushed for CAPIA members to follow three key principles:

1. Brotherhood. Professional Public Adjusters should work together. Public adjusters should interact with each other on a claim with respect. Respecting the profession includes following a first-come, first-serve approach when several adjusters arrive on a loss site. Adjusters should join together to help protect policyholders.
2. Education is fundamental. Each CAPIA meeting features experts who discuss relevant insurance topics.
3. Socialize. The monthly meetings, originally held over breakfast, allowed the adjusters the opportunity to build up a sense of camaraderie.

Currently, CAPIA’s headquarters is in Los Angeles, California, and the association promotes professional public adjuster education and employs lobbyists throughout the Los Angeles area to protect the interests of the industry and the insureds.

Jeff Sjobring, vice president of CAPIA, said the association plans to honor Stan with a plaque, recognizing Stan’s lifelong hard work and dedication to the initiation and preservation of CAPIA at their August 5, 2011 Bi-Monthly meeting in Simi Valley.

For more information on how to join CAPIA, Jeff encourages licensed public adjusters to go to the CAPIA website at www.capiainc.com to contact the association. To be considered for membership, persons must be licensed by the California Department of Insurance and adhere to the CAPIA Code of Ethics. To be considered for affiliate membership, a person must be employed by a company or firm engaged in the business which serves the best interests of Insureds.

For directions to the August 5, 2011 meeting, where the featured speaker will be Amy Bach Esq., of United Policyholders, go to: http://www.lostcanyons.com/facility_directions.php. All Public Adjusters are welcome. Admission is the cost of lunch. Applications to join CAPIA will be available at the meeting.

This would be a great chance to meet Stan. After helping insureds for over 60 years, Stan has a wealth of knowledge concerning the principles and application of insurance coverage, and he is willing to share his knowledge in every way that helps policyholders.

There’s a disturbing nationwide trend of insurance companies chipping away at coverage for homeowners, says Amy Bach, executive director of the nonprofit United Policyholders consumer group. She says she’s disturbed by what she sees as policies becoming less adequate.

"We have been working on a number of fronts to try to reverse this tide, while alerting consumers so they have a chance to protect themselves," Bach says. "We have been going to regulators from all over the country and telling them it is getting very messy out there in the homeowners' market. Instead of blanket protection, it is more like Swiss cheese and there really are a lot of holes."

"In much of the country, the basic home policy is just for fire and theft," Bach asserts. "For everything else you have to have extra coverage.”

Public claims adjuster Steven Venook in Florida points out that mold used to be covered under standard home insurance policies; now it’s listed as an exclusion.

Like many other adjusters and policyholder representatives, Venook formerly worked for insurers but left to help policyholders. He founded Advocate Claim Service, a statewide insurance public adjusting claim service with a focus on customer satisfaction, in 2002. Venook is a graduate of the University of Florida. He gained extensive knowledge and experience as an insurance adjuster working for an independent insurance adjusting company and as an in-field claims supervisor for a major insurance company. During this time, he handled hundreds of property damage claims for both first and third party clients.

When asked why Venook changed careers, he said, "As a company insider, I observed firsthand how some insurance companies put their own profit motives ahead of their policyholders. I was schooled on how to turn a blind eye to customer feelings, only protecting what was best for the company. My hands were often tied from doing what I thought was right for the customer. After feeling remorse for my past actions, I decided to make a difference by helping policyholders with their insurance claims. Now, I put my knowledge to use helping protect consumers by making sure claims are handled in a way that is fair."

Readers are likely to be familiar with Amy Bach, she was a featured speaker at the 12th Annual Wind Conference^® last January when she addressed the expanding role of quasi-public insurance entities. Chip Merlin has also posted about United Policyholders and Amy Bach’s advocacy on the blog many times, including the posts Amy Bach and United Policyholders Supports Mississippi Insurance Protections and United Policyholders Continues its Good Work.

DeLuise prepared the claim on behalf of Onysko, and during the evaluation of the damages, he learned from an industrial hygienist that the insulation and the walls of the property were damaged by smoke. In order to replace the insulation, the insured must remove the sheetrock or take the siding off from the outside.

According to the news report, Farmers’s spokeman, Mark Toohey, said the company has already paid for a deodorizing technique to treat the damages inside the walls. After being contacted by 7News, a Farmers representative said they would visit the loss again. As of the time of his post, however, Farmers would not agree to appraise the damages with the insured.

