Instead of sending a full and adequate amount of insurance proceeds, is your insurance company sending over just a small offer hoping it “settles” the claim and that you accept it and go away?

For a moment, let’s break down the purchase of buying property insurance. In this example we will consider a homeowner residential property. After talking with policyholders about losses we know that many of our clients think they are doing everything right when it comes to be being “covered.”

Consider the following reasonable and prudent homeowner, Mrs. Claus (MC)

MC does some research about property insurance and speaks to a professional broker. The insurance policy MC buys comes in her email and she reviews it. The policy has full replacement cost coverage, ordinance and law coverage, includes coverage for additional living expenses, and even has a dwelling extension coverage that MC paid extra for when she bought the insurance.

MC goes on with her busy life with the peace of mind that should a significant problem happen to her home causing accidental direct physical loss, she has insurance that will replace her damage!

Three years later, MC experiences the dreaded damage to her home. Whether it be walking up in the morning to three inches of water in your house, lightning that causes a power surge, or the tree that comes crashing down on the garage in a storm, these are all significant losses that can turn your life upside down while you go through a claims process.  In addition, there are the horrific, catastrophic losses of fire, hurricanes, and tornados that can devastate a property. For this example, we will assume that MC suffered water damage from a broken pipe in her home.

MC called the insurance company and they sent someone to look at the damage.

Insider tip:  Make sure the representative is licensed and can adjust insurance losses in your state.  Ask for a business card. If the insurance company sends someone other than a licensed adjuster, stop reading and consult with counsel.

In MC’s claim, an adjuster shows up and he proudly tells her that he loves working for the insurance company and it has been a great three months of work.

MC is nervous that the adjuster is not qualified or trained but she gives him all of her original documents—she has a copy of her photos, but the rest are originals.

Insider tip: Never give away your only copy. Yes, we live in a digital age and electronic information is easier to access but it is best to give duplicates and save originals. Always retain a copy of everything you submit and send a confirming email of the documents you sent over and the date.  A written record is critical in these cases.

MC is worried because the adjuster was only at the property for a few minutes and although she pointed out the damage, he didn’t seem to investigating or evaluating.

MC feels better when the adjuster calls her a week later to tell her that an engineer is coming out.

But when the engineer comes to the property, the engineer is just banging on things with a broom stick and asking her if she agrees with him that the areas of damage were pretty old anyway.

A short time later, MC receives a check in the mail along with a document that appears to be an estimate of damage but she really can’t figure out what R&R is and how much of the problem area is being addressed.

MC is glad that the insurance company covered her loss, but thinks the check will not be enough money to fix all of the damage.

MC can’t take any more days off of work and so she moves on with her busy life and is glad the month of stress with the insurance company is over.

Did MC receive all the benefits of her insurance coverage? The claim was not denied and an engineer made an inspection, so one might think that this should be an adequate claim evaluation. If you ask MC, she felt the claim was mishandled and she was not fully paid, but she doesn’t build houses, fix pipes or handle insurance, so she moves on and just uses additional money from her savings account to pay to get the work done.  She does not want to deal with the insurance company anymore and wants to get recoverable depreciation back, so she goes on to fix the house.

Now, this is a common fact pattern we hear about all too often in this line of work. Policyholders are naïve when it comes to damages and coverage.  Policyholders are exhausted and don’t realize what an ordeal a claim will be, so they are deflated. However, the insurance company should not short their clients and should pay pursuant to the policies.  Anything less is taking advantage.

So who is checking behind the insurance companies to see if they are fully paying?

The insurance company is in the business to make money and if they drag out the claim and then send over policyholders some money, they understand that many, many insureds will cash the check and move on with life. Insurance companies also do this with denial letters.  Check out Rutgers insurance law professor Jay Feinman’s book, Delay, Deny, Defend,

The insured might be adamant that he or she was short changed, but the cost of time and money to press the insurance company seems like too much to handle.  The insurance company is banking on a policyholder feeling this way and throwing the in towel.  Many policyholders give up or they move on without proper payment because they accepted the check.

There are two impressions that a policyholder can have at the stage of the check being issues.

  1. They think they were paid in full because they don’t know the cost and scope of the loss or they don’t know the coverage they purchased, or
  2. They are pretty certain that the claim payment isn’t fair but they don’t want to fight about it.

In a recent Hurricane Matthew meeting with Florida CFO Jeff Atwater in St. Augustine, insurance company representatives explained to the CFO and Commissioner that many of the insureds are accepting the “offers” being made after Hurricane Matthew.  You can watch this recorded meeting on the Florida Channel, and you can read our recap post here.

So the insurance company is telling the leaders of our state that after the hurricane hit, they were making offers. Offers? This is not right. This is not a bargaining time. The insurance company should pay the amount of the covered loss that returns the property back to the pre-loss condition pursuant to the policy. By calling them offers it assumes that policyholders are being cheated and shorted and that more money is available if they just counter-offer. This is not part of the policy. This is a different process and agreement than the contract contemplates.

Whenever an insurance company tenders you funds in a claim, you need to find out if an acceptance of that check will be the final payment.  Watch out for checks labeled as full and final payment.  Universal Property and Casualty often puts final release language on their checks. If you want to seek more funds from an insurance company, you do not want to accept, deposit, or cash a final settlement check.

So if you are in MC’s position, where you are relieved to finally move on from your headache of an insurance claim and start to rebuild, consider this.  Consider whether you were paid properly and fully.  The person in charge of your claim may be just as busy and tired as you are and may just be hoping you accept the check and move on, even though the claim was not properly estimated or scoped.

What is an insured like MC to do?

  • Don’t sign and accept the check if this is not your final payment. Get written confirmation from your insurance company that this is not a final payment before you deposit.
  • Consider whether you should have an expert assist in learning about your insurance coverage and your claimed damages. Public adjusters can do this as a service in many states and do not charge unless there is a further recovery.
  • Know when you don’t know, and hire help. Most policyholder attorneys do not charge for an initial consultation and claim review.
  • Complain to your state insurance department. Make a written complaint.
  • Research what the insurance covers and how to fix your damages and demand full payment.

Remember these prior posts also on point: