You and the Law
When Mother Nature hands you a catastrophic insurance claim
Times-Standard (Eureka, CA)
"These past two years, Mother Nature revealed her fury, resulting in property loses of terrifying, historic amounts," observes veteran of some of the most destructive fires in the Western United States, San Francisco attorney Dan Veroff, adding:
"And many insurance companies - trusted to help make families whole again - did the exact opposite-with adjusters massively underpaying valid claims. Sadly, the lack of knowledge by businesses and homeowners of the claims process-and steps they needed to take before the loss -magnified the harm.
He outlined "The worst mistakes a claimant can make when facing what we call a CAT-catastrophic-insurance claim."
1 - Take whatever the first adjuster tells you as Gospel
Consequences: They could misstate your rights under your insurance policy.
Insurance companies bring in an army of CAT "Storm Chasers" who are almost always from out of state. Rarely do they have specialized knowledge or training in creating accurate estimates of repair costs, or state law as it applies to your loss.
They often tell claimants that they have less insurance coverage than what their policy provides.
Please, do not act on what they tell you without consulting with an attorney! (More on what kind of attorney in a moment, and to my readers, this is really important!)
2 - Accept the first payment as being complete and comprehensive.
Consequences: You will be underpaid!
In a typical case, a CAT adjuster comes out with an estimator who is in the insurance company's pocket. They write up a "quick and dirty estimate," in their car and cut you a check to cover rebuilding and temporary living expenses.
This is where things get sticky.
Usually, an insured will meet with a contractor who will prepare a bid for repairs, but it can take months for it to arrive and will almost always be much higher than what the adjuster has already paid.
If you had a rebuilding estimate available before the loss, you could have reviewed it with the adjuster. Now you are starting from square one and your limited payment for temporary housing has run down further. Also, your claim has probably been reassigned to a second or third adjuster because CAT adjusters are usually only deployed for a short period of time.
You've got to learn what the claim is actually worth quickly. Never count on the insurance company to do this and always expect the initial estimate to be well below what it should be. You have a duty to yourself to question what you are told at the scene by the CAT adjuster and those who follow.
Under extreme pressure and worry, accepting what the adjuster tells you can be a costly mistake.
3 - Fail to get an estimate to rebuild your home as it was before a CAT loss
Consequences: You will be at the mercy of an adjuster who will likely under-value the claim.
The carrier is obligated to pay the cost of rebuilding your home as it was before the loss and not a different home. Yes, you can rebuild something different but this sets your maximum insurance budget. Only getting proof of the home you want to build now-with modifications and improvements and not what you had-helps the adjuster stick with their low estimate, dispute your figures and thus underpay the claim.
So, you need to answer this question: "What will it cost to replace or rebuild the home we had, not the home we would like to build now?"
So, if you get this estimate from a contractor in advance, you will be ahead. You can also use the estimate to ensure you have adequate insurance limits. At the same time, have the contractor prepare an estimate for the home you would like to build. As long as the cost comes in within the amount of your insurance coverage, you should be ok.
4 - Fail to prepare an inventory of the contents in your home in advance of the loss
Consequences: You will have to create it from memory, from photos that you might be able to find, receipts, talking with family members. Who can remember all the books, the dresses and suits, the details? Lacking proof, you will not be paid.
Also, assembling this inventory in advance allows you to increase the amount of coverage for personal property so as to not be under-insured. Save the list to the cloud.
5 - Hire a lawyer who is not experienced with insurance law
Consequences: Missing key deadlines and losing your rights. Getting involved in litigation for years when it could have taken months. Having the case turn out badly.
Insurance law is unique. If a lawyer tells you, "Oh, I know personal injury, divorce, tax - whatever - therefore I can handle your insurance claim," RUN! Lawyers inexperienced with property insurance law lose cases because of their lack of knowledge.
So, look for a lawyer who primarily concentrates on property insurance work.
6 - Exaggerate your loss. Lie
Consequences: In some states, if the company can prove you have lied, they can deny the entire claim. Lie about a dollar and you lose the whole thing!
Dennis Beaver practices law in Bakersfield and welcomes comments and questions from readers, which may be faxed to 661-323-7993, or emailed to [email protected]. Also, visit dennisbeaver.com.