Dayle Cedars reported that the Colorado Division of Insurance considers appraisal proper “only when there are discrepancies concerning value, the actual cost of an item or items. In situations where the ‘scope’ of the claim is in question, a third party is not required. The Division of Insurance cannot force an insurance company to pay a claim or to go through the appraisal process with a third party, known as an umpire.”

Many policies provide for appraisal when there is a disagreement regarding the amount of the loss. To set the amount of loss, the scope of damages should to be reviewed by the appraisers and the umpire. Thus, it seems the Division of Insurance’s limitation of appraisal to exclude scope of damages is off base.

The Colorado Department of Regulatory Agencies Division of Insurance’s bulletin, Insurer Requirements Related to Disputed Claims Subject to Appraisal, does not specifically exclude evaluating the scope of damages in an appraisal. It states “most, if not all, property insurance policy contracts include an appraisal clause which may be invoked if there is a dispute between the insured and the insurer regarding a coverage determination, the claim handling process, or the settlement amount.”

Unfortunately, Joshua Onysko is not alone in his fight against his insurance company. The reporter for 7News uncovered 18 others who were having problems. Scott deLuise explained that United Policyholders has been actively helping the victims of the fire loss learn more about insurance. Amy Bach, of United Policyholders, advised that her group is partnering with the County of Boulder to host a series of educational workshops. The next workshop will be held on Monday, January 10, 2011. The information provided to the policyholders from the last educational session is available here.

Next week, my post will feature more information about the situation in Boulder.

The full interview is available here.

In the unpublished section of the interview, Khan weighed in on why hiring a public insurance adjuster is beneficial. Recently, PAs have been under an even hotter fire than usual and, in light of all the negative news, it is refreshing to see a qualified public adjuster get the spotlight from a non-profit consumer organization.

Here is a portion of the interview:

AB: How can public adjusters get more money out of an insurance company than a policyholder can get on their own?

MK: It is simple. We level the playing field. If an insurance company adjuster told an insured following a fire to his 3,000 square foot house occupied by only two people, that what is standard in such a case is a one or two bedroom apartment or house, would he know if the information was correct? Would he know where to go to challenge it? There can be hundreds of issues on every claim where knowledge, background, expertise, experience and tenacity come together over and over again to get a policy holder more than he can on his own. It is the insurance company adjuster’s job to protect his principal. He does so by paying as little as possible. Having him represent both sides, considering he gets paid by the insurance company, makes no sense. We see to it that the policy holder is on equal footing. It requires availability of proper resources, knowledge, expertise, experience, perseverance, creativity, and just being proactive. Expertise comes with time, and through experience dealing with different types of claims and issues in a variety of ways.

AB: I’ve heard critics say that public adjusters justify their fee by padding the numbers. What is your response to that?

MK: No insurance company will ever pay a client more than they are owed after the carrier is absolutely convinced of the obligation. Any public adjuster that “pads” a claim is only asking for a protracted and long drawn out adjustment that will hurt their client as well as the public adjuster’s own reputation. This will ultimately result in a reduction in business for the public adjuster.

Every industry has bad eggs. I’ve had a philosophy that has worked for me on both sides: being aggressive, defensible and reasonable. That is why it is critical that the DOI license and regulate anyone who engages in representing a policyholder in a first-party claim.

At Greenspan we add value through our expertise with properly and accurately measuring insurance claims. We have in-house inventory specialists who go through a damaged site, and physically count every T-shirt, sock, pencil and makeup, or whatever articles you’ve got. Our building estimators have construction backgrounds and know how to properly cost what it takes to put a property back to its pre-loss condition. And, our in-house accountants and CPAs have tremendous insight on the working of numerous types of companies that allow them to accurately schedule a business interruption claim. Finally, having public adjusters who zealously advocate the policyholder’s right to fair and just indemnity under the policy is critical. That is how a public adjuster should add value.

Masood Khan previously practiced law, primarily representing insurers. Khan now represents policyholders as a public adjuster and is a vice president of Greenspan Adjusters International, in their South San Francisco office.

Masood Khan is no stranger to the law. He is a licensed California attorney who found his calling in public adjusting. He has made a point of telling me that he does not practice law in his dealings with insurers. Masood is delightful and very engaging. I have enjoyed working with him on matters where legal representation was required to get a claim fairly paid. I hope he will take a more active role in the leadership of public adjusting because his background and views about the role of adjusters are insightful.

