A very fine insurance defense attorney, Brian Hunter, made a comment to yesterday’s post, Do Insurance Companies Overpay Claims? with the following observation:

"Second, not only can claims be overpaid, they can be underpaid…."

Assuming this is true, and it probably is based on the law of averages, how can we have any meaningful data? What is the standard against which a claim is judged over- or underpaid? Is it the proof of loss, or the public adjuster’s estimate, or the appraisal award, or something else? Even if we use the most presumably objective of these, i.e., an appraisal umpire’s award, as a standard, then a good many claims I have seen resolved in that manner have been simultaneously underpaid by insurers and grossly inflated by the insured and/or public adjuster.

Of course, in most cases, an appraisal award is a legal fiction that may or may not bear a rational relationship to the amount necessary to repair the property; but it is certainly and merely an estimate. Frequently, the umpire’s award is an average of two competing estimates. Regrettably, few court-appointed umpires have any specialized training in the construction fields, and many have never written an estimate of their own nor done any kind of construction work. Maybe a better standard is needed.

What we do not have is reliable data in Florida during the past several years comparing claim payments with amounts spent by policyholders to actually accomplish like kind and quality repairs. (If I am wrong, I would love to see a source.) Changing the law to require insurers to pay actual expenditures, and not mere estimates of replacement cost (some honest, some not, all estimates nevertheless), would bring greater certainty to all the parties, I think. Yet this is opposed by the same folks, i.e. public adjusters, bemoaning the lack of accuracy in claim adjustment.


Continue Reading Insurers Track Overpayments

A blog, Overpaying Insurance Claims, caught my attention. The premise was described as follows:

I recently began questioning how much money insurers hand out needlessly because their adjusters don’t have enough training or are so overloaded with work that they can’t possibly handle all of the files they are assigned due in part to a claim a family member recently made.

A few months back, my sister’s dishwasher piping burst, which flooded her finished basement and the kitchen sub floor. She filed a claim and received immediate action because the loss was deemed an "emergency" by her insurance company’s claims triage unit. The field adjuster came out, estimated the damage, and made arrangement for repairs under the company’s preferred contractor program.

The glitch arose when she decided to replace the floor in the basement bath/laundry room with ceramic tile instead of the linoleum that existed before. Being the most honest person on the face of the earth, she was willing to pay the difference on the upgrade.

That’s where the insurance company lost out.

The repairs were made to everyone’s satisfaction and the contractor was paid. My sister called the adjuster and the claims office a number of times to ask how much she had to repay. After a number of excuses — waiting for paper work, too many other emergencies, “we’ll get back to you,” the adjuster is over booked — she resigned herself to accepting more than she felt entitled to.


Continue Reading Do Insurance Companies Overpay Claims?

Slabbed has been dogged regarding its reporting on the Mississippi qui tam litigation involving State Farm. A recent post, Rigsbys file “Motion to Reconsider Scope of Proceedings in Light of Evidence Adduced in Discovery” – ask Court for additional time to conduct Discovery into “the Scheme,” provides some insight regarding the flood adjustment techniques required by National Flood versus how flood adjusters in the field actually do their job.


Continue Reading Flood Adjustment Methods Discovered in Qui Tam Case

In recent conversations with attorneys representing homeowners against insurance companies in claims practice disputes, a number of recurrent themes in discovery arise. Insurers typically raise relevancy, privacy, trade secret and burden objections when policyholders attempt to find internal documents explaining the how, what, and why of an insurer’s claims procedures. Policyholder counsel must make motions to compel in spite of these common objections or those claims procedures and the motives behind them will never see the light of day.


Continue Reading The Big Picture in Discovery of Insurer Claims Practices

Last week in Don’t Forget to Consider the Severity of Your Claim, I wrote about what severity means in the insurance context. We also started to talk about how severity can affect whether the insured’s claim was handled fairly by the insurer. Let’s hear a little more about what some of these carriers have to say about it and whether it makes sense to you.


Continue Reading Don’t Forget to Consider the Severity of Your Claim: Part II

Many of you probably think that I am referring to the extent of damage of a claim or a claim involving a total loss. The word “severity” naturally conjures up the thought of something that is serious or grievous. But I’m actually writing about something many of you probably don’t know all that much about. In the arena of bad faith litigation, severity is a way that insurers measure claims employees’ performance. And, of course, it doesn’t stop there – you knew there was an angle, right? Yes, severity can affect whether your insured’s claim was properly handled by the insurance company. Severity is one of the many, important factors that you should consider in your bad faith case against a carrier. Let me tell you more…


Continue Reading Don’t Forget to Consider the Severity of Your Claim

Remember back in the day when an insurance adjuster arrived at your house to inspect the damage and the adjuster wrote you a check on the spot? Some of you may, but most do not because it probably rarely happened. There may have been a day when most insurance companies paid claims immediately and in a manner respectful of the policyholder. Many claims departments required adjusters to help the insured find coverage. But, this is rarely the case today. Chip Merlin has even written about one insurance company currently calling out its competitors for not properly servicing policies in Chubb Calls Competitors Cheap And Unfair.


Continue Reading The Fantasy of “the Good Ole Days” When Insurance Companies Adjusted Claims Fairly and Paid on Time

(Note: This guest blog is by Vivian Persand, an attorney with Merlin Law Group in the Coral Gables office).

Last week, I wrote about some of the things you can expect to see, and not see, when Insurers like Safeco and Liberty Mutual respond to discovery requests. This week, I want to explain one of the steps you can take to combat these evasive discovery tactics. Some of the most effective and successful methods have been used across the country by large and small firms alike. What makes these plaintiffs’ law firms stand out is not the type of claim they pursue, the amount of the claim or the kind of insured they represent, but their commitment to not letting insurers get away with stonewalling discovery tactics. These attorneys go the extra mile, invest wisely, and do their homework. Sure, it might take some time; it’s going to take extra effort, and, naturally, nothing is free. But in the end, plaintiffs’ attorneys who obtain adjuster’s diaries, employee training manuals, and documents showing incentives for employees to put money into their own pockets instead of the insureds’ pockets, are going to go a long way in proving how their insured’s claim was improperly handled by the insurer from day one. This type of evidence can show your judge how the insurer never really intended to pay anything near a fair amount on your insured’s perfectly legitimate claim, if anything at all.


Continue Reading Getting the Inside Scoop on Insurance Company Claims Practices

Dimechimes ClaimSmentor had an interesting post on its blog which partially supports my opinion that the BP claims process has an insufficient number of qualified people attempting to figure out and pay the full amount owed to those damaged by BP. An Open Letter to Admiral Thad Allen, President Obama, White House News Correspondents, ESIS Insurance, and All involved in the BP Oil Response- We Can Help Address Your Claims Concerns- Lead, Follow, or Get the Heck out of our Way!!!! stated this:

Continue Reading Is BP Hiring Ignorant Claims Handlers with Little Dollar Authority to Pay Claims?

This is a continuation of State Farm Agrees With Chip Merlin Regarding Claims Handling Obligations and State Farm Claims Handling Standards. These are some of the standards, which are the recognized insurance industry obligations of good faith claims handling, that State Farm teachs to its claims adjusters.


Continue Reading State Farm Recognizes that Good Faith Requires It to Inform and Assist the Policyholder to Fully Obtain All Benefits