Rarely do insurance commissioner bulletins warn insurance companies of paying too much or that consumers are not entitled to insurance benefits. Most departments of insurance only write bulletins because insurance company adjusters pay far too less to similarly situated consumers suffering from the same loss.  Of course, insurance company lobbyists now go into overdrive to argue against the bulletin and to influence those in power to change the bulletin to favor payment of less money. Insurance companies essentially use policyholder premiums to pay the expense of their lobbyists to reduce payments to those paying for the insurance benefits.  How ironic.

Missouri wrote the following bulletin which should be used by all hail damage victims:

Since the hailstorm. . . .the department has received more than 500 complaints. . .relating to the replacement of damaged siding under homeowner’s coverage – a truly overwhelming response from the public. Generally, these complaints concern the replacement of damaged siding on dwellings when the original siding is no longer manufactured.

Some companies have refused to replace the siding on such dwellings except on the side actually damaged by the impact of hail, leaving the policyholder with a house that has mismatched features. Many insureds cannot understand how essentially identical contract language and essentially identical damage can produce widely varying benefits, based on insurer, and that compels the department to clarify its position.

Companies that refuse to replace siding (or compensate for damage to siding where coverage is under a standard fire dwelling policy) except on the side actually damaged by hail may not have fully considered Section 375.1007(4), RSMo (2000). In this “good faith” provision, Missouri requires insurers to effectuate prompt, fair and equitable settlement of claims submitted in which liability is reasonably clear. Typical homeowners policies require insurers under certain circumstances to repair damaged dwellings with ‘like,’ ‘equivalent’ or ‘similar’ materials and/or construction. Some insurers have limited the meaning of ‘damage’ to include only the side of a house actually dented by hail. They contend they are required to replace only the dented side of the house with like, equivalent or similar siding – an interpretation that could result in mismatching of siding with the remainder of the house, especially in instances of older residences built with materials no longer manufactured.

Nothing in the policies forewarns consumers of such a potential result. Consumers have relied upon a more expansive and reasonable interpretation of the policy language: when siding is damaged, the siding as a whole is damaged and must be replaced with ‘similar’ or ‘like’ siding unless the original siding or a substitute of the same color, size, composition and quality is available and satisfactory to the insured. 

Insurers who insist on the narrow interpretation of ‘damage’ may violate the good faith provision in Section 375.1007(4) and the false advertising provisions…. Continued resistance by an insurer may result in violations of…which prohibits insurers from compelling insureds to institute lawsuits to recover amounts due under their policies. . . .

The issue of like, similar or equivalent materials and construction may well grow as the thousands of Missouri subdivisions built during the post-WW II era mature, and the materials used become unavailable or extremely scarce. . . .

Why aren’t more insurance commissioners writing bulletins like this? The honest answer is because most insurance commissioners have ties to the insurance industry or they need them for election to other office. Does anybody disagree?

The sad part is the Missouri Department of Insurance repealed this bulletin for unknown reasons. I researched the issue while preparing for one of my recent seminars regarding “matching,” and the best I can figure is that insurance lobbyists convinced the Missouri Department of Insurance that a wholesale repeal of various favorable bulletins for policyholders was in the best interest of Missouri citizens.

Democracy requires constant vigilance by its citizens.  This is something we should remember on any Inauguration Day.

Thought For The Day

Popularity should be no scale for the election of politicians. If it would depend on popularity, Donald Duck and The Muppets would take seats in senate. 

—Orson Welles

  • shirley heflin

    Dear Chip:

    Reading your blog entry is akin to sitting in an Algebra class I never understood! The simplicity of doing the right thing is not complicated, but insurance companies don’t get that concept. Why do carriers insist that whatever they’re doing for an insured is like doing them a “favor”? It’s not shocking that the Missouri Department of Insurance pens a Bulletin stating what carriers are supposed to do for their Insureds. It’s also not shocking that they repeal their Bulletin for their own selfish interests, as well as that of insurance companies.

    You’re right – constant vigilance is required and we must be on top of insurance companies every second, every minute of every day.

  • Chip, what you and Shirley are saying is largely biased presumption and I say that with all due respect. My career in the P&C insurance industry spans 6 decades. Bulletins like the one described carry no force of law, though insurers often abide by them. I have no idea why the bulletin was withdrawn and I checked with someone who worked at the MO DOI at the time and he did not know. It is not a fact-based conclusion that somebody is in the pocket of the insurance industry.

    Here is an article about this (no password needed…I got so many questions about this issue that I made the article public last year):


    As the article points out, some states have statutory or case law that governs such consequential or indirect claims. The ISO homeowners forms (as do most non-ISO forms) clearly state that they only cover DIRECT damage. If I own a suit and the coat is physically damaged, but not the pants, I don’t get a complete new suit even under replacement cost coverage because only the coat suffered DIRECT damage. That may not sound “right,” but that’s precisely what the insurance contract says and means. HOWEVER, this is why the ISO homeowners policies have a “Pair or Set” clause that pays the difference between the value (on an ACV basis) before and after the loss, such that you get more than just the value of the pants.

    I’ve personally and successfully used this clause when settling a tornado claim that damaged or destroyed 6 of 18 shutters on my home a few years ago. I invoked the Pair or Set clause (something my adjuster said no one had ever done for real property, though the clause does not say it’s limited to personal property). And the really good news? The insurer used the ISO HO-3 policy but had a broadening endorsement that provided replacement cost, not just ACV, on the Pair or Set clause. Long story short, because the shutters were almost 30 years old, they couldn’t be matched, so I got 18 brand new shutters.

    What is covered is governed by what the insurance contract said. My experience over 47+ years is that claim denials are not most often based on the insurer trying to screw its customers. Most often denials are based on the FACT that the policy doesn’t cover the claim. That being said, it is sometimes, perhaps even often, that the language is subject to another interpretation. I’ve spent the past 28 years assisting independent insurance agents who are advocating FOR coverage for their customers in such cases.

    There are other reasons for claim denials we could talk about (including the sad state of education today), but I truly and honestly believe that deliberately refusing to pay a covered claim is a rare reason and more often due to either the FACT that the policy doesn’t cover the loss or that there is some measure of incompetence or misjudgment involved.