On Tuesday, July 27, 2010, The SunCoast News ran an article by Carl Orth titled: “Fasano Aide Brings Ideas Back from Sinkhole Conference.” According to the article, issues regarding public adjusters, sinkhole losses, fraud, the rise in sinkhole claims in the downturned economy, and the value of Florida’s Neutral Evaluation program were discussed at the conference.

In my experience, when sinkhole claims are litigated, the most common issues raised by insurance companies seem to be the following:

  • proper protocol to repair sinkhole damaged properties;
  • whether a sinkhole is the reason for the damage;
  • whether the claim for damages was promptly reported; and
  • whether the cause of the damage manifested during insurance company X’s period of coverage.

According to the article, the conference discussed recent problems in a residential area of Port Richey where claims for sinkholes are on the rise.

One suggestion for insurers which might be helpful is to make sure the proper testing is performed to determine if sinkhole indicators are present. A simple guideline is to evaluate the subsurface conditions near the areas of damage. For example, if the majority of the damage is showing along a garage wall with stair step cracks, test the soils near this particular wall. I know the complexities of subsurface drilling can make testing in some areas of the property more difficult than others, but the locations of the tests should at least attempt to correlate with the areas of the property showing signs of damage.

Public insurance adjusters are often helpful in sinkhole claims. They know the right questions to ask of the insurance company to learn more about how the claim is being evaluated. Public adjusters are licensed, trained, and bonded professionals. Many of the public adjusters I know have a resume which includes insurance expertise. That’s right, company adjusters, agents, preferred contractor vendors, claims handlers, supervisors, and special investigators are the former occupations of many public insurance adjusters who now work for policyholders.

It is helpful to have a professional public adjuster helping with a sinkhole claim because the investigation process is more complex than many other property damages claims and the repair protocols are unique with this kind of loss.

An OPPAGA Report recently evaluated the growth, discipline and helpfulness of public insurance adjusters. Here is a direct link to this report titled “Public Adjuster Representation in Citizens Property Insurance Corporation Claims Extends the Time to Reach a Settlement and Also Increases Payments to Citizens’ Policyholdershttp://www.oppaga.state.fl.us/MonitorDocs/Reports/pdf/1006rpt.pdf

A quick summary from the report reads:

The number of licensed public adjusters in Florida has grown significantly in the last six years, and the incidence of complaints, regulatory actions, and allegations of fraud involving public adjusters is generally low. Florida’s public adjuster laws are comparable to and in some cases more restrictive than those of other similar states.

Our analysis of Citizens Property Insurance Corporation claims data found that cases took longer to reach a settlement but received higher payments when claimants used public adjusters for claims filed in 2008 and 2009. Public adjusters represented policyholders in 26% of non-catastrophe and 39% of catastrophe claims filed during this period.

With respect to claim amounts and the need for policyholders to hire help, it states:

Policyholders with public adjuster representation typically received higher settlements than those without public adjusters. Policyholders that filed catastrophe claims in 2008 and 2009 generally received larger insurance settlements than policyholders that did not hire these persons. The typical payment to a policyholder represented by a public adjuster was $22,266 for claims filed in 2008 and 2009 related to the 2004 hurricanes (see Exhibit 6). In contrast, policyholders who did not use a public adjuster received typical payments of $18,659. The difference in payments was larger for claims related to 2005 hurricanes, with public adjuster claims resulting in payments that were 747% higher. However, as policyholders pay public adjuster fees as a percentage of their settlement, their net settlement would be lower than this amount.

 

Orth’s article highlights the Department of Financial Services Neutral Evaluation Program and urges consumers to use this process:

The state has approved 43 experts as neutral evaluators with no connections to builders or insurance companies. Insurers typically pick up any expenses for the evaluations.

Many people still don’t realize they have this option, though, Giordano said.

The “neutral” evaluation program however, should not be used in lieu of hiring a policyholder advocate. Many of our prior posts have explained how this program works and the pitfalls associated with the process. Neutral evaluation was discussed in “How Neutral are “Neutral Evaluators Certified by the DFS,” “Something is Rotten in the State of Denmark, I mean, Florida – Problems with the Proposed Sinkhole Legislation,” and “Neutral Evaluation of Sinkhole Claims: A Three-Ring Circus.”

Specifically in the post “Down and Dirty with Neutral Evaluation,” the neutrality of the evaluators was discussed. To become a neutral evaluator an applicant needs to fill out an application with the Florida Department of Financial Services and be either a geologist or a geotechnical engineer. To qualify as neutral, the applicant can receive up to 90% of his or her gross income or revenue in the past calendar year from property insurance companies. Also, since the cost for the neutral evaluation process is paid for by insurance companies, the neutral evaluators are in effect working “for” the carriers.

As policyholders are required by statute to go to neutral evaluation if requested by the insurance company, I have attended many neutral evaluations. Before the actual evaluation, I provide the expert reports which support my client’s claim for damage. This is information many unrepresented policyholders would not even be aware they need or something they might not be able to afford. Unless the policyholder hires a trained advocate or has the knowledge and resources to handle the matter without help, the neutral evaluator only receives the reports commissioned by the insurance company. This can make it difficult to truly evaluate what is happening at the property.

  • Ed Rega

    Chip

    Makes me think “Darned P/A’s are so Slow!!!”

    ED

  • Pete Price

    The Tampa Bay Online Article turns my stomach.
    They can only focus on the fact that it’s a bad economy so people are making claims. If PA’s are making false claims then why are they getting paid.

    They say how more and more people are becoming PA’s. I say hell yeah, because more and more of the public needs our help. I’m sure the amount of people wanting to become insurance adjusters hasn’t decreased, nor the amount of people selling policies to people that can barely afford the coverage they’re being asked to pay for.

    Are we going to bring up these issues at the next legislation ?

  • Pete,

    Yes. I think these issues will come up at the next legislative session. I encourage you and others with similar sentiment to participate and help get consumer friendly legislators elected.

  • Good article. Public Adjusters in Massachusetts should be considering this as well.