Insurance companies insure all kinds of buildings in all sorts of conditions. Insurers that decide to insure older structures and buildings with older roofs in various states of wear and tear love to recite exclusionary clauses when those roofs and older structures suffer damage.

The Arizona Supreme Court put an end to this type of "accept the premium and deny the claim and coverage" practice of insurers who deny windstorm claims which caused new or additional damage finding the following:

We reject the proposition that windstorm coverage extends only to buildings in objectively reasonable condition. Insurers are free to expressly limit coverage to buildings meeting certain structural qualifications or to inspect buildings before issuing windstorm coverage. Absent such limitations, however, a windstorm is a wind of sufficient force to proximately cause damage to the “ordinary condition of the things insured....¹

We are constantly being asked to review denied claims where older roofs with wear and tear are damaged by subsequent windstorm or hail. Those claims and types of losses are covered. There should be no question about that. The problem is some insurance company expert consulting firms fail to note the additional damage trying to help insurers deny payment for the loss by wrongfully claiming that the windstorm or hail caused no additional damage.

Those with this type of issue should read my post from last week, Hail Storms, Wear and Tear, and Inadequate Maintenance.

Positive Thought For The Day

"The most important measure of how good a game I played was how much better I’d made my teammates play”
                 —Bill Russell

I was crying as the verdict was read in the Phoenix federal district courthouse. So was my client. We won a very hard fought multi-million dollar hailstorm trial against Travelers. It came only because of hard work. The short video above is of our client explaining why we won.

Phillip Sanov was the lead trial attorney. I decided that new Merlin Law Group trial attorney, Mike Poli, should take my place after hearing views from a focus group. I relegated myself to the trial "bullpen" and presented the direct examination of only one rebuttal witness after taking the majority of the depositions. We won the case because we worked harder and smarter than very hard working and very smart counsel for Travelers.

Travelers is a well-funded corporation and has a stable of great trial attorneys if it decides to make a point and go to trial rather than settle. I am lucky to have Phillip Sanov and Mike Poli working with me or we would never have won. We also had attorneys Shane Smith, Kesha Hodge, Jeffrey Zane, Lawrence Moon, Monica Lindstrom, Jean Niven, Mary Fortson, and Ruck DeMinico working on this case—you need a village and a big wallet to beat Travelers.

I will write more about this victory later. I have emphasized that our firm should pursue resolution through trial whenever insurers adjust claims in a manner that delays, under values, or wrongfully denies a covered loss. If insurers do not understand that their insureds are represented by attorneys who will competently, aggressively, and ethically litigate these claims, they may be tempted to adjust claims in a manner that favors the company's bottom line and not their insured's best interests.

Positive Thought For The Day

"All right Mister, let me tell you what winning means? you're willing to go longer, work harder, give more than anyone else." 
           —Vince Lombardi

Insurance company claims adjusters and claims managers are most important people. Their jobs are not easy and the stakes of their decisions can be very high. My post yesterday, Merlin Law Group Wins Hailstorm Trial Against Travelers—Hard Work Pays Off, brought a lot of pleasant private comments and congratulations. It also brought some personal reflection because the tendency for many representing policyholders is to look at us as the only "good guys" when in fact there are legions of good people working for and representing insurance companies, including those at Travelers.

Phillip Sanov's closing statement made me think of this when he discussed the testimony of Travelers claims manager Wade Ledbetter, who inherited the claim once it went into litigation:

Next in line is Wade Ledbetter. I like Mr. Ledbetter. Mr. Ledbetter got up there and told the truth. Mr. Ledbetter said that Travelers paid based on [the expert's] report, paid for wind-damaged tiles....They didn't fully pay. [The expert] only looked at five out of 15 buildings. But that's what they paid on.

I also spoke with Randy Goodman, a past president of the National Association of Public Insurance Adjusters (NAPIA), who told me that one of Travelers capable trial attorneys is a "Prince of a guy." Of course, that Prince was doing his best to cut our throats and win the case for Travelers, but that is the nature of American legal advocacy. It is hard to look at one's opposing counsel as anything other than "the enemy." But, I find it helps me and my client if I do not.

Showing respect and acknowledging the important role of insurance company adjusters and their interests is highlighted in the first two ethical points of NAPIA:

Members shall conduct themselves so as to command respect and confidence. They shall work in harmony with one another, with their clients, and the insurance company’s representatives, so as to foster a cordial and harmonious relationship with all branches of the insurance business, and with the general public.

Members must be fitted, by knowledge and experience, for the work they undertake. They must not endanger the interests of the public adjusting profession, or risk injustice to assureds or to the insurance companies, by attempting to handle losses or claims for which they are not qualified, and for which they cannot find competent technical assistance.

Admittedly, in the heat of battle or while advocating for the interests of the policyholder, I too am often guilty of looking at the insurance claims adjuster as "the enemy" rather than a person with important responsibilities and views. I am certain this viewpoint and reaction is not in my best interest or my client's.

So, if you have some time for weekend reflection, I would suggest you read Classic Blog: Reflections on Insurance Disputes and Adjustments After Two Weeks in Italy.
 

Positive Thought For The Day

"Do I not destroy my enemies when I make them my friends?” 
             ―Abraham Lincoln

Last week's post by Chase Mathis about California Insurable Interest made me think, "we've written about Insurable interest issues in California before." So, I did something that I suggest others do when researching topics on the Merlin property insurance law blog—use the search function on the right side of the blog to find relevant posts.

