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

I often feel as if one gets a lot more from teaching a subject than simply being taught by another because you have to research, prepare, write about, present and answer questions on the issues. Teaching aspects of insurance coverage makes me a much better insurance attorney.

Roof damage disputes have been significant areas of contention lately because many of the insurance company expert vendors have been providing opinions, seemingly minimizing the impact that wind has on roofs. Accordingly, I need to know this area to do my job. I felt that others in the field needed more knowledge on the topic as well.

Our law firm has a competitive edge over many other policyholder firms because we have invested in a full time “Knowledge Manager.” Ruck DeMinico is an attorney with a library science background. He can help us find rather obscure, but significant, information regarding our cases that can literally mean the difference between winning and losing. Often, the amounts of recovery for our clients are enhanced because information is power and provides our attorneys with better arguments than the insurance counsel we oppose.

Regarding my presentation on the effects of wind on roofs, I asked Ruck to make a bibliography on the topic so others could have a list of scientific references for use in their cases. Some of the more important papers include:

• Baskaran, A., Murty, B. and Wu, J. “Calculating roof membrane deformation under simulated moderate wind uplift pressures”
• Xu, Y. L. “Fatigue damage estimation of metal roof cladding subject to wind loading”
• Lee, K., Rosowsky, D. V. “Fragility assessment for roof sheathing failure in high wind regions”
• Ali, H. M., Senseny, P. E. “Models for standing seam roofs”
• Baskaran, B. A., Koa, S., & Molleti, S. “A novel approach to estimate the wind uplift resistance of roofing systems”
• Cochran, L. “Wind engineering as related to tropical cyclones”

For readers of my Blog, simply click for a download of the bibliography.

I cannot emphasize enough how important it is to understand the physics of wind loads and flow if you are going to be able to fully find and explain the extent of damage caused by wind. Many of these scientific papers develop concepts of how subtle fatigue damage during a high wind event can lessen a structure’s life expectancy because the fastening and structural systems were altered as a result of having been pushed and pulled by the wind. I have been amazed at the numerous engineering committee comments regarding building integrity issues.

Tim Marshall has been my partner in this presentation. He is the other Tim Marshall, and not the infamous one from HAAG Engineering that is the insurance industry’s darling forensic engineer. I suggest that policyholders may want to hire Tim so that they can freak out the insurance industry by claiming that they have a report from Tim Marshall that found significant roof damage.

To be fair to HAAG and its Tim Marshall, they sponsor an in-depth roofing class that provides significant information regarding roof damage claims. While I have heard grumblings that the class is more concerned about how to not find roof damage and thereby lower claims payments, virtually everybody I have talked with urges others to go and learn from HAAG’s experiences on this topic and from what that Tim Marshall has to teach.

I am sorry that everybody could not attend the seminar here in Providence. I promised that the PowerPoint presentation would be placed up for review by all, and it will be available here following the Conference. I will make this topic part of firm’s regular seminar presentations to public adjusters in the future because it is important to understand these issues.

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.

The parties bringing the action, Kerrie and Cori Rigsby, are two former independent adjusters that worked catastrophe claims for Sate Farm,. The hearing is being covered extensively by Slabbed and Anita Lee of the Sun Herald. I wrote a comment a couple days ago in response to SLABBED Daily – May 20 (qui tam Hearing), which sets out how I feel about the Rigsby sisters:

“The Rigsby sisters deserve a big “thank you” from many along the Mississippi Coast. It is a very courageous action to go against one of the largest and most powerful corporations in the world.

As with any that leave a culture complaining of unethical conduct, the first attack is from the company they leave. It is an awful position to be in as a whistleblower.

The information that the Rigsby sisters suggested existed is what lead us to follow up with clients and then engineers that claimed that second reports were far different and limiting than the first reports which indicated different opinions supporting more coverage. In an early lawsuit, we attached both the first and then second report to quiet insurance industry spokesman, Bill Bailey, who challenged and disclaimed the existence of two reports.

Whatever the outcome of this action, the Rigsby sisters decision to leave State Farm and bring this action have significantly helped many of their friends and neighbors. My hat is off to them and to their new counsel.”

