Business owners and owners of commercial property should not buy Farmers Insurance. Virtually every insurance company in the United States considers the entire cost of restoration right away when making payments, including at actual cash value—except Farmers Insurance. Farmers Insurance has declared war on its own customers and independent restoration contractors.

In Crazy New Policy Language? Report It To United Policyholders!, I posted about rogue insurance company tactics used to get a competitive advantage; the following endorsement to the Farmers Insurance business policy is a classic example:

When it comes to reconstruction, replacement costs always include the contractors profit and overhead. This policy effectively removes payment of these significant costs when even determining actual cash value. State insurance regulators should never be approving this rogue insurance policy form.

Farmers Insurance is a cheap insurance company that advertises how good it is yet is selling a horrible product through this business policy. Farmers Insurance agents should warn their own commercial customers against buying this policy because this policy is clearly not providing the best coverage at the best price for the commercial customer.

Thought For The Day

There is no advertisement as powerful as a positive reputation traveling fast.
—Brian Koslow

  • Bruce Holmes

    Well, apparently you can’t trust the Swiss. They only “farm” you pocketbook.
    “Farmers Insurance has more than 48,000 exclusive and independent agents and approximately 21,000 employees. It is a subsidiary of the Swiss company Zurich Insurance Group.”

  • Bill Wilson

    I’d be interested in the reasoning for this, something presumably outlined in the regulatory filing when the form was introduced.

    Don’t all insurers limit payment to actual expenses paid and those that are “reasonable” (whatever that might be)? This would seem to quantify that contractually.

    It might also be an attempt to exclude payment to an insured acting as his own general contractor?

    Again, I’d want to see the expressed logic behind the form and/or how the language is actually applied.

    • wmerlin


      Since most policies say they pay ACV until the lower of the amount amounts actually paid limited to the RCV of the loss, the underpayment occurs when paying actual cash value which has to be paid first. ACV traditionally includes a determination of RCV with all costs then with a subtraction of depreciation.



      Suppose you built a home with your wife. It cost $1m. It finished and then burnt down with your wife in the home on the first day after it was built. Assuming the insurer did not also deny the claim for poor workmanship causing the fire (LOL) the Farmers policy would only pay RCV less the contractor’s overhead and profit until you rebuilt that home. Suppose you did not want to rebuild build it because you were heartbroken—the insurer never pays even ACV. Assuming overhead and profit was 20%—it would only pay $800k.

      My example shows how wrongful this clause is when its logic is pushed to the extreme.

      • Bill Wilson

        I’d want to see the full policy provision modified by this endorsement, but I see your point based on this particular example.

  • shirley heflin

    Dear Chip:

    It never ceases to amaze me how insurance companies frown about paying other’s overhead and profit, yet their industry is a multi-billion dollar one solely focused on paying out LESS than what they take in!

    Tampa, FL

    • wmerlin


      Contractors are people trying to make a living and many are in small family owned enterprises. Many insurers treat these entrepreneurs trying to live the American dream as the enemy. To me, profit is the basis of a successful capitalistic country and insurers simply are being greedy, trying to run over and demonizing our much needed restoration contractors. While I agree there may be some bad apples, most of these contractors doing this work are just trying their best to make a living and care for their families and employees.

  • Bill Wilson

    The mold expert claim sounds like an adjuster that doesn’t understand how insurance works. Unless there is a contractual provision to the contrary, the insurer’s expense is just part of its aggregate loss adjustment expenses across all policyholders.

    This expense should not be reflected in an individual insured’s loss, just the overall loss experience of the carrier. If this is not an isolated incident involving an uninformed individual, then it should be addressed at a higher level with the carrier.

    I’ve been doing this for decades, even a UM PD claim involving my son where the adjuster (and perhaps others) didn’t understand the state’s UM PD law. I usually find that there’s nothing nefarious going on, nor systemic, just someone who doesn’t know what they’re doing.

    • Matthew Tennenbaum

      Correct. After multiple attempts to overturn this misinformed practice, with an AIC designated adjuster no less, we will be filing an internal appeal for starters. It is unfortunate that proper adjustments and internal loss adjusting practices imposed by a carrier are often at odds with another at the expense of the policyholder.