When I wrote "California Insurable Interest" into the key word search, seven posts were noted:

• Insurable Interests Defined: A Blog Series - Episode Four, California
• Insurable Interests - Making Sure You Really Have an Insurance Policy
• Insurable Interest - Making Sure You Really Have an Insurance Policy
• The Road to ALE, from Loss to Being Incurred, Part 1
• Make Sure Your Policy Insures Your Interests!
• Property Owners Are Not the Only Ones With an Insurable Interest
• Marijuana in the Mainstream: How courts are dealing with insurance claims of loss for marijuana plants and marijuana plant clean-up

Disputes involving Insurable interest usually involve the following situations:

1. A death occurs and the policy is not changed.
2. A divorce or separation occurs and the policy is not changed.
3. A named insured business operating at the property is not the owner of the property, although affiliated with the operating business.
4. The tenant and not the owner of the property is the only party listed as a named insured.
5. Family trusts and limited liability entities are owners of the property but not named insureds.
6. A family member occupying the premises, but not owning the premises, is the only named insured.
7. A real estate transaction occurs and the parties do not get permission to transfer the insurance contract or the new policy is not written with the correct buying entity.

Insurance agents and brokers should always be asking and warning about the significance of these issues with their clients and especially at the time of placement of the insurance. Many policyholders are ignorant about the fine detail of insurable interest requirements and are more concerned with "getting the property" rather than "getting the right party" insured.

I often give speeches and challenge those in the audience to better themselves through education and joining with others in endeavors so that, by mutual experience, the best practices can be copied for current and future policyholder clients. I feel like I have done this with the addition of nine new attorneys into our firm on Monday.

I already knew that we hit a home run with Mike Poli and his team in Phoenix. Mike Poli, Kesha Hodge, Lawrence Moon, and Jeff Zane worked as a team to help Merlin Law Group attorneys win at trial against Travelers, as I posted in, Merlin Law Group Wins Hailstorm Tial Against Travelers—Hard Work Pays Off.

There is not a Childress Duffy without Mike Duffy. Mike Duffy was a partner in a property insurance defense firm in Chicago before joining the partners at Childress. Duffy is engaging and the most passionate person anybody could meet. Mike loves to resolve cases through trial and we will allow him to do just that. I made a point of emphasis with our firm last year to take more cases to trial because some insurers figure that most policyholder firms make more money by settling cases for less without preparing them for trial. We are putting an end to any thought of that with a dedicated trial division with mature and experienced advocates.

Ed Eshoo was a partner with Mike Duffy in Chicago. He knows Chicago and has an active book of business with first party claims. He has around 30 years of experience in the business and if Ed says something about property insurance law, people should listen. I feel I am going to enjoy practicing law with Ed because he always gives down to earth practical suggestions to resolve problems. Many attorneys look for the hard way to do things, and Ed is more concerned about getting full recovery for the client right away.

Christina Phillips was giving a speech at a conference I was attending, and I was sitting next to Craig Speck. I leaned over to Craig and asked, "Who is this woman and where is she from? She knows what she is talking about." I am fortunate that all nine attorneys joining us are smarter than me. There is some suggestion that leaders hire people better than themselves if they want to improve the lot.

Chris Mammel is another former Childress Duffy partner. Through work we have been doing in Colorado, Corey Harris mentioned to a colleague how thorough Chris' briefs were and how hard he litigated cases. We could tell these things just by the on-line pleadings, but Corey had also called Chris Mammel to discuss some esoteric and cutting issues of law. I barely knew Chris except by reputation and the next thing we know, Chris is calling. He is with us and everybody—and I mean greater than the Merlin Law Group everybody—is the better for it. He is dedicated and wants to make a point for consumers of insurance before he calls it a day.

Chris has a right hand associate with Tamara Chen-See. Of the nine attorneys, she is the newest attorney; but, with a bunch of ten figure case experience that Chris Mammel brings with him, she is very experienced at highs stakes insurance litigation. Most associate attorneys in many firms do little significant matters on cases and she is far ahead of that curve.

Over thirty years ago, I went to my first Annual Conference of the National Association of Public Insurance Adjusters (NAPIA). It was held in Carmel, California. I gave a speech about proofs of loss and notice of loss. I was barely 26 years old, a sole practitioner, and had just recently left an associate position at very growth-oriented insurance defense firm. This year, I am humbled to have over forty policyholder attorneys practicing law with me, and many new colleagues just as superior in skill and ability joining us as others already practicing with me.

I owe a lot to Dick Tutwiler for introducing me to others in Florida. I owe a lot to the late past NAPIA President Ira Sarasohn for getting that first speaking opportunity I had in Carmel in 1985. I owe a lot to a young Harvey Goodman who thought he could ask me trick questions I easily answered at that NAPIA conference because I could show off that young mind I used to have. And, I owe a lot to all the attorneys, public adjusters, and others that have given me tips and pointers about how to do my job better, helping policyholders over the years—and those people are not just on the policyholder side of the business.

The cup of good fortune runs over for me, and I thank my friends that are trying to help make this a better and more just place for consumers of insurance. My wish is that our new firm makes historic strides helping policyholders obtain the justice they deserve.

This will be fun.

Chip's Positive Thought of The Day

"I love to play the game, love to be around the rink, and love to joke around with my teammates and have some fun."
              —Patrick Kane

More Traditional Positive Thought of The Day

“Teamwork is the ability to work together toward a common vision. The ability to direct individual accomplishments toward organizational objectives. It is the fuel that allows common people to attain uncommon results.”
              —Andrew Carnegie 

Fathers love to see their children flourish and live a meaningful life. We all keep an extra eye out for our daughters. Every father watching Diane Swerling's induction as President of the National Association of Public Insurance Adjusters (NAPIA) was thinking of how fitting it was that it occurred over Father's Day Weekend.