Here are some of his comments about unauthorized public adjusting:

We do not let our lawyers, doctors, real estate and insurance agents, etc. engage in their professions without being licensed. Even our mechanics and our hairstylists are regulated and held to a certain minimum standard. Accordingly, individuals negotiating and compromising the rights of policyholders, particularly after they have suffered a loss, must be regulated, licensed and held to a higher standard.

Unfortunately, there are an abundance of construction firms, water and smoke remediation firms, and accounting companies that are engaging in unauthorized public adjusting, and breaking the law regularly, mostly with impunity.
...

Unless a CPA is an employee of the insured, it’s illegal for them to represent a policyholder for compensation in the settlement of an insurance claim without a license. A CPA would be an improper person to measure inventory losses. Additionally, simply having a CPA designation will ensure he/she has the skills necessary to measure and adjust the business interruption aspect of the claim. An insured would need the skills of a forensic insurance accountant who has intimate knowledge of the particular business, and one who is skilled in representing policyholders.

The legal audit departments of some major accounting firms and publicly traded consulting companies probably have good cause to be concerned about this interview. United Policyholders' newsletters are read by the various departments of insurance. It does not take a genius to figure out that an enforcement officer of any department of insurance could simply look on the web to find those people that cannot legally practice public adjusting, but advertise that they provide those services. I am surprised that more public adjusters do not file a criminal notice or complaint. It does not take much to start a mandatory criminal investigation in many states.

So, in the spirit of "The Clash" between public adjusters and those hoping not to get arrested, this song seems an appropriate warning:

 

The January Claims Tips explained how policyholders can effectively communicate with their insurance company adjusters following a loss. For many policyholders, ineffective communications leads to delayed claims or underpaid claims. The tips provide some practical suggestions that I recommend all claimants consider:

Effectively communicating with your insurance company is an incredibly important part of the claims process. Many insurance companies will try to handle your claim by telephone, with no records. You must make sure that everything in the claim gets documented in writing. How you communicate makes a world of difference in the amount of benefits you collect and how fast you collect them. We recommend that you:

1. Document every communication with your insurance company in a notebook or diary so you can keep track of the status of your claim.

2. Create a paper trail. Confirm representations and promises made in person or over the phone by insurance company personnel by sending them a short follow-up email or letter.

3. Use good grammar, punctuation and capitalization. Promptly respond to letters and requests if they are unreasonable. If they are, say so, in writing.

4. Be proactive: Give your insurer proof of your losses and ask for the dollar amounts you are entitled to. Don’t wait for them to tell you how much they owe you.

5. Use specific instances of improper conduct by your adjuster or insurer as leverage to negotiate the settlement you need. Your diary will come in handy.

6. Don’t mistake a friendly claim adjuster for a friend. Remember you’re in a business negotiation. Keep it professional.

7. Don’t use your insurance company as an outlet to vent frustrations and emotions related to the original cause of your loss.

8. Remember that everything you write and say may be noted in the insurance company’s records. Even if you’re frustrated, avoid saying or writing things that will make you seem uncooperative or the cause of delays or problems.

9. Don’t sign a confidentiality or non-disclosure agreement without consulting with an attorney. Agreeing to an overly broad or premature non-disclosure agreement can significantly reduce your leverage and ability to obtain full policy benefits.

10. Attitude is Everything: Be Polite, Be Prompt, Be Persistent.

This is great advice. I would add to number 9 that a policyholder should never sign a release without first consulting an attorney. Policyholders filing a claim with their own insurance company for a property damage are almost never required to sign a release to obtain payment, unless the matter is in litigation.

The United Policyholders site has hundreds of valuable tips and information about every imaginable type of claim. I consult it on a regular basis and have spent hours reading its seemingly unending library of claims information. Amy Bach, United Policyholders Executive Director, has accumulated and organized a very valuable site for anybody with a claims question or who may be looking to become more involved in the advocacy for policyholders.

Most people never admit they made a mistake, even after reflecting upon it and knowing they have. I make plenty of them everyday and made one in Friday afternoon's post, Amy Bach and United Policyholders Supports Mississippi Insurance Protections by not pointing out that the proposed Mississippi legislation may not accomplish enough to be worth anything and is worded incorrectly. Slabbed fairly slammed my post in "Merlin – Amy Bach and United Policyholders Supports Mississippi Insurance Protection" for failing to point this out, as they did in "Watered Down Policyholder Legislation Still Hanging on in the Mississippi Legislature."

