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

Indeed, this issue does not get raised just by insurance adjusters. My experience is that when insurance defense counsel hire engineers, the engineering report repeatedly notes the lack of “structural” damage to a building. A noted example of this is with roof claims. HAAG engineers often repeat in their reports and at seminars that there is no structural or functional damage to shingles or parts of the roof. The result is insurance company attorneys saying that they are not paying for anything unless there is proof of “structural damage.”

I am going to provide just one example to show how absurd this position is. The FC&S Bulletins discuss the issue and use the same example of vandalism that I usually provide. Interestingly, the question posed involved a roof with cosmetic damage, and I bet the insurance company had a roofing expert say there was no functional or structural damage to the roof:

Direct Physical Loss and Cosmetic Loss

Hail stones have created dents to a copper roof. The section of roofing is located over a second story bay window. It does not appear that the hail has compromised the life span of the roof's surface or otherwise affected or decreased its useful lifespan.

Our HO policy provides coverage for direct physical loss. If the roof's integrity was not compromised by the hail stone impact, has a physical loss occurred?

We believe that some carriers view this type of damage as cosmetic and do not provide coverage for replacement of the copper roof. Does FC & S have an opinion?

ANSWER

Whether or not the dents are cosmetic or affect the roof structure, they are still direct physical loss. The policy doesn’t define damage so standard practice is to go to a desk reference. Merriam Webster Online defines damage as loss or harm resulting from injury to property, person, or reputation. The roof now has dents where it didn't before; that's direct damage. The policy doesn't exclude cosmetic damage, so direct damage, even if it is cosmetic, is covered. It's the same as if vandals had painted the side of the house purple. While cosmetic, it's damage, and is covered. The principle of indemnity is to restore the insured to what they had before the loss, and this insured had a roof with no dents.

I am raising this issue in part because there are so many Hurricane Ike disputes where the insurers are not paying for roof damage. One of the arguments is that they do not pay for “cosmetic damage” which is wrong. The vandalism example made by the editors of the FC&S Bulletin clearly shows that the property policy covers for damages to the appearance of structure or property so long as it is by a covered peril.

This post came about as a result of Mary Kestenbaum Fortson and me being invited to Baltimore for a meeting to organize an education conference for property insurance claims. Most of the organizers in attendance were public adjusters. They asked me why other insurance industry groups "shunned" their overtures to create a fall property insurance claims conference.

Mary and I were smiling because it seemed they simply did not get it---insurance company personnel are trained that public adjusters interfere with the claims process and have to be treated almost as if they are the enemy during an adjustment. The enemy stigma, once placed into the adjuster's head, does not seem to go away.

Need proof? Go to the Property Loss Research Bureau website (PLRB). The PLRB is the one property insurance conference professional claims adjusters for the insurance industry do not miss. It involves the "who's who" of the property insurance world. Property insurance vendors like HAAG, Rimkus and SEA show up to court possible business with claims managers. Property insurance company attorneys are there as well. They take their clients to dinner and pontificate about claims issues and how well they have beaten down customer claims through litigation.

I only know these things through hearsay. I actually have close friends who go, share their materials with me, and talk about the events at the PLRB. The PLRB written materials are excellent and the speakers are renowned for their experience. I wish I could attend because many of the topics are my passion. However, I am not invited.

On the PLRB web site, guidelines for the attendance and other rules are posted. Believe it or not--a section exists for rules regarding public adjusters. It states:

PUBLIC ADJUSTERS, AGENTS AND BROKERS
The Claims Conference is open only to those employed by the insurance industry and those who, as their primary business, provide goods and services directly to insurers. Others, such as public adjusters, brokers, and agents, are not invited and may not register nor attend. Any such uninvited person found attending the Conference will be asked to leave and will not receive a refund.

I guess the old saying that if you are not for us, you must be against us is alive and well in the insurance company claims industry. I wonder what kind of information and secrets insurance company claims departments and their attorneys, and vendors want to keep from people who help the insurance company customers? I have always felt it hypocritical that insurance company claims executives and their attorneys say they must be honest with their policyholders, but keep claims procedures secret. How can you be honest when you are withholding the truth?

In the agenda, there is even a seminar: "How to Deal with Public Adjusters." That seminar's details indicate:

** Locate local governing authority websites regulating the licensing and conduct of Public Adjusters
** Employ policy provisions to protect the rights of the insurer relative to coverage and policy conditions
** Resolve claims with PAs by skillful negotiation of the scoping and estimating process
** Document the claim file for effective resolution or success in appraisal

It is sad that there was not one insurance claim seminar at the PLRB devoted to the policyholder's main concern--how to get paid fully and fast. Even skeptical readers probably get the point of what the PLRB is about---but I still wish I could go.

The organizers of the new public adjuster claims conference will not have as a spectacular event as the PLRB. Indeed, they may be in serious trouble if they are asking for my opinion about how to organize it. Yet, I can assure there will not be claims practice secrets and everyone will be treated as equals.