The late Bruce Swerling, a former Past President of NAPIA, was devoted to the profession of public adjusting and his legacy lives in part through his daughters, Diane Swerling and Dayle Swerling Burke. They work together at Bruce's old firm, Swerling, Milton and Winnick. Here is a little history about the firm as described on their website:

Solomon Swerling grew up in Boston’s West End, across from a fire station. A self-proclaimed “firebug,” Solomon would travel to fires across Boston, seeing first-hand how devastating they were for home and business owners. A well-educated man, Solomon began to help business owners navigate insurance claims after fires, and in 1898, Swerling Milton Winnick was born.

Solomon’s tradition of compassion and expertise continues to this day, as a fourth generation runs the family business. Principals Diane Swerling and Dayle Swerling Burke proudly carry on the legacy of their father Bruce, grandfather Dan and great-grandfather Solomon: helping families and businesses in a time of great stress and need.

Bruce Swerling was a tremendous public adjuster. He always seemed to have a tip or two for me, as did his partner Marvin Milton, who was educated as a lawyer before becoming a public adjuster. I noted Bruce Swerling's passing in Former NAPIA President and NAPIA Person of the Year, Bruce Swerling, Passes. I miss him, and many regretted that he was not with us to celebrate.

Many public adjusting firms are smaller family run businesses. We hosted a dinner on Thursday evening with three father/son public adjusters attending. I asked each of the sons to give a little history about when they first remember doing anything in the family business—most rode in the cars as their fathers solicited losses and started by counting personal property inventory.

Watching and starting with the basics is a good way to learn any business. There are many expert adjusters at NAPIA conventions because many started watching and working in the family public adjusting business when they were very young. When you work at something passionately your entire life, you have an excellent chance of becoming one of the best.

I want to wish a special "cheers" to Diane and Dayle's father on Father's Day—he did well and we miss him. To all other Fathers, enjoy and let's not forget how our footprints live with our children long after they are grown.

Unauthorized Practice of Public Adjusting (UPPA) has become the predominant discussion among public adjusters at virtually every public adjuster association meeting I attend. Brian Goodman, general counsel for the National Association of Public Insurance Adjusters (NAPIA), said that UPPA is now the most important issue facing public adjusters because licensing of the profession is accepted in almost every state and even recognized in Model Legislation with the National Association of Insurance Commissioners.

The unauthorized practice of public adjusting is a serious problem because when it occurs, consumers of insurance are harmed. Robert C Baker III delivered a paper and a speech on Saturday that crystallizes the issues. Baker's paper, The Costs of the Unlicensed Practice of Public Adjusting: A Legal and Economic Analysis, was the winning submission of the Paul Cordish writing competition sponsored by NAPIA. His speech was even better than the paper.

Baker's introduction states the problem calling for a remedy:

The Unlicensed Practice of Public Adjusting (“UPPA”) is a vehicle of consumer fraud that preys upon some of the most vulnerable elements of our society—the disaster stricken, the elderly, the unsophisticated, and those for whom English is a second-language. Individuals’ losses range from a couple thousand to tens of thousands of dollars, and frequently victims are left without a remedy because UPPA offenders disappear or are not worth suing. But outright fraud is only one piece of the UPPA problem. A less malicious but nonetheless harmful variant seeks to help homeowners but executes poorly, sometimes leaving consumers far worse off than when they began. Particularly for smaller damages, this incompetent execution is especially troubling because it is difficult to detect and, if not quickly discovered, it becomes permanently concealed once home repairs cover up the evidence. The resulting financial losses from UPPA trigger a tangled web of social and economic consequences to the public, the insurance industry, and the economy. State legislatures have made great strides in recent years to curtail UPPA’s impact, but significant consumer costs remain.

Baker identifies insurance restoration contractors as the most frequently guilty:

UPPA has become synonymous with fraud perpetrated by disreputable contractors, ne’er- do-well storm chasers, and similar predatory ilk. The stereotypical transaction involves the fraudsters going door-to-door after a natural disaster advertising repair and insurance negotiating services. Then, once retained, the fraudsters engage in pro forma negotiations with the insurance company and, depending on the circumstances, (1) invalidate the insurance claim due to incompetence, (2) steal the settlement check, (3) demand a steep public adjusting fee, (4) perform shoddy repairs, or (5) some combination thereof. 9 Less frequently discussed, however, is the variant of UPPA not found in malice, but mediocrity. These contractors conduct the pro forma negotiations but then actually complete the repairs. No obvious harm is done and no impetus for complaint is provided. But, nonetheless, the consumers are assessed the opportunity cost of substandard adjusting—the additional recovery, peace-of-mind, and time-savings they could have enjoyed with a licensed public adjuster.

In the closing of his speech, Baker called for three things to help remedy the current situation:

1. Criminalization of the activity with meaningful penalties.
2. Enforcement of the enhanced criminal penalties.
3. Enforcement against insurers who allow the practice to take place.

I recently highlighted two cases involving unauthorized public adjusting by contractors:

Public Adjusters Argue For Class Action Certification Against Roofer Accused of Unauthorized Public Adjusting

Unauthorized Practice of Public Adjusting and the Lon Smith Roofing Case Should Scare Contractors and Roofers with Contingent Contracts

I agree with Brian Goodman's view. Public adjusters should not dictate how the policyholder rebuilds a structure. Contractors should not adjust insurance claims.