Mississippi already has a very limited Policyholder Bill of Rights. I feel that the proposed requirement that the Policyholder Bill of Rights "must include a provision establishing reasonable time frames for the processing and payment of homeowners insurance claims" is something very worthwhile because delay of payment is the most common complaint of insureds following a loss. I also believe that eliminating the citation to the Fifth Circuit Court of Appeals decision in Leonard vs. Nationwide, 499 F.3d 419 (5th Cir. 2007), in the current Policyholder Bill of Rights is a valid change by substituting the language:

If a policyholder sues to recover under the insurance policy, the insurance company has the burden of proof as to the application of any exclusion in the policy and any exception to or other avoidance of coverage claimed by the insurer.

However, the following language in the proposed bill makes no sense:

Unless based on sound actuarial principles, an insurance company may not treat a policyholder differently from other individuals of the same class and essentially the same hazard when evaluating a claim.

Actuarial principles typically apply to rates and underwriting. They never apply to claims handling. Here are a couple of examples of how a slight modification of the proposed language may help policyholders:

Unless based on sound actuarial principles, an insurance company may not treat a policyholder differently from other individuals of the same class and essentially the same hazard when underwriting a policy.

or

Unless based on sound actuarial principles, an insurance company may not treat a policyholder differently from other individuals of the same class and essentially the same hazard when evaluating whether an application for insurance is acceptable.

So, is the quest of one motivated private individual, Kevin Buckel, to get a revised Policyholder Bill of Rights a practical attempt to add a little meaningful law for policyholders (assuming the wrong language can be corrected) or a Don Quixote waste of time that does more harm than good, as Slabbed suggests? Could it be a little of both?

United Policyholders noted Kevin Buckel in its 2007 Newsletter:

One person making a difference in Mississippi:
During the summer you’ll find Kevin Buckel keeping kids safe at the water park he manages, but since Katrina blew his home away, he’s become a self-taught citizen lobbyist working to enact a Policyholders Bill of Rights in his home state. With drafting and strategy help from UP, he’s refined the bill and is connecting with other MS citizens working to strengthen protections for policyholders in that state.

Visit Kevin’s site to read his proposal: http://www.msbillofrights.com/msinsurancebillforus.html, and check out “Homeowner Rights Battleground”
http://www.gulfcoastnews.com/GCNnewsHomeownersRightsBattleground.htm.

I give credit to Slabbed for demanding that my posts are accurate and that laws are written to make sense and advance justice. I also give all the credit to non-professional lobbyists, such as Buckel, who are actually meeting with our representatives, writing proposed legislation to advance policyholder rights, and trying to encourage others to take time and participate in our democracy. Policyholders need all the help we can get to protect our rights against the army of lawyers, public relation consultants, and governmental affairs types that the insurance industry has lobbying full-time in every state legislature.

In a letter to Mississippi Insurance Commissioner Chaney, Amy Bach calls on him to support policyholders in Mississippi with regulations demanding that insurers sell and service the insurance product so that full and prompt indemnity is accomplished. Here is what she calling on Chaney to do:

I’m writing to encourage you to lend your support to a legislative measure that passed out of the Mississippi House of Representatives earlier this week. My understanding is that the bill has been amended to address concerns you raised to the sponsor. The bill will strengthen legal protections for insured property owners in your state, and we hope your office will help get it enacted. You know all too well about the problems people have experienced in getting paid on their hurricane damage claims due to confusing legalese in property policies and unanticipated exclusions.

I am certain many may think these efforts are a waste of time because the insurance lobby in Mississippi seems to be in control of the political process. Standing up for the right principle and social policy is always the right thing to do. Like water in a stream relentlessly influencing the earth, just social policy reflected in law will eventually happen. But this will occur only so long as we stand up to those with more significant wealth or power that are attempting to keep the unjust status quo in place.

My hat is off to everybody who stands with Amy Bach and does something, however seemingly slight or unimportant, to help even the playing field for policyholders. In the long run, these efforts will prevail and be reflected in rules for accountability for the greater benefit of all.

Sometimes, the best course of action is to take simple steps to solve a problem rather than a radical departure. Tweaking a process may be the best course of action rather than setting in motion an entire new process that creates additional and often unforeseen adverse consequences. If I had to suggest one thing to Sean Shaw regarding his recommendations, it would be: “keep it simple.” There were so many new ideas being espoused at the roundtable without thorough thought as to all the consequences, that I am afraid he and others at the Office of Insurance Regulation could promote a new policy which could end up being more harmful than good.