I met and spent considerable time with Kerrie Rigsby. She is a very nice and polite person. She is not the rumble and tumble stereotypical catastrophe adjuster that I so often deal with. She looks and acts like a soft spoken third grade teacher. I am certain that the State Farm attorneys will try to show her in a different light. However, if you are a nice person, Kerrie is the type you want to call your friend.

As indicated in Judge Senter’s Order the current hearing concerns the following issues:

“My reading of the Amended Complaint and the documents submitted in
connection with the pending motions leads me to the following conclusions:

1. The merits of this action depend on evidence that the defendants, acting
in concert, systematically submitted false flood insurance claims to the
United States, claims that were not valid under the terms of the Standard
Flood Insurance Policy (SFIP) used in the National Flood Insurance
Program (NFIP).

2. It is the amount of the flood insurance claims that the Relators allege to
be false, i.e. the allegation is that the defendants acted in concert to
submit flood insurance claims in an amount greater than the flood
damage that actually occurred.

3. The Relators allege that the motive for the submission of these false
claims was the defendants’ desire to reduce the exposure under State
Farm homeowners policies, which covered wind damage, by exaggerating
the extent of the flood damage where both types of policies were in force
on the same property.

4. The Relators allege that the defendants had the opportunity to submit
these false claims because the insurers are authorized to evaluate and
settle claims for both wind damage and flood damage, and the adjustors
and engineers the insurers hired were in a position to inflate the amount
of flood damage they observed.

5. There is no allegation that the defendants ever submitted claims to the
United States that were fabricated, only that the defendants acted in
concert to inflate or exaggerate the amount of the legitimate flood insurance claims that they submitted.”

I would strongly suggest that those with an interest of how State Farm operates its catastrophe operations read the Lecky King deposition.

Slabbed has a number of articles on this case including a recent one suggesting that State Farm has invited me to sue it for “settlement fraud.”

To the extent I can, I will comment more on this topic of flood adjustment later.

In the post, The TWIA Roof Damage Memo: Checking Basic References to Resolve Adjustment Questions, I showed that the TWIA claims memo is wrong based upon the most basic insurance training available to rookie adjusters. Then, in the post preceding this, Roof Repair Methods Prove TWIA is Wrongly Denying Roof Claims, it was shown how roofers and the manufacturer's of shingle roofs appreciate the need to repair shingles that have seals which are broken from a hurricane's high winds and how to fix them. Maybe the TWIA claims executives sitting behind desks in Austin do not know that adhesive seals are a tangible substance or their purpose on roofing shingles. Or, maybe they have been going to HAAG Roofing Seminars and learned a new trick on how to avoid paying for roof shingle damage. HAAG Engineering is good for my business, but not good for policyholders with an insurance claim.

What about the insurance coverage caselaw regarding "direct physical loss?" The case discussions I like best to help those understand "direct physical loss" are Ward Gen. Ins. Services, Inc. v. The Employers Fire Ins. Co., 114 Cal. App. 4th 548, 7 Cal. Rptr. 3d 844 (2003) and Meridian Textiles, Inc. v. Indemnity Insurance Co. of North America, 2008 U.S. Dist. LEXIS 91371, 2008 AMC 1411 (C.D. Cal. 2008).

The facts of Ward involved loss of the insured's computer data which was mistakenly deleted. The insured filed a claim to recover the cost of recovering the data and the business loss incurred from temporary loss of data. The insurers denied the claim on the ground that the policy required a direct physical loss before there would be coverage. The court held computer data was not a tangible or physical item and a physical loss, which did not happen, was required in order to trigger coverage.

The Court first provided a definition for direct physical loss:

"Neither party submitted any evidence suggesting that the phrase "direct physical loss" has some technical meaning or special meaning given by usage. Accordingly, we interpret these words in their ordinary and popular sense to determine whether they impart a clear and explicit meaning in the context of the losses claimed against the insurance policy. We conclude they do.

The word "physical" is defined, inter alia, as "having material existence" and "perceptible esp. through the senses and subject to the laws of nature." (Merriam-Webster's Collegiate Dict. (10th ed. 1993) p. 875.) "MATERIAL implies formation out of tangible matter." (Id. at p. 715.) "Tangible" means, inter alia, "capable of being perceived esp. by the sense of touch." (Id. at p. 1200.) Thus, relying on the ordinary and popular sense of the words, we say with confidence that the loss of plaintiff's database does not qualify as a "direct physical loss," unless the database has a material existence, formed out of tangible matter, and is perceptible to the sense of touch."