My prediction is that there will be more cases involving UPPA, more regulation regarding people acting as public adjusters and contractors at the same time, more enforcement actions preventing UPPA, more civil lawsuits against contractors acting as public adjusters, and more legislation involving contractor insurance restoration contracts—specifically, assignment of benefit (AOB) clauses.

Positive Thought For The Day

"I care not what others think of what I do, but I care very much about what I think of what I do! That is character!"
            —Theodore Roosevelt

Why should I go to Chip Merlin’s Las Vegas public adjuster seminar in August? A number of public adjusters understandably have asked this question, but an insurance company adjuster who publicly criticized me has placed the value of my advice at $10,000!! If you are a public adjuster, do not miss this valuable seminar; sign up while seats last at the bargain price of a $100 donation to United Policyholders.

According to Kevin Hromas, I am the most valuable educator of first party property insurance claims in the world. Hromas is an insurance company appraiser and adjuster. A couple months ago, I got a number of text messages indicating that he was saying all kinds of negative, and even defamatory, things about me and our firm during a speech in Oklahoma City. I did not think much about it because others told me that few people paid attention to him. But we noticed that he signed up for a public adjuster seminar we are hosting in Las Vegas. Why would an insurance company representative come to our seminar?

I asked Craig Speck to call Kevin Hromas and disinvite him. We had no idea how he got on our email invitation list. Friends are invited; he is not a friend.

Craig told me the following:

Chip, I told him that the $100 donation he made to attend was being refunded. He told me to tell you that unless you (Chip Merlin) sent him $10,000, he was going to attend.

I told Craig that Kevin Hromas set the value of the seminar—$10,000. Why would an insurance company expert appraiser want $10,000 to not attend my seminar? Does he hope to learn things that the insurance companies he works for have not taught him?

Now some insurance company claims adjusters and their attorneys are wondering if this is true. Here is Hromas' social media post on the matter:

Kevin Hromas and his two-person firm is not a major player in the insurance claims adjusting industry. His obvious bias against policyholders and his crazy "Chip Merlin is going to pay me $10,000 or I am going to show up and force myself into his seminar" establishes that at least one insurance company adjuster assumes that policyholders who suffer losses and their representatives should be viewed as suspected frauds. Why would I or any insurance company want this man or those of the same persuasion at a seminar or want to work with him in resolving an insurance claim? Policyholders need honest, empathetic, and motivated professionals to fully and promptly pay the entire amount owed, not derogatory zealots who assume policyholders and their representatives are crooks.

Ethical insurance claims managers who want to hire ethical and vendors may want to recall recent lessons from Superstorm Sandy. Unreasonable outcome-oriented vendor "expert" firms consider their role as a tool to help reduce claim severity.

There is a legitimate need for SIU claims adjusters, and I do not espouse a Pollyanna view that all policyholders and their representatives are completely honest. They are not. But two wrongs never make a right. Hiring vendors with an attitude to help control claims severity at the cost of paying less than full value of a covered loss is not right.

For public adjusters looking to help policyholders, we invite you to our Vegas Seminar at the Venetian, August 3-6. It starts with an opening cocktail party on August 3rd, and seminars run through August 6th. Is it worth $10,000? I guarantee you it is for you!!

If you are interested to see if Hromas crashes our event, you will have to come—everybody knows what happens in Vegas, stays in Vegas!!

Seating is limited, if you are a public adjuster please RSVP @ 813.229.1000 EXT 212 or events@merlinlawgroup.com.

Thought For The Day:

"It is up to the public to stop attending these theatrical...shows...and circuses with wild animals. The rhetoric about how the animals are happy and well cared for are lies. Don't be swayed by them. The money behind these shows is huge; there is nothing good about them." 
         —Tippi Hedren

Some insurance companies seem to be in a race to the bottom by searching and questioning every possible way to pay their customers less following a loss. Taking depreciation on labor charges is a fairly new method for these companies. If you are a public adjuster and want to know all the arguments against this practice, you should be in Las Vegas with me next week.

Depreciation of labor is one topic that struck me as having a lot of materials that I did not know existed. For example, I was going through the 186 page handout booklet yesterday afternoon and came across an Insurance Bulletin from Vermont that specifically prohibits the practice and indicates that the depreciation of labor is an unfair claims practice.

It is the Department's position that depreciation of labor costs is prohibited by 8 V.S.A. § 4724(9)(F) and therefore is an unfair claim settlement practice in violation of8 V.S.A. § 4723 {the Vermont Insurance Trade Practices Act) when committed or performed with such frequency as to indicate a business practice. While the value of the property as a whole may be considered in order to put a claimant in the same position as the claimant was before the loss occurred, labor of any kind related to the repair, rebuilding or replacement of covered property should not be subject to depreciation.

Insurers are reminded that the justification for the adjustment of a claim must be contained in the claim tile. Title 8 V.S.A. § 3568 requires that every insurer preserve their business records in accordance with the rules adopted under this section. Additionally, Regulation 99-1, Section 4(A)(3) specifically requires that all claims records be maintained so as to show clearly the inception, handling and disposition of each claim. Claim records must document the adjuster's determination of the amount of any depreciation as it relates to that specific claim.

There are other bulletins on the topic from other states--but you will have to show up to learn about them.

So, if you have been wavering on attending, just make a commitment to help yourself. This seminar that has been valued at $10,000 by the insurance industry as noted in Insurance Company Representative Says Merlin Law Group Las Vegas Seminar Worth $10,000. I think it is worth a lot more to public adjusters.

To register, call 813.229.1000, or events@merlinlawgroup.com.