Assuming that appraisal is a mandatory requirement in all property insurance policies, I still like what I proposed in my post, A Method for Keeping the Appraisal Clause in Property Insurance Policies Which Will Satisfy All Concerns. I have no problem saying that I may be persuaded with a better idea, but I heard none yesterday that provided a simple solution. After listening to others, I have changed my opinion regarding the licensing of appraisers. I think that there should be licensing of appraisers to help protect consumers from unregulated individuals giving legal and claim advice.

Policy should be reflected in law and regulation that promotes quick and full payment of property insurance claims. The implied performance duties of an insurer to adjust the claim are found nowhere in the insurance contract. Regulators and judges must understand that law and regulation are the only methods of placing adjusting performance claims duties contractually upon insurers. I agree with the insurance executive that spoke during the public comment portion of the session who said there needs to be accountability when those duties applied to the contract are violated. The Prompt Payment requirements championed by Senator Jeff Atwater should have greater teeth and the obligations of good faith claim handling should always have an aspect of accountability when breached.

The California law which requires disclosure of the insurer’s claims file to the insured upon request should be adopted in Florida. I raised this point in the session and nobody seemed to disagree. The first party claims file is the most relevant evidence of how the insurer is evaluating the claim. It seems to work in California and there should be no reason why it would not work here. Why shouldn’t an insurer be honest with its customer and honestly share how the claim is being handled? Only cheating adjusters would be afraid of honesty and transparency.

The individual largely responsible for this California law is Amy Bach, the executive director of United Policyholders. The California law provides:

The insurer shall notify every claimant that they may obtain, upon request, copies of claim-related documents. For purposes of this section, "claim-related documents" means all documents that relate to the evaluation of damages, including, but not limited to, repair and replacement estimates and bids, appraisals, scopes of loss,
drawings, plans, reports, third-party findings on the amount of loss, covered damages, and cost of repairs, and all other valuation, measurement, and loss adjustment calculations of the amount of loss, covered damage, and cost of repairs. However, attorney work product and attorney-client privileged documents, and documents that indicate fraud by the insured or that contain medically privileged
information, are excluded from the documents an insurer is required to provide pursuant to this section to a claimant. Within 15 calendar days after receiving a request from an insured for claim-related documents, the insurer shall provide the insured with copies of all claim-related documents, except those excluded by this section. Nothing in this section shall be construed to affect existing litigation discovery rights.

When I was speaking with Amy Bach about the Roundtable, she reminded me that California has optional appraisal where there has been a disaster. Either party may opt out. There, the insurers were abusing the process by outspending the policyholders and making the process so expensive for the consumer that it significantly lengthened the time to recovery and reduced the net payout because of the expense. Insurers leverage this fact with policyholders by threatening appraisal when negotiating settlements. As I pointed out yesterday, absent the obligations of good faith claims handling, the insurer often has no time pressure to pay claims quickly. Raising time and expense as a negative aspect to a consumer can provide insurers with enough leverage to achieve an underpaid claim result to the customer. Here is that portion of the California law:

Appraisal

In case the insured and this company shall fail to agree as to the actual cash value or the amount of loss, then, on the written request of either, each shall select a competent and disinterested appraiser and notify the other of the appraiser selected within 20 days of the request. Where the request is accepted, the appraisers shall first select a competent and disinterested umpire; and failing for 15 days to agree upon the umpire, then, on request of the insured or this company, the umpire shall be selected by a judge of a court of record in the state in which the property covered is located. Appraisal proceedings are informal unless the insured and this company mutually agree otherwise. For purposes of this section, "informal" means that no formal discovery shall be conducted, including depositions, interrogatories, requests for admission, or other forms of formal civil discovery, no formal rules of evidence shall be applied, and no court reporter shall be used for the proceedings. The appraisers shall then appraise the loss, stating separately actual cash value and loss to each item; and, failing to agree, shall submit their differences, only, to the umpire. An award in writing, so itemized, of any two when filed with this company
shall determine the amount of actual cash value and loss. Each appraiser shall be paid by the party selecting him or her and the expenses of appraisal and umpire shall be paid by the parties equally. In the event of a government-declared disaster, as defined in the Government Code, appraisal may be requested by either the
insured or this company but shall not be compelled.