The Court then ruled against the policyholder under reasoning that other courts, including one in Texas, disagree:

"...the loss of a database is the loss of organized information, in this case, the loss of client names, addresses, policy renewal dates, etc.

We fail to see how information, qua information, can be said to have a material existence, be formed out of tangible matter, or be perceptible to the sense of touch. To be sure, information is stored in a physical medium, such as a magnetic disc or tape, or even as papers in three-ring binders or a file cabinet, but the information itself remains intangible. Here, the loss suffered by plaintiff was a loss of information, i.e., the sequence of ones and zeroes stored by aligning small domains of magnetic material on the computer's hard drive in a machine readable manner. Plaintiff did not lose the tangible material of the storage medium. Rather, plaintiff lost the stored information. The sequence of ones and zeros can be altered, rearranged, or erased, without losing or damaging the tangible material of the storage medium."

However, the Court also noted a number of examples of "direct physical loss" that provide coverage:

"...in Hughes v. Potomac Ins. Co. (1962) 199 Cal. App. 2d 239 [18 Cal. Rptr. 650], heavy rains caused the backyard of plaintiff's insured dwelling to slide into a creek, but the structure of the building itself was not damaged. The court held the first party insurance policy covering physical loss and damage to the "dwelling" covered plaintiff's loss. This decision does not stand for the proposition that loss of or damage to intangible property can constitute a physical loss. Quite clearly, the loss of the backyard was a physical loss of tangible property. The essential question decided by the Hughes court was whether the insured "dwelling" included the ground under the building.

...in Western Fire Ins. Co. v. First Presbyterian Church (1968) 165 Colo. 34 [437 P.2d 52], gasoline had accumulated in the soil around the insured building, infiltrating and saturating the foundation and making the structure uninhabitable. The court found the loss of use was covered by an insurance policy insuring against the consequential results of a direct physical loss. ( Id. at pp. 38-39.) Again, this case does not stand for the proposition that loss of intangible property can constitute a physical loss. A physical loss occurred when the foundations became saturated with gasoline. The essential question decided by the First Presbyterian court was whether the resultant loss of use could be recovered under the policy.

...in Azalea, Ltd. v. American States Ins. Co. (Fla.Dist.Ct.App. 1995) 656 So. 2d 600, a sewage treatment plant was vandalized by the dumping of an unknown chemical into the system. Inter alia, the chemical destroyed a bacteria colony, which was an integral part of the sewage treatment facility. ( Id. at p. 602.) The court found the loss was covered by a policy insuring against direct physical loss....

...in Retail Systems v. CNA Ins. Companies (Minn.Ct.App. 1991) 469 N.W.2d 735, a third party liability policy covering "physical injury or destruction of tangible property" was held to cover damages for the loss of a computer tape containing the results of a voter survey conducted by a political party. The computer tape, together with the data it contained, was found to be "tangible property," and the measure of recoverable damages was enhanced by the value of the lost data stored on the tape. But the condition of coverage, the loss of tangible property, was plainly satisfied by the loss of the tape.... "

In Meridian Textiles, the Court's discussion is even more helpful to our roofing situation:

"[t]he requirement that the loss be "physical," given the ordinary definition of that term is widely held to exclude alleged losses that are intangible or incorporeal, and, thereby, to preclude any claim against the property insurer when the insured merely suffers a detrimental impact unaccompanied by a distinct, demonstrable, physical alteration of the property.

10A Couch on Ins. § 148.46 (3d ed. 2005) (citing Commercial Union Ins. Co. v. Sponholz, 866 F.2d 1162 (9th Cir. 1989) (finding that marine insurance policy did not cover defect in title, which did not constitute physical injury)....see e.g., Farmers Ins. Co. v. Trutanich, 123 Ore. App. 6, 8, 858 P.2d 1332 (Or. Ct. App. 1993) (concluding that under Oregon law odor from methamphetamine "cooking" "was 'physical' because it damaged the house"); Yale Univ. v. CIGNA Ins. Co., 224 F. Supp. 2d 402, 412-13 (D. Conn. 2002) (concluding that while plaintiff could not seek coverage under an all-risk policy for "mere presence of asbestos-and lead-containing materials in its buildings," it could seek coverage for the "contamination of its buildings by the presence of friable asbestos and non-intact lead-based paint").