Quote For The Day

"The reason you should go to Las Vegas is because...they have rebuilt Sodom and Gomorrah. It's back!! And you have the opportunity to see it before it turns to salt."
         —Lewis Black

Christina Phillips justly received an honor that has eluded me. At the American Bar Association's Annual Convention this weekend in San Francisco, Christina became the Chair of the Property Insurance Law Subcommittee.  I was a Vice Chair for about a decade, but never the Chair.

Christina Phillips works out of Merlin Law Group's new Chicago office with Ed Eshoo and Michael Duffy.  A quick review of her biography on the firm website demonstrates that she is an accomplished author on various topics of property insurance and a regular speaker at various Bar Association events.  We are very proud of her recent appointment and I am proud to affiliated with such a leader in our field of practice.

Christina and the Merlin Law Group Chicago office will be hosting a seminar for public adjusters on September 15.  Click below to register:

https://attendancetrackerpro.net/Registration/RegistrationPage.aspx?confId=711

Positive Thought For The Day

 Don't mistake activity with achievement.” 

 -John Wooden

“I am here to help you and get you everything you deserve to get.” That is the script and the first lie Louisiana flood insurance adjusters will say. They will not tell this dirty secret to any flood policyholder, but it is being played out by the thousands of claims of desperate people in Louisiana who paid their premiums and are hoping for relief. Everybody in the National Flood Insurance Program knows it, but nobody will say it is true for risk of losing lots of money.

Half-truths told for deception are the worst of lies because they lead others to believe another reality. The National Flood adjuster is instructed by managers to tell the flood policyholder this lie in the disguise of a half-truth:

“I get paid more money when I write a higher estimate. I am on your side to write an estimate for as much as possible.”

In truth, the National Flood adjuster signs a contract that makes him agree that if he writes an estimate for more than what is owed, he has to pay the money back for the overpayment out of his own pocket. No National Flood Adjuster ever says this truth to the policyholder because it would obviously indicate a bias to underpay a claim at the risk of overpayment which would come from the flood adjuster’s own pocket.

Those National Flood adjusters are motivated to make lots money by making as many estimates as possible but none being for too much. This is because they are not managed, measured and paid on success not by how accurate an estimate for a claim is. but he is paid on a percentage of the total estimates so long as the individual estimate is not too much—there is no (I mean zero) penalty for writing an estimate that is for too little than what is owed. The only penalties are for paying too much. So, if a Flood Adjuster can write eight inaccurate estimates for amounts that are not for too much in a day versus three that are very accurate but may risk being seen as being for too much by management or a FEMA auditor, getting paid for eight on a percentage is a lot more than being paid on three. The loser is the policyholder. This is an obvious dirty secret and nobody at FEMA seems to care.

For those that have missed some of our warnings about what is really going on with claims in the National Flood Program, I suggest you read the following:

• FEMA Whistleblowers Speak-Out at Washington, DC Hearing
• Why The Tom Brady Decision is Similar to Insurance Altered Engineering and Damage Reports
• FEMA Flood Back to Slow Mo with Old Guard in Place
• Rigsby Sisters Win Qui Tam Appeal Regarding Fraudulent Handling of Katrina Flood Claims
• Kieserman Calls FEMA's Flood Program a "Melting Iceberg"
• Kieserman Appointed to Lead FEMA Superstorm Sandy Investigation of WYO Claims Handling
• Superstorm Sandy Draft Estimates of Damage Ordered Produced--Have They Been Altered as Well?
• FEMA to Re-Open and Review 144,000 Sandy Flood Claims
• Coast Guardsman Takes Control of Superstorm Sandy Claims
• WYO's Want Release From Criminal Liability and WYO Attorneys Warned of Sanctions

The sad part is that after all this corruption, FEMA and Congress have not indicated that anything has changed. There have been no new regulations or laws that prevent the same thing from happening again. A few managers have been terminated, but the status quo is in place.

So, when a FEMA regulated National Flood Claims adjuster tells you the first sentence in this post, just remember he is really telling you:

“I am from the government. Don’t worry, I am here to help you.”

Positive Thought of The Day

Cautious, careful people, always casting about to preserve their reputations... can never effect a reform.
             —Susan B. Anthony

And an uplifting song about flood:

Were you preparing for a flood from Hurricane Hermine that hit with some warning or even if it surprised you, most flood policyholders are in the same position: “Where do I go from here and what do I do regarding my flood insurance claim?”

After doing this for over thirty years, here are some tips I have learned from victims of flood disasters while helping them get through those tough times and then facing the flood insurance claim process:

