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

An inexpensive property insurance policy that does not cover claims as thought or bought prior to loss becomes is a very expensive insurance policy...We must remember that cost of risk includes uninsured loss whether subject to deductible, exclusion, inadequate limit or improperly placed coverage.

There is more to property insurance than simply the major categories of building, contents and business interruption. What about all the various sublimits and nuances within the grants of coverage? A 2010 New Year?s resolution for risk management professionals is to make time to understand what makes up the complete property insurance policy... The sum of all property loss exposures must be understood in order to create a sound property insurance policy that is loss effective as well as cost effective.

Many of the problems uncovered during an insurance policy review are not from complex issues but simply from the risk management professional from not spending enough time to understand and arrange the basics of coverage.

Austin's article is worthy of reflection by anybody involved in commercial insurance coverage issues. He provides a checklist of items he feels are important and should be studied for 2010. One of the reasons that I endorse the use of the IRMI.com, is its extensive use of checklists for coverage. Any professional involved in selling or advising about property insurance cannot reasonably do their job without a heavy reliance on such checklists. Otherwise, too many coverage issues will simply be missed and uncovered losses or gaps in coverage will occur.

Policyholders should find a trusted insurance professional who has the experience and understanding of how to properly insure risks unique to them. I often remind my clients that "cheap" insurance may be a lot more expensive when a claim occurs and coverage is excluded or benefits limited. When it comes to insurance coverage, as it is often in life, you generally get what you pay for. As Austin warns, with insurance coverage:

The devil is in not knowing the details. Coverage needs to mirror exposure whenever possible. All property risk management details must be understood prior to policy inception: peril, exposure to loss, values exposed and minimum coverage limit. Numbers used in any insurance policy to express a coverage limit, including sublimit, must be analyzed to ensure adequate coverage at time of loss.

I noticed a few trends worthy of note. The number of restoration companies and disaster contractors has significantly increased. This industry has boomed in the last decade. Their business model before the large catastrophes led them to market adjusters and insurance claims departments for leads to policyholders with losses. It was not uncommon for them to arrive, arm in arm, with an insurance adjuster. In response, insurance companies obtained the promise of a bid proposal and work which would be less than local contractors. Insurance companies essentially controlled the scope of work and therefore, the adjustment by having a "favored vendor" do the repair work. Whether the work was excellent or left something to be desired is hard to tell when covered up with paint. If the policyholder did not want to choose that contractor, the adjuster would simply use the lowball estimate of that contractor against the policyholder. These contractors wined and dined field adjusters and claim departments to get these leads.

After the 2004 storms, these restoration contractors more frequently directly marketed their services to policyholders. They claim to be "insurance recovery and restoration" firms and go so far as to claim that they will negotiate the policyholder’s rights with the insurance company. This is illegal, but this is how many, not all, market their services. They will contract to do the work for whatever the insurer will pay.

This scenario sets up a situation where the insurance company often is overcharged on pricing, especially labor charges, and the policyholder gets inferior work. There is no bidding and negotiation regarding quality and price. Insurers are overpaying for what is done and policyholders are not getting enough done and in the quality the policy provides. But, that industry, unlike other aspects of construction, is booming.

Computerization of claims and the sophistication of database mining is evolving. Before long, insurers will be able to profile very private and subtle aspects of every policyholder. "Good" policyholders will be those who pay premiums and never call an agent, much less report claims. Your risk as an insured will be tracked on your property and how aggressive you are expecting payment. CSC Corporation is a leader in this insurance computerization field.

The message is clear--"if you make a claim, you are not as good a policyholder as one that does not. Do not rock the boat or we will make you somewhat uninsurable." Risk managers are often evaluated on how well they keep premium costs down. They should also get evaluated on how much courage and effectiveness they have getting the insurer to pay promptly and fully.

Mega-disasters and the effects of global warming was the subject of prominent discussions. The concern is that the floods, tornados, and hurricanes are getting stronger and bigger. Whether this plays out over the long term or is just something which appears as a trend, is something we will find over time. Yet, there were many more "disaster preparation" seminars and vendors at the convention.

Trends are important to me as I try to analyze the decisions and circumstances that affect my clients. Many lawyers seem to think you become an "expert" (lawyers do not ethically call themselves "experts" in certain types of cases) in a field of law by reading cases and doing enough of them to advertise some experience. The truth is that the best in my field know what has, and is, going on with our opponents and their motivations for various activities. This is learned by talking with people at various levels and in different disciplines of the insurance industry and by observing--not by reading insurance case law, which a second year law student could do.

A recent news article, Disaster Planning By Businesses Helps Even When Minor Disruptions Hit, noted a book that I suggest every small business owner or manger consider purchasing. Donna Childs’ Prepare for the Worst, Plan for the Best: Disaster Preparedness and Recovery for Small Businesses, 2nd Edition, contains specific considerations and practical applications of how small businesses (the rules apply to large ones as well) can mitigate and prevent losses. Her initial findings are on point and a warning to business owners and communities that do not take these measures:

"Disasters occur more frequently than we realize. Research consistently shows
that for small businesses, the effects of a disaster can be devastating:

• More than one in four businesses will experience a significant crisis in any year.
• Of those businesses that experience a disaster and have no emergency plan, 43% never reopen.
• Of those that reopen, only 29% are operating two years later.

The losses that these figures represent do not appear to have motivated
preparedness efforts by small businesses: A recent survey of 2,500
small business owners found that 71% did not have a disaster preparedness
plan in place. Nearly two-thirds of them stated that they do not need one.
63% expressed confidence that they would resume business within 72 hours
if they were affected by a natural disaster, even though historical experience
shows that this is absolutely not the case.

Disasters are, for the most part, manageable. We cannot prevent disasters
from occurring, but we can equip small business owners with the knowledge that they will need to mitigate their risks and to recover quickly when disasters do strike."

Natural disasters, losses and insurance controversies are as certain to occur in the future as death and taxes. While they can be minimized, my law firm is there to help policyholders recover as fully and as quickly as possible. Insurance defense attorneys are there to advocate for the insurance companies and attempt to justify their denial and excuses for delay.

Recognizing this, we are distributing a small handout with some suggestions for business owners and risk mangers, A Risk Manager’s Guide To Property Insurance For The Upcoming Hurricane Season. We think some easy pre hurricane season risk management techniques can help all in the possible wake of a hurricane. Spring is here, and now is the time to prepare for possible catastrophes that we all hope will never come.