Making the appraisal optional by law is an option which may be considered. Under this view, the inexpensive informal mechanism can stay in place by agreement. A negative aspect of my proposal is that policyholders may be better off simply litigating the matter rather than going through a full blown arbitration.

The insurance industry wants to push mediation. It wants to do this to avoid the perceived negative results of appraisal and still provide an alternative to litigation. My impression is that the insurer’s financial desire to achieve a reduction in the amount of claims severity (the average amount an insurer pays out for claims) can be achieved through a negotiation process where the insured can be leveraged by the prospect of delay and expense. Insurers train adjusters how to negotiate and even a voluntary mediation process can be abused. A Biloxi television station ran a feature of clients we represented that twice went through the Mississippi Department of Insurance mediation program following Katrina:
 

The real issue is how to get these disputes prevented in the first place. And, when they arise, how to get them resolved quickly and fairly. While it is easy for me to say that, coming up with an alternative dispute resolution process that is fair, quick and inexpensive, in a one size fits all format, is a puzzle that nobody has a perfect answer for. The prevention of the dispute and fair treatment can be accomplished as I have suggested with strong laws, transparency and good faith claims practice obligations.

But what about good faith disputes between parties? I still strongly feel that the insurer’s request for fair process of binding claim resolution with transparency is inherently sound. Indeed, that is what consumer’s want. And, what is often not said is that the result for the consumer once the dispute arises is often the skill of the appraiser or if litigated, the attorney selected by the policyholder. For example, our clients in the above video were advised by the first attorneys they hired to accept less in settlement than what the insurer twice offered in mediation. The skill of the right appraiser is something I noted in, Appraisers, Umpires and Appraisals as Valid Substitutions for the Right to a Jury Trial Depend on Viewpoint.

Insurance Veteran made a point that everybody in the insurance business knows. There are certain policyholders who want much more than what is fairly owed, and they unrealistically believe they are entitled to the money. Some of these people go over the top and commit fraud. Others just want magic to happen, and the claims money to be paid regardless of any justification.

While I can certainly appreciate his comment, he may have missed part of the point of my post. Many policyholder appraisers do not fully understand how to win the appraisal for the policyholder. They do not comprehend that the appraisal is truly an alternative dispute process that binds the policyholder.

Some may suggest that I am wrong, and that the goal of appraisal is a fair number for both sides. But, my policyholder clients may have a very different view of what fair is. So, if the insurer wants to dispute the amount in an appraisal, I want as much as I can get for my clients. After all, if there were no appraisal, my client would be asking a jury of peers for justice. But the insurance companies were historically so afraid of juries and costs, that a hybrid dispute process became standard in form insurance policies. Guess who benefitted most from that process?

Accordingly, my warning to all policyholders and those working with them in appraisals is that it is binding and should be taken as seriously as a public trial. I want the mindset of policyholders faced with an appraisal to be:

There is no second chance.

I started writing a reply that I feel better explains my impressions on this topic. Some suggest that I am opposed to appraisals for a number of reasons, including the possible loss of litigation revenue. These people do not fully understand the consequences of appraisal. I have a hard time explaining the historical importance of a jury as a core concept of American democracy, but I believe that giving up the right to a jury trial is the most important consequence of appraisal. Justice comes from the values of one’s peers in the community, not experts or government deciding what is fair and just. This is a fundamental concept of American democracy and protected by our Constitution.

My impression is that the skills of consumers’ appraisers have become much better. There are now numerous seminars that provide knowledge to public adjusters which result in an understanding of how to obtain a fair settlement for the policyholder through the appraisal process. Indeed, there now seems to be a certain segment of public adjuster that cannot reach voluntary resolution and thus use appraisal as the actual adjustment of the claim. The response is that some insurers are now removing the clause. From their view, there is not first a good faith adjustment which is then subject to a process that has no rules and enough transparency for them to think it is fair. And, the most important reason insurers are removing the clause is that they losing.

Finally, I applaud Sean Shaw. I would love to participate and listen to the views of the insurance industry. I have a warning about the comment from the lobbyist from the insurance trade association. But, that is for another day.

Again, keep it simple.

This week, Miller testified before the National Association of Insurance Commissioners that damages caused by Chinese drywall are covered under first party property insurance policies. Dan Luby of the Florida Insurance News forwarded an article, Lawyer Sees Insurer Vulnerability To Drywall Claims, that indicated:

Charles Miller, of the Insurance Law Center in Berkeley, Calif., made his remarks here at a hearing on drywall issues by the National Association of Insurance Commissioners Catastrophe Insurance Working Group at the NAIC’s Winter National Meeting.