1. Be safe. Floods bring in all kinds of hazardous materials into a home. Poisonous fluids and snakes in the flood water are common. Make certain the structure is safe and watch for looters and criminals which arrive before first responders. Live power lines do not have warnings—be careful when trying to reach and first walking around your property.
2. Take as many “after the flood disaster” photos and videos as you can of your property and surrounding property. The rule of thumb is that it is impossible to take too many photos and videos, especially close-up photos showing the damage and wet stains. Wet stains are very important and are hard to photograph and some cameras allow you to verbally explain what you see with your eye even if the camera lens is missing it.
3. Notify your agent immediately of a flood loss. Do not wait. Get in line and get your claim number as soon as possible. Do not throw out wet and damaged objects until the adjuster sees them.
4. Protect the property from further damage. Get the wet stuff to a dry area and protect property from further damage.
5. Keep receipts for everything. The costs to mitigate further damage, purchasing replacement items, hiring handymen, and repair contracts are documents the National Flood Adjusters will ask for and have a right to obtain. Keep those and store them on a computer as soon as possible so they are safe and can be easily transferred to those that request them.
6. Keep a diary documenting everything following the flood. I should probably put this as the first tip, but whenever the red tape starts, it is great to be able to say you are keeping a diary of everything and know, who said what, promised, whatever. This will be invaluable if you need to show how slow your claim is being handled.
7. Keep track of deadlines. National Flood Insurance has strict deadlines to submit everything and do not expect extensions and never rely upon promises of extensions from field adjusters who have no authority to give them and no idea if they will actually happen. Filling out a National Flood Proof of Loss (which is necessary to get paid) is more technical than filling out a federal income tax return. In addition, if you make an error, they are less forgiving than the Internal Revenue Service.
8. Field flood adjusters want to help, but you cannot trust them. See my blog, Louisiana Flood Insurance Claims - Secrets That Flood Adjusters Will Not Tell You. If they overpay, they have to pay back the overpayment out of their own pocket.
9. Unless you really have the time, experience and desire to prepare all of the estimates yourself, consider hiring a public adjuster. A public adjuster represents your interests, not the interests of the flood insurance company. They usually earn back more than their normal 10% fee by having the knowledge and motivation to work through the details of a loss and not miss items you probably will not consider, but are owed—items the flood adjuster may not tell you…see my last note.
10. Only hire licensed, bonded, referenced, and thoroughly vetted contractors. Do not let any contractor pressure you or promise things that sound too good to be true. Contractors repair things and those that promise “inside knowledge” or “good relationships with the flood adjusters” are those you should run from. Get your building repaired by somebody that is reputable.

Last Tuesday night, I held my head in my hands almost crying after Sean Shaw confirmed he won election to Florida's House of Representatives by a little more than a hundred votes. I could see the relief in Sean's eyes as well. Waiting for a jury verdict and results from an election have certain similar emotional similarities.

I told Sean that my father grew up a couple of blocks from Hillsborough High School and that area is in the middle of Sean's district. I thought about Sean Shaw's father as well because successful fathers leave big legacies to fill. Sean's father, Leander Shaw, was Florida's first black Supreme Court Justice and a significant leader in Florida's Civil Rights movement. Trying to live one's own dreams while fulfilling self-imposed expectations aimed to please a parent can be as tough task.

Sean Shaw's current task is to become the best he can as a leader and representative of his community. Later last week, we talked about the huge responsibility he has to those that elected him. Being a great representative is a lot more than showing up for the 60-day Florida legislative session. While some may think that working on insurance matters is Sean's only priority, I can assure everybody that taking care of the good folks that have placed their trust with him is also where his focus will be.

Insurance is an expertise that Sean Shaw will carry with him. The insurance industry may be pleasantly surprised about some of his views, especially regarding Assignment of Benefit clauses. Both of us have expressed concerns about restoration contractors obtaining complete assignment of benefits when the work performed is only for a portion of the claim and for coverages that have nothing to do with work performed. "Gaming" of claims is not good for consumers of insurance nor the insurance industry.

I am very proud to have Sean as an attorney in our firm and was even more proud as he described how he intends to keep rooted in his community's interests rather than his own personal and political interests.

Louisiana and Florida have suffered severe flood disasters. A second disaster may occur if the Federal Government does not extend the 60-day time limit for filing flood insurance claim forms and a National Flood Insurance Proof of Loss.

This is an absurd and anti-consumer regulation that should be changed by Congress. It also smacks of government indifference by not routinely giving extensions immediately following significant flood losses.

I have been on a number of radio shows this week warning people of this 60-day requirement. I also noticed that Insurance Journal ran a story on Thursday stating the Louisiana Insurance Commissioner was calling for an extension.

Hopefully, our federal representatives will help convince those running the National Flood Program to immediately grant a significant extension.

Mathew is my favorite gospel. One of my favorite verses reads something like this:

"Ask and it will be given to you; seek and you will find; knock and the door will be opened to you."

So, last week, I posted 60 Day Time Limit to Make Louisiana and Florida Flood Claims, which called for FEMA to extend the National Flood Proof of Loss deadlines. This is what I asked for:

Louisiana and Florida have suffered severe flood disasters. A second disaster may occur if the Federal Government does not extend the 60-day time limit for filing flood insurance claim forms and a National Flood Insurance Proof of Loss.

...
Hopefully, our federal representatives will help convince those running the National Flood Program to immediately grant a significant extension.

This prayer was partly answered by FEMA yesterday by its granting of an extension for Louisiana flood Policyholder's to file their formal claim through a proof of loss by announcing the following:

FEMA has granted an extension for Louisiana National Flood Insurance Program (NFIP) policyholders affected by August’s severe storms and flooding to file proof-of-loss claims.

You now have 120 days from the date of your loss to file a flood insurance claim if you’re a Louisiana NFIP policyholder. The extension doubles the 60-day deadline NFIP usually requires for policyholders to submit a fully documented, signed and sworn proof-of-loss claim.

FEMA determined Louisiana policyholders need more time to file claims given the recent flooding’s magnitude.

The proof-of-loss is included in the claims package that documents your flood losses. The claims package should include:

Photos or video of your flood damage.

A comprehensive and itemized list of what was damaged.

Receipts, if possible, for your damaged items along with any other supporting documents that show the value of what you lost.

I was in Lake Charles, Louisiana, this past weekend. I spoke with a very experienced flood adjuster about the problems with the floods and flood claims in Louisiana. We both agreed those in government need to provide an extension for filing Proof of Loss. It is good to see that there are some good and caring folks working in our government and that they see the wisdom of the extension. This little request means a lot to folks.

Amen.