For example, in Glens Falls Ins. Co. v. Covert, 526 S.W.2d 222 (1975), the insurance policy provided coverage against "ALL RISKS OF PHYSICAL LOSS OR DAMAGE" to certain vehicle safety stabilizers owned and sold by the insured. Id. The stabilizers fell from a storage area to the floor. Id. However, because the stabilizers were sealed units, they could not be inspected for damage. Id. Thus, it was not known if the stabilizers suffered any physical or internal damage. Id. The manufacturer of the stabilizers withdrew its warranty, and the insured decided not to sell the units, concluding that the units lost their merchantability. Id. In affirming the trial court, the Court of Appeals held that although the insured decided that the units could not be sold without their warranties, "under the clear language of the policy of insurance . . . , that was a type of loss not covered." Id. The court concluded that because "there was no physical loss or damage," the insured could not recover...

Similarly, in Columbiaknit, Inc. v. Affiliated FM Insurance Co., 1999 U.S. Dist. LEXIS 11873 (D. Or. 1999), relied upon by defendant, the court held that under an all-risk insurance policy providing coverage for physical loss or damage, the plaintiff must "show that a physical loss occurred to covered property."....

The court noted that "if an article of retail clothing has an odor strong enough that it must be washed to remove it, (and the garment therefore cannot be sold as new) it has sustained physical damage and would be covered under an 'all-risk' property insurance policy."... The court reasoned that on the other hand, a retailer's "decision not to sell the garment as new, in the absence of distinct and demonstrable physical change to the garment necessitating some remedial action that would preclude honestly marketing as first quality goods, is not a covered loss."... The mere "alteration of property at the microscopic level does not obviate the requirement that physical damage need be distinct and demonstrable." Id. The court thus held that to recover, the plaintiff had to demonstrate that its garments and fabric had been water-soaked, that they had developed an odor, mold, or mildew, or that the goods had been physically changed in such a way that the goods would develop an odor, mold, or mildew." 

From this legal perspective, the substance which makes up the adhesive material on or applied to roofing shingles is tangible. It can be felt, measured, and seen. Roofers tell me that the adhesive property of the "seal" can even be measured. Policyholders will need to prove that the winds and debris carried in the winds from Hurricane Ike caused an alteration to the adhesives which formed seals to the roofing shingles. I suspect that many newer and better maintained roofs suffered less of this damage than older and less maintained roofs and shingles.

Adjusters and policyholders need to understand that finding shingle damage is not done from the ground--unless you do not want to find any damage. You have to closely inspect the shingles. Roofers tell me that one does pull up the shingles with your hand to see if the seal is broken, unlike the directions in the TWIA memo. But, be careful. Inspections can damage the roof; and, possibly damage you, if you fall.

One last warning to all who are not attorneys: do not take this post, or copy it, and start practicing law by arguing what cases mean to the insurance company or TWIA. This warning is especially applicable to public adjusters.

I am off to Rome celebrating my fiftieth birthday. Guest Bloggers will take over for the next two weeks

Ciao. 

Property Loss Adjusting is the most elementary treatise in my law firm’s library regarding property insurance adjusting. The American Institute of Insurance uses it, and it is mandatory reading for those obtaining a designation as an Associate of Insurance Claims. I will cite this treatise to demonstrate that the orders TWIA executives are providing to those in the field do not comply with standards in the industry.

The TWIA memo stated in part:

“It is important to note that we only cover direct, physical, loss from windstorm. Direct means it happened during Ike or Dolly, physical means the damage to the property is clearly visible and there must be a loss (destruction or damage to property) involved. Shingles that show no signs of damage other than they are not sealed and can be raised with your hand are not considered windstorm damaged. Some call these “lifted” shingles. Some call them “blown up” shingles. Some call them “unadhered”. Regardless of the terminology, these are not considered windstorm damaged. The shingles are mostly laying flat and are continuing to do as they were intended…….to repel water.”