Mr. Miller drew upon language contained within Fire, Casualty & Surety (FC&S) bulletins, a publication within National Underwriters parent Summit Business Media, to raise questions about whether exclusions apply.

If you want to read the FC&S Bulletin Miller is referring to, I wrote about it in a prior post, Chinese Drywall Losses Covered Under First Party Property Insurance Policy.

The article also noted:

Mr. Miller said FC&S - resource for insurers for interpretation of both commercial and personal lines coverages - notes that many courts have found the pollution exclusion in homeowners policies only applies to “traditional environmental damage.”

Mr. Miller said, “The release of gases inside of a residence is not normally considered to be traditional environmental damage.

Regarding latent defect and inherent vice exclusions some insurers have cited, Mr. Miller noted the FC&S bulletin states the exclusion applies to “a loss due to any quality in the property that causes the property to damage or destroy itself that results from something in the property itself.”

The drywall, he noted, is not destroying itself, but rather causing ensuing damage to its surroundings, which should be covered.

Mr. Miller said regulators should look to protect consumers by conducting multistate market conduct exams to ensure proper investigations into Chinese drywall are being conducted. Mr. Miller said there is a “critically important relationship between a timely and thorough investigation and a proper evaluation of the coverages.”

Amy Bach of United Policyholders was at the same lecture concerning Chinese drywall coverage issues that I wrote about earlier this week in Ensuing or Resulting Loss, and the Burden of Proving Causation Explained Simply. I talked briefly with Amy about my concerns over the coverage analysis and whether courts would misconstrue "ensuing loss" language.

Amy Bach also testified and was quoted with a rather unique suggestion for helping out policyholders with coverage issues:

"Ms. Bach indicated that insurers should assist policyholders and cover their claims now, and if they are found not liable later, they could then subrogate against those entities."

I personally do not know any first party insurer that has afforded any coverage for Chinese drywall losses. I seriously doubt they would do so because insurance companies love to hold money. Further, if there truly is no coverage, they may lose their subrogation rights as a volunteer rather than a party obligated to pay a debt.

One trend seems to be more coverage gurus stating that coverage exists to some extent for first party Chinese drywall claims. As a result, more claims are going to be made. We will see how they play out after denial and litigation ensues.

Below is an item from the National Association of State Farm Agents' website. The letter she referenced provided:

Florida Fallout

Florida agents statewide are in a controlled panic over State Farm's recent decisions concerning its desire to remain in, or leave the State of Florida. Whether the problem is driven by underwriting issues or political considerations really does not make much difference at this point. The current underwriting restrictions alone are enough to drive many agents out of business.

You are all familiar with the more recent facts. State Farm requested, among other things, a sizeable rate increase. When that increase was denied, it filed a request to withdraw from the fire market in Florida. That request was met with a remarkable opinion from Florida Insurance Commissioner Kevin McCarty (see the entire opinion, and other related documents on NASFA.com). In a 14-page order, Commissioner McCarty not only denies State Farm's request, but takes strong exception to the Company's conduct to date. State Farm has until March 7 to appeal the order.

The order highlights the strong difference of opinion and approach being taken by Florida and State Farm. One glimmer of light for agency is the finding in paragraph 24 of the order that State Farm is placing too great a burden on Citizens Property Insurance Corporation by only permitting agents to rewrite the policies there. The order goes on to require State Farm to permit it's agents to write homeowner's coverage for other carriers. We would expect State Farm to vigorously oppose this idea.

At this time, there are far more questions than answers. Each type of agent contract faces different issues and challenges. Entitlement to or continuation of termination and extended termination benefits being paramount to the AA3/4 agents. However, other critical questions, most directly affecting the agent's ability to survive, still loom large. Most cannot be accurately answered until Florida and State Farm determine if, and how, State Farm will stay in Florida.

NASFA continues to collect information concerning State Farm's actions, the State's actions and company releases to agency.

I suggest that if you want to see whether all of State Farm's agents truly trust State Farm "to be there," as it advertises it will, you visit the National Association of State Farm Agents website.

Again, for many different reasons, I hope McCarty and State Farm can work out a deal. And, as indicated in my post, Is the State Farm Policy Really Worth Anything?, the current advertisement campaign by State Farm suggesting that it will be there for policyholders after a disaster is a joke.