Positive Quote of the Day

America's present need is not heroics but healing; not nostrums but normalcy; not revolution but restoration. 
        —Warren G. Harding
 

Public adjusters have been calling our Florida offices regarding Hurricane Matthew. One of the frequent questions asked is if they can practice public adjusting in the Bahamas. Only the Almighty knows for certain where Hurricane Matthew is going, and I would not count out anywhere from Florida and up the eastern seaboard of the United States. But in the event Bahamian policyholders need help, public adjusters can do so.

The Bahamian requirements for public adjusters are:

V. PUBLIC ADJUSTERS

1. Public Adjusting Firms (Public Adjusters) must be incorporated under the Companies Act (Ch. 308).

2. All Public Adjusting Firms are required to register with the Commission, and are subject to ongoing supervision. Registration and supervision of these entities are intended to provide an acceptable level of protection for consumers and policyholders.

3. Public Adjusters must employ at least one Registered Adjuster. Further, the firm must be able to demonstrate that it is financially sound and well-managed.

4. Public Adjusters are not required to maintain a statutory deposit. However, a Public
Adjusting firm must maintain a minimum capital of not less than $50,000.

5. Public Adjusters must maintain adequate books and records. These should be retained for a period of no less than 5 years. These records must be accessible to the Commission. The Commission may inspect the records of the Adjuster, as necessary.

6. A Public Adjusting firm must obtain professional indemnity insurance with a minimum limit of indemnity of $2 million for any one claim.

7. Public Adjusters are required to file audited annual financial statements and renew their registration with the Commission on an annual basis.

8. A Public Adjusting firm must have an internal complaints handling process.

So, public adjusters can practice in the Bahamas. They should be careful to not practice law or violate any other business laws in the Bahamas.

Hurricane Matthew is a dangerous storm and should be watched by everybody in Florida, the Caribbean, and Eastern Seaboard this weekend. The water is warm and conducive to accelerating the growth of tropical cyclones if the upper wind patterns allow.

Jeff Diamond is a very good insurance lawyer. I was in the audience of the Georgia Association of Public Insurance Adjusters (GAPIA) yesterday when Diamond gave a speech about how public adjusters can set a tone and attitude for avoiding claims disagreements which lead to lawsuits.

Diamond started off with some reasons property insurance claims turn into lawsuits:

·       Breakdown in Communication

·       Conflicting Agendas Between Insurer and Insured

·       Breakdown in Trust

He also warned of and listed some consequences of a lawsuit and why they often should be avoided:

·       Expense

·       Delay

·       Lack of Control--third parties will decide issues.

When talking about how to avoid lawsuits, Jeff coined a phrase I will certainly copy in my future speeches---"Attitude is Altitude." I thought it was a catchy phrase but did not understand what he meant. So, I raised my hand and asked him what he meant. He explained that it meant that a public adjuster should 'have a winning attitude so the public adjuster obtains a fair settlement for the amount owed without going to a lawsuit. Public adjusters have to ethically and professionally interact with insurance company adjusters to obtain this recovery and work with rather than against them to obtain it. I agree.

To do this, Jeff explained that public adjusters should constantly be building a working relationship with insurance company adjusters. To do this, the public adjuster should establish open lines of communication, including:
 

1.  Methods of Communication. The “tone" of each communication is a significant determinative factor.
    
2. Timeline of Expectations in Exchange of Information. Unreasonable time demands make for negative relationships. This can be demands by public adjusters or insurers.   Similarly, sometimes carriers ask for numerous things and their demands are unreasonable as well.
    
3. Avoid the "escalation cycle of demands and time constraints."

He emphasized that escalation of tension leading to breakdowns and then lawsuits are usually seen when:

·       Tactics shift from light to heavy

·       Issues proliferate

·       Stereotyping and demonizing

·       Good intentions give away to bad

·       More parties get brought into the fray

In a "put yourself in the shoes of the person you are dealing with" comment, Diamond suggested that public adjusters should always remember that the insurance company adjuster is overworked, usually underpaid and often not respected enough for the work they do. They often work in a stressful and performance based environment reporting to supervisors with their own performance goals.

He stressed that public adjusters often may not get the "true story" from the client during the inventory process and have to work diligently to get all the facts accurately if the claim is to run smoothly. The critical aspect is thorough and accurate exhibiting and describing of the damaged property. He warns that the insurance adjusters are often taught to look for "gotchas" in the inventory.

It is very important to produce requested documents because if you do not, insurance adjusters often think you are hiding something. Today, insurance companies are increasingly asking for:

·       Receipts

·       Financial Documents

·       Tax Returns

·       Credit Card Statements

·       Cell Phone Records

·       Computer Hardware

Providing documents avoids lawsuits and withholding generates lawsuits. Providing wrong information invites a lawsuit. The advice was to be accurate and produce documents to the extent they exist if you want to avoid lawsuits.

On the other hand, policyholders will normally get upset about turning over everything private. They will ask the public adjuster if and why they have to turn these things over. Diamond suggested that public adjusters should call and discuss the issues with attorneys and not provide a legal opinion. Some of these requests are becoming much more broad and some insurers do not want to explain the relevancy. Getting a legal opinion seems like the safest thing to do if the public adjuster is asked by the policyholder about what to do.

Sworn Statement in Proofs of Loss are extremely important if demanded or required. He noted three aspects of the Proof of Loss:
 

1. Form--use the correct form and fill it out completely.
    
2. Content of Proof- Structures, Contents, Loss of Income/Additional Living Expenses. He suggests filling each coverage out on separate forms. But, give them what they want if they demand all coverages on one form to avoid insignificant disagreements.
    