Property Loss Adjusting has the following discussion on this topic:

1.18 Determine Whether the Loss Is a Direct Physical Loss

The first step for determining coverage for a particular loss is to review the insuring agreement and determine whether the loss is a direct physical loss. This section of the chapter explains the meaning of this threshold requirement of policy coverage…

Property insurance policies (other than those for time element losses) protect against direct physical loss only. Any loss that is not a direct physical loss is not covered. This is true under both special-form and specified-perils policies. To be covered, a loss must be both a direct loss and a physical loss, as well as to clarify the meanings of other insurance policy terms, see the following box.

Identifying a Direct Physical Loss
Policy forms do not define the phrase “direct physical loss”. However, policies do define the meanings of many terms in an insurance policy. To determine or clarify a term’s meaning, the following four sources should be consulted in order of priority

• 1. Definitions listed in the policy
• 2. Definitions given to the term by previous court decisions
• 3. Definitions found in dictionaries or other references
• 4. Meanings from common usage

Because “direct physical loss” is not defined in insurance policy forms, a definition must be found elsewhere. Black’s Law Dictionary defines “direct loss” as “one resulting immediately and proximately from the occurrence and not remotely from some other consequences or effects thereof.” One dictionary definition of “direct” is “marked by absence of an intervening agency, instrumentality, or influence.” An example of a direct loss is a store burning down. An indirect loss associated with the fire would be the loss of market resulting from the store’s being closed for six months to rebuild.

Direct Loss
All losses must be “direct” (as defined above). Indirect losses, if covered by insurance, are separate from direct losses. The most important type of indirect loss is the loss of use of property. Whenever property is damaged or destroyed, it cannot be used. Property insurance covers only the value of the damaged or destroyed property, not the loss of use of it while it is repaired or replaced. Coverage for loss of use is separate…

Physical Loss
A loss is “physical” if it involves tangible property’s damage, destruction, or disappearance. Nonphysical losses, if covered by insurance, are separate from physical losses. Nonphysical losses include all kinds of financial loss, such as value to an inventory caused by changes in fashion or obsolescence, loss of value to a financial investment such as stocks or bonds, loss of income from an interruption on a business’s operation, or loss of customer’s goodwill. Likewise, embezzlement, swindling, and other forms of financial fraud are not physical losses and would be covered, if at all, only by special fidelity policies.

Nowhere in Property Loss Adjusting have I found TWIA’s requirement that damage is “clearly visible.” Indeed, the physical nature of the loss seems to indicate that “damage, destruction, or disappearance” is all that is required. Property Loss Adjusting does not discuss TWIA’s requirement that a “utilitarian function” of the property not work as well after alteration to classify it as a “loss.” An independent adjuster sent me a note that made fun of the TWIA claims memo by indicating that paint blown onto the roof would not be “direct physical damage” because the shingles work just as well as before the windstorm.

Property Loss Adjusting also has sections on roofing damage and repair:

9.33 Roofing Damage and Repair

Strong winds (generally in excess of 40 miles per hour); hail; and falling objects such as tree limbs are the usual causes to loss to roofs. Steep pitched roofs are less likely to sustain wind damage from significant wind. Slate and tile roofs are unaffected by wind unless it is hurricane or tornado force.

Exposure to heat from the sun and normal wear and tear exact a heavy toll on common roof coverings. The average life of an asphalt composition shingle roof is fifteen to thirty years, depending on the roofing material’s quality. Worn granular surfaces, curling of the shingle ends, and leaks into the interior are signs of age and damage that accumulate over time. Insurance does not cover wear and tear, but it might cover a new roofing job as part of an insurable loss to a home with replacement cost coverage. Because of their composition, asphalt roof shingles might sustain several slight incidents of damage that go unnoticed. The first indications of leakage usually signal the need for a new covering.

A roof can sustain a great deal of damage from a hailstorm, depending on the roofing material and the size of the hail. Large hailstones can shatter Spanish tile and slate. Light gauge metal can be severely dented. Wood shingles can be dented or split. Even asphalt shingles can be dented by large hailstones.

Inspection of Roofs

When inspecting damage to an asphalt roof, adjusters should, if possible, climb onto the roof. Wind might have broken the shingles, but unless the shingles are visibly torn, damage can be observed only by close inspection. Even if broken, the shingles will lie flat once the wind has subsided and will not appear to be damaged. Roofs of slate, tile, fiber panels, or wood can be damaged if walked on. Adjusters can go up on a ladder to get a good vantage point for inspection and should take photos from the edge of the roof.

