Usually, I write about cases involving public adjusters, but here is an interesting case where the insurance company’s adjuster helped the insureds.
Recently, a frequent allegation raised by the insurance companies seems to be “too little…too late.” Insurance policies typically include a condition that requires losses to be promptly reported.
Jeremy Tyler and Shaun Marker have addressed late reporting and late notice issues in great detail in their posts about hurricane losses. This week, I came across a case where the insureds were successful in overcoming the late notice/late discovery defense raised in a water damage claim in Pennsylvania. After reading the case, I reached out to some of the public adjusters in Pennsylvania and I learned a little more.
Adam and Sylvia Spector purchased a home in 2000. The home was built by a company called Bentley Homes. The record lists the Spectors’ home size in excess of 8,000 square feet. Fireman’s Fund Insurance Company provided insurance to the Spectors and to other homeowners in the area who also owned Bentley built homes.
At times, the Spectors noticed water on the inside of their window sills but did not report the water to the insurance company. The Court recognized the Spectors were not experts in moisture intrusion and understood the homeowner had to hire experts to help them determine the problem.
The insureds did not hire the experts at the first sign of water.
The Court’s record reads:
During heavy rain storms, Plaintiffs experienced some minor dripping problems which were limited to isolated areas, usually window sills. However, during dry seasons, there were many consecutive months where Plaintiffs had no water leakage problems.
It was not until 2006 when the window paint started to peel away that the insureds determined they needed help. First, they hired a construction consultant to inspect the home. This expert only did a visual inspection and then explained to the Spectors they should hire a stucco expert. A firm was then hired to evaluate the external stucco of the home. The firm tested the property with a moisture meter and found areas of concern, but, unsure of the problem, the firm recommended destruction of walls.
At this point, the Spectors also learned other Bentley built homes were experiencing serious problems due to water damage. However, after hiring two experts, they were still not sure if there was a problem or what was happening. Finally, the Spectors consulted a plaster expert who tested the property. In November of 2007, the plaster expert was able to provide the Spectors with information about the water damage he discovered.
After sending an adjuster and an engineer to evaluate the property, Fireman’s Fund denied the Spectors’ claim.
This policy, like many other policies for residential insurance, includes exclusion for water damage caused by repeated leakage or seepage. An exception in the policy does provide coverage for hidden or concealed damage reported to the insurance company within 30 days of detection or within 30 days of when the damage could have been detected.
I am sure many public adjusters have reviewed policies with similar language and have claims where the date of discovery or manifestation of the damage is at the heart of the adjustment.
In this case, the record indicates Fireman’s Fund sent an adjuster to the property to investigate the loss, and the Spectors testified the adjuster told them “the claim should be covered.” The record also reflects that during the same meeting the adjuster told the insureds to hire a lawyer for the claim, and even recommended a lawyer! Why would the insurance company’s adjuster encourage the insureds to hire a lawyer?
Perhaps this was because of the three other homes in the neighborhood with water damage claims against Fireman’s Fund. Or, maybe, it was the insurance company’s engineer’s influence — the same engineer assigned to this claim found similar damage at another property and Fireman’s Fund paid.
The Court wrote a detailed Memorandum of fact findings from the trial. It discussed the other water damage claims against Fireman’s Fund and listed other insureds who were paid by Fireman’s Fund for similar damages. The insurance company expert appears to have determined the damages from the Spectors home were exactly the same as damages to the other Bentley homes. Fireman’s Fund paid more than $120,000.00, on the other claim.
The claim is complicated because Fireman’s also alleged the property damage was excluded because of construction defects. The insureds had replaced the roof of the home and many windows. The insurer stated it would not pay for the damages caused by the faulty or defective roof or windows,
The Court ultimately determined that the insureds were entitled to damages for the water damage which was hidden from view.
The Court wrote:
The exception requires that the insureds report the hidden or concealed damage within thirty (30) days…[t]he Court finds that the Policy provided allows an insured party a ‘rolling” thirty (30) day grace period each time new damage is discovered, or where there is an ongoing discovery of damage. (Emphasis added)
The Spectors had the burden to prove they complied with the 30 day rule and the Court agreed the applicable time period began when the third expert found the damage and ended when the claim was reported. This length of time was only a few weeks and qualified for coverage based on the wording of the policy.
The Court awarded $104,432.50 for water damages at the property.
At the same time the Court decided this breach of contract case, it also considered allegations of bad faith and deceptive business practices. The Court denied these counts because the insureds failed to establish by clear and convincing evidence the bad faith requirements—that the insurer lacked a reasonable basis for the denial and it used deceptive practices.
My sources tell me a public adjuster was not hired by the insureds to help with this claim. So, I am wondering if any public insurance adjusters have comments about how other claims are being handled with similar issues in Pennsylvania and elsewhere. And also, what services could have been provided to the Spectors if they had retained a public adjuster?