Iowa Insurance Commissioner Doug Ommen deserves a big shout out for issuing a Bulletin on July 26 warning policyholders of the impending statute of limitations for a derecho that struck Iowa on August 10, 2020. He is calling on insurance companies to be liberal granting extensions to file lawsuits and warning derecho claimants to file suit or get an extension before August 10—next week! This Bulletin provides:
The purpose of Bulletin 21-04 is to provide ongoing guidance to individuals and entities regulated by the Iowa Insurance Commissioner when severe weather and natural disasters impact Iowa consumers and circumstances may prevent them from completing claims handling within one year of the date of damage.
The derecho that swept through Iowa on August 10, 2020 was one of the most devastating disasters the state of Iowa has ever experienced. On top of the significant damage, material shortages, the lack of available contractors, and subsequent weather events have been hurdles to the completion of repairs over the past year. The Iowa Insurance Division has also heard from carriers about shortages of claims adjusters available to inspect and reinspect property damage, which has led to additional delays.
Many insurance contracts include provisions requiring replacement or repairs to be completed within a specified time period in order to receive the replacement cost settlement proceeds, also known as ‘recoverable depreciation.’ The intent of this provision is understood in ordinary circumstances. The Iowa Insurance Division commends the significant efforts by carriers and consumers working together to rebuild our communities. However, there is much work left to be done. Many policyholders, through no fault of their own, but due to the scale of the damage from the derecho, are still waiting for work on their homes or other property to be completed. Given the varied circumstances leading to delays around the derecho recovery, invoking contractual provisions prohibiting payment of recoverable depreciation after a certain deadline may be viewed as a failure to act in good faith to effectuate fair and equitable settlement of a claim pursuant to Iowa Code sections 507B.3 and 507B.4. This remaining liability is readily apparent and has been documented thoroughly within many still pending claims.
Concerns have also been raised that these delays may limit a policyholder’s ability to later file an action against the carrier for disputed claims. Carriers must use great care in applying these provisions in the current circumstances as policyholders request extensions in claims handling. Insurance carriers have a duty to pay what is owed under the contract in a timely manner and cannot compel insureds to institute litigation by offering substantially less than what is ultimately recoverable under a claim.
Insurance carriers have a duty to their policyholders to be there for them when the worst happens by providing the coverage promised in a timely manner. The derecho has presented unprecedented challenges for carriers and policyholders alike. If policyholders are making reasonable progress toward completing the repairs, a company’s responsibility to act in good faith should guide them to accommodate a request for extensions or appropriate determinations for reimbursement related to cost increases outside the control of the policyholder. The existence of or the interpretation of insurance contract provisions cannot be employed to frustrate an insurer’s duties of fair dealing. Great work has been done here in Iowa as the Iowa Insurance Division has seen companies in this derecho disaster rise to that challenge by working to pay a large volume of claims quickly – over $3 billion to Iowa policyholders to date.
… The Iowa Insurance Division expects carriers, who have a duty to be fair in the claims process, to make certain they continue to support their Iowa policyholders throughout this rebuilding process in its entirety.
The lesson is clear—check the policy to see if there are any time limits that are about to expire. Ask for extensions. If it is a one-year statute of limitations issue, get an extension or file a lawsuit.
Appraisals may not automatically extend statute of limitations. If you are in an appraisal, ask for an extension if you have a one-year statute of limitations.
We have written on Iowa property insurance law in the past and have been involved in a number of lawsuits in Iowa. Iowa follows the Broad Evidence Rule, as we noted in Calculating Actual Cash Value: Part 11: Iowa. I noted that the Iowa Supreme Court determined that “appraisers may determine the factual cause of damage to insured property to ascertain the amount of loss,” in Ashley Harris Cited by Iowa Supreme Court Regarding Causation Issues in Appraisal Proceedings. Jon Bukowski recently noted in, Line of Sight Rule for Matching of Undamaged Materials in Iowa, this about the matching issue in Iowa:
While Iowa has clearly recognized the importance of matching replacement materials with undamaged materials, whether matching of undamaged property is covered often boils down to a subjective exercise of determining what constitutes a ‘reasonably uniform appearance.’ This requires a policyholder to present evidence, beyond his or her own opinion, that the proposed repair will not achieve a reasonably uniform appearance within the same line of sight.
Again, please spread the news that the one-year anniversary of the derecho has implications with insurance claims. While Iowa has highlighted the issue with the bulletin, other states hit by this storm may have similar issues.
Thought For The Day
“Shoeless” Joe Jackson: “Is this Heaven?”
Ray Kinsella: “No…..It’s Iowa.”
—Field of Dreams