Most building codes allow only two layers of asphalt shingles on a roof. This amount is based on the roof structure’s capacity to bear the cumulative weight of the material. Some adjusters believe that if the roof already has two layers, an allowance should be made to remove only the top damaged layer. The underlying layer, though, will almost certainly be damaged while the top layer is being removed, resulting in a need to replace parts of the underlying layer. The care needed to minimize underlying-layer damage can make the job take longer, increasing the labor cost. Whether both layers should be removed therefore becomes a matter of judgment.”

It was interesting that Property Loss Adjusting noted that “strong winds” only needed to be in excess of 40 miles per hour. I guess insurance industry engineers like HAAG and Rimkus had not influenced the author at the time this edition was written in 2004. Those companies typically call for much higher wind speeds for expected damage to roofs.

Pursuant to the memo, “damage” can be excluded. I saw no exclusionary language in the Property Loss Adjusting which followed the logic of the TWIA memo. However, I thought the discussion of excluded types of damage could be instructive:

“9.62 Damage to Exterior Paint

Because exterior paint is exposed to weather, it can be damaged in ways that interior surfaces cannot be. Wind-driven rain, dust, and debris can chip or pit surface paint and can wear off its protective coating. Intense direct sunlight and heat and very cold temperatures and accumulations of ice and snow can peel and crack exterior paint and shorten its lifespan. Improper methods of construction, which prevent proper ventilation, can create a moisture buildup causing wood siding to remain wet and paint to peel away from the surface. Problems such as these, caused by normal wear and tear, are not covered by insurance and are handled through regular maintenance.

The two basic adjusting considerations in handling damage to exterior paint are (1) distinguishing normal wear and tear and deterioration from insurable damages and (2) determining an allowance for appearance. Physical damage caused by fire or exposure to heat from fire at an adjoining property, hailstone damage, strong winds that propel objects into the exterior finish,

The complete exterior may be treated as one unit. Because paint can change color as it ages, new paint can rarely be perfectly matched to the old. Adjusters must carefully judge the situation after inspecting the property. Building interiors are segmented and are generally a variety of colors, but exteriors are usually one color and should present a consistent appearance. The adjuster must decide among painting only the damaged area, painting the entire side where the damage is present, or painting the entire building. Many states have claim practices regulations that dictate how the situation should be handled.”

I will write more on the TWIA memo tomorrow. For policyholders, risk managers, and attorneys, a partial point of this discussion is that the field of adjustment is studied. There is significant information outside the case law regarding how an adjustment is done. One of the most basic questions in every case is what is and is not covered. We use the adjustment reference material to help courts and insurers get the coverage decision right.

The email was an advertisement from Compuweather. Here is the advertisement:

COMPUWEATHER – WEATHER INFORMATION REQUEST FORM

 NEED PAST WEATHER NOW? PIN-POINT THE EXACT CONDITIONS FOR A CASE OR CLAIM
WIN MORE CASES - PAY LESS CLAIMS - SAVE YOUR COMPANY MONEY

ANY WEATHER • ANY PLACE • ANY TIME

SPECIALIZING IN MARITIME CASES, VOYAGE RECONSTRUCTIONS, HURRICANE, TORNADO & FLOOD CASES!
#1 RESOURCE FOR YOUR HURRICANE DOLLY, GUSTAV AND IKE CASES

LIGHTNING • HAIL • HURRICANES • RAIN • FLOODS • SNOW • TEMPERATURE • WIND • TORNADOES • VISIBILITY
SWELLS • SEA STATE • OCEAN CURRENTS & WAVES • GALE WARNINGS • ICE • VOYAGE RECONSTRUCTIONS • ADMIRALTY CASES

5 Minutes Now Gets You A Detailed Report in 5 Days or Less!
Compare CompuWeather with Others: 1/2 the price, 3-4 times faster delivery & Outstanding Accuracy & Service

Phone: 800-825-4445  • Fax : 800-825-4441
Email: experts@compuweather.com • Web: www.compuweather.com