This is the California Law she referred to:

Cal Ins Code § 10082.3 Provisions regarding loss requirements, appraisals, and adjusters; Applicable policies

 Notwithstanding any other provision of law, the following provisions regarding loss requirements, appraisals, and adjusters shall apply to the following types of policies originated or renewed on and after January 1, 2002: all policies of residential property insurance, as defined in Section 10087, all policies, endorsements, or certificates of insurance providing coverage for loss or damage caused by the peril of earthquake issued pursuant to this chapter; and all policies of basic residential earthquake insurance issued pursuant to Chapter 8.6 (commencing with Section 10089.5).

...

 The insurer shall notify every claimant that they may obtain, upon request, copies of claim-related documents. For purposes of this section, "claim-related documents" means all documents that relate to the evaluation of damages, including, but not limited to, repair and replacement estimates and bids, appraisals, scopes of loss, drawings, plans, reports, third party findings on the amount of loss, covered damages, and cost of repairs, and all other valuation, measurement, and loss adjustment calculations of the amount of loss, covered damage, and cost of repairs. However, attorney work product and attorney-client privileged documents, and documents that indicate fraud by the insured or that contain medically privileged information, are excluded from the documents an insurer is required to provide pursuant to this section to a claimant. Within 15 calendar days after receiving a request from an insured for claim-related documents, the insurer shall provide the insured with copies of all claim-related documents, except those excluded by this section. Nothing in this section shall be construed to affect existing litigation discovery rights. (Emphasis Added)

I love the "including, but not limited to" language. Why shouldn't these documents be turned over? It would stop much of the gamesmanship and deceit that commonly occurs. Honest claims adjustment should be transparent--does anybody disagree?

I recently wrote on the noble work United Policyholders does on a very limited budget. Amy Bach's suggestion that this law become a national standard is well founded. It would prevent some of the needless insurance coverage lawsuits because the insurer's analysis would be truly transparent to the customer. I know of at least one major insurer, FM Global, that claims to have this good faith standard in place throughout the country.

For consumer interest attorneys attending the American Association of Justice Convention in San Francisco next week, Merlin Law Group, with a number of other policyholder law firms, is co-sponsoring a cocktail party to benefit United Policyholders. It will be held on Monday, July 27, in the private library at Bourbon & Branch, a 1920’s inspired San Francisco speakeasy located one block away from the AAJ convention hotel. It starts at 5:30 p.m.

Since the party is sponsored by a number of consumer interest law firms, including: Daley, DeBofsky & Bryant; Goldstein, Gellman, Melbostad, Gibson & Harris; and the Merlin Law Group, there is no cover charge and your first drink is on us. If you wish to support United Policyholders or add your firm as a sponsor of this FUNraising?? event, a minimum (tax deductible) contribution of $500 is required. Please contact Emily Cabral at (415) 393-9990 or emily@uphelp.org to sponsor, donate, or obtain an invitation.

The work of a handful of policyholder advocates such as Amy Bach help keep policyholder interests in front of state legislatures and Departments of Insurance despite an extraordinarily well funded opponent. I find it ironic that the major players in the insurance industry spend so much time and money trying to prevent passage of laws, such as the one above, which would ultimately protect them, as well as their consumers, from unscrupulous competitors. Maybe that says something about the claims culture of many insurers...and something they should think about when they reflect on business ethics and lobbying

The newsletter also links to even more information on the United Policyholder website, such as Claim Tips:

“United Policyholders' Claim Tips simplify the insurance claim process and offer practical suggestions for getting the insurance protection you paid for. Our tips are based on our organization's many years of hands-on experience. They include information from the nation's leading policyholder-oriented insurance professionals, including former industry insiders, agents and brokers, attorneys, consumer advocates and public adjusters. Our goal is to help policyholders understand the process and get fair claim settlements. We offer these tips as a public service.”

I met with United Policyholders Executive Director, Amy Bach, in California two weeks ago. She has done a wonderful job incorporating new projects and raising awareness of insurance concerns from the consumer’s standpoint. She is always looking for help from those with an interest and knowledge in the issues facing policyholders. She needs expertise from those individuals to participate in dialogue with Departments of Insurance and in front of legislative bodies. If you have such knowledge or interest, I strongly urge you to contact her. Attorneys can always participate in the pro bono amicus project. And, everybody should consider financial support for such an important organization.