EXPERIENCE MATTERS: Over 33 Years in Business & 58,000 Cases To Date Serviced By CompuWeather
We are the #1 Source for Weather for the Insurance, Legal and Engineering Industries

CompuWeather is a Member of the FleetWeather Group of Companies

Policyholders should be concerned when experts for the insurance company are getting business by advertising: 

“WIN MORE CASES - PAY LESS CLAIMS - SAVE YOUR COMPANY MONEY”

As I read the advertisement, I remembered my old post, Policyholders File RICO Suit Against State Farm In Handling Of Katrina Claims, where the pressure by State Farm upon engineers was brought to light. I recently posted in Why Causes Of Loss Are Important To You, that:

“Unfortunately, it is sometimes my experience that insurance company adjusters are experts in telling policyholders how little damage occurred following a loss, and they fail to describe how such perils often affect parts of structures which are not readily available for inspection. Indeed, HAAG, an engineering consultant company retained by insurance adjusters, even has courses for adjusters which demonstrate to the adjusters how HAAG can prove that the damage is less than what meets the eye or common sense may expect. The reason other engineering firms generally do not get insurance company business is because they typically lack an orientation to find ways to minimize claims or refuse to accept the low rates insurance engineering firms charge. Guess whether the low rates correspond to low quality work?”

My observations are supported in numerous cases and complaints by policyholders. For example, Slabbed reported in Aiken V USAA Casualty Insurance Company Day 3: The Experts, that Rimkus changed its engineering report with no notice to its policyholder and without even asking permission from the engineer that authored the first report.

The point is that judges and regulators need to understand that the insurance experts hired by insurance companies are often not there to provide truthful opinions but to help underpay claims. Policyholders need to be forewarned about the reality of the experts hired by many insurance claims adjusters.

The large increase of catastrophe wind claims must be the result of Hurricane Katrina and Wilma which occurred in 2005. I can imagine that those wind claim loss figures may trend up because there are still numerous losses in litigation from those storms. Still, from an individual occurrence, fire is the most significant cause of loss.

As a member of the Citizens Mission Review Task Force, I heard testimony that water losses in older homes were a major cause of loss. The report supports this as a national cause of loss as well. Older homes in particular suffer more individual loss, as parts of the structure wear and tear. Old roofs, plumbing, and wiring need maintenance and replacement to avoid damage from fire, water, and wind.

These statistics are important to policyholders, insurers, adjusters, restoration vendors, building code officials, policymakers and even me. Policyholders need to insure for these calamities. For fire, wind, water damage and hail, policyholders should be encouraged, and possibly mandated, to mitigate against the frequency and severity of such perils. The best loss is the one that never happens. In the long term, we have to make our structures more resistant to the most common and costly perils to maintain affordable insurance.

Adjusters need to be experts regarding how these perils affect buildings. Unseen damage to structures, which commonly follow these perils, must be investigated and paid. Proper methods of repair must fully restore buildings to a new condition that often make the buildings better than before. This is the service and product paid for by the policyholder before the loss occurred.

Unfortunately, it is sometimes my experience that insurance company adjusters are experts in telling policyholders how little damage occurred following a loss, and they fail to describe how such perils often affect parts of structures which are not readily available for inspection. Indeed, HAAG, an engineering consultant company retained by insurance adjusters, even has courses for adjusters which demonstrate to the adjusters how HAAG can prove that the damage is less than what meets the eye or common sense may expect. The reason other engineering firms generally do not get insurance company business is because they typically lack an orientation to find ways to minimize claims or refuse to accept the low rates insurance engineering firms charge. Guess whether the low rates correspond to low quality work?

In our law firm, I often preach that we have to understand how insurance companies are supposed to do their job. For the same reason a doctor would not learn about how to practice medicine from reading medical malpractice cases, lawyers will never learn how an adjuster is supposed to work in good faith from reading insurance cases. Our library is full of insurance industry books, manuals, videotapes and instructional materials. We go to conferences regarding insurance adjustment and learn from contractors and engineers about the effects of nature on buildings and how they are supposed to be fixed, as well as the ramifications of improper repair. There is a true science to the field of insurance adjustment. Most professional adjusters know how difficult it is to fully become an expert in this very demanding and important vocation.

Everybody has an interest, albeit different, in the major property loss causes of fire, water, wind and hail.