3. Supporting documentation and estimates should be included with the Proof of Loss. Do not just send the form.

New appraisal Issues and courts defining various issues of appraisal seem to be coming up all over the country. Diamond highlighted areas in Georgia where issues arise:
 

1. Demand for Appraisal--how did it get to this point and if appraisal can resolve the controversy and scope of damage.
    
2. Selection of an appropriate Appraiser and Umpire

Diamond has seen more claims where an impasse regarding the selection of the Umpire gives rise to a lawsuit. He discussed the difference between sending a letter, which some suggest can be done in Georgia, versus filing a petition. He cautioned that many judges are not familiar with appraisal and do not understand how appraisal differs from arbitration.

Jeff finds that many judges do not know what to do regarding the selection. He feels it is better to have a judge appoint an umpire than to agree to an insurance company's selection of a biased umpire. The problem is that he thinks many in the insurance industry who agree to the policyholder's view and would rule that way are under pressure by insurers who will not select or agree to them in the future as an umpire. For this reason, the appointment of an unbiased umpire is important and the selection by a judge is far better than agreeing to one proposed by the insurance company.

Diamond also made some comments on the considerations of misrepresentation and concealment:

• Concealment and Fraud Policy Language--Diamond made the point that a mistake is not an intentional misrepresentation. He even says that some insurance companies have pre-ordained the denial based on the assumption that wrong answers are fraudulent versus accidents or non-intentional acts.

• Duties of Cooperation---Diamond suggests public adjusters want to cooperate if possible to avoid lawsuits. Public adjusters want to have their clients get paid and not cooperating slows the payment or may prevent it. Diamond suggests asking to get in writing why certain requests or views are relevant or material. It is important for public adjusters to get the insurance company to place reasons why they are demanding what many may think are unreasonable things and get those reasons in writing.

Lawyers know about time limitations for lawsuits and Jeff warned public adjusters in Georgia they should be careful about limitations. His advice was Do Not Wait Until the Deadline. This is especially important if there is a claim for bad faith because there is a sixty-day demand time before filing a bad faith lawsuit.

So, follow Diamond’s advice. Public adjusters should use a professional tone with every communication. Follow the golden rule and remember that the insurance company adjuster has a tough job. Accurate and thorough estimates and inventories with prompt and full responses to requests for information lead to quicker and better claims results without having to resort to a lawsuit.

 

Many commercial property owners and investors hit by Hurricane Matthew may insure multiple buildings under one policy. Depending on the insurance coverage form, one or multiple deductibles may apply. I was thinking about this while reading a recent case indicating that multiple deductibles applied.¹

As I read the opinion, I kept thinking, “did the policyholder attorney ever show other policy forms which are much clearer and state words to the effect that “locations damaged from one event or occurrence will have the deductible applied separately to each location?” I then read the policyholder’s brief and there was no such argument or showing.

Most judges are not experts analyzing insurance contracts and depend upon attorneys for the parties to educate them. Judges certainly are not thinking about deductibles to multiple locations occurring during a storm like Hurricane Matthew. But, insurance agents, adjusters, and my other nerdy friends who read this blog are thinking about these things. These issues arise all the time at apartment complexes and the answer often depends on the policy form.

The policyholder attorney in the referenced case should have consulted the FC&S Bulletin and an expert in these forms. For instance, the FC&S Bulletin has at least two question and answer discussions on this which could have led to a different result:

Deductible Application for Multiple Locations Loss

Discusses application of deductible when more than one property is insured on single homeowners or dwelling fire policy, or when two separate policies are in place, and the same covered loss damages both properties.

August 1, 2008

Deductible Application for Multiple Locations Loss

If an insured has two separate locations insured on the same ISO homeowners policy, and each location is destroyed by the same tornado, should one deductible apply or two? Would the answer change if they were insured on separate policies? Would the answer change if these are dwelling fire forms?

Michigan Subscriber

The answer depends upon which edition of the homeowners policies is being used. The 1991 homeowners forms are silent as to application of the deductible, so the insured would probably get the benefit of the doubt. However, if a separate deductible was shown applying to each location, then an argument could be made that both should apply. Two policies, with two declarations, would appear to argue for two deductibles.

In the 2000 edition the deductible provision states that "subject to the policy limits that apply, we will pay only that part of all loss payable under Section I that exceeds the deductible amount shown in the Declarations." Here, if both properties are insured on the same form, an argument can be made that one deductible applies to all Section I damage. But with two policies, it would appear that the deductible would apply separately. Obviously, then, it is to the insured's advantage to insure both properties on one policy.

If the properties are insured on one dwelling fire form, the 1989 edition does not address application of a deductible. If two forms were used, then, similarly to the homeowners, the presence of a deductible on each declarations page argues for two being applied. The 2002 form states that "Subject to the policy limits that apply, we will pay only that part of the total of all loss payable that exceeds the deductible amount shown in the Declarations." Here, it appears that even if two properties were insured on one form, presumably each would have a separate property limit of liability, so an argument could be made that two deductibles apply. On the other hand, the "total of all loss payable" could just as easily refer to both properties, and therefore one deductible would apply. The benefit of the doubt would go to the insured.

And,

One Deductible or Two?

How many deductibles should be applied for losses at more than one location?

April 8, 2014

A CP 00 10 form was written on three properties for the same insured, all located at different addresses. Each location is listed with a limit of coverage and deductible on the declarations.

A storm caused damage to two of the three locations.

My superior states that both losses to the buildings will be covered with one deductible taken. I felt that since there is a deductible listed for each location, a deductible would be taken for each loss.

What is the correct interpretation?

Mississippi Subscriber

The CP 00 10 states that when there is loss to more than one item of covered property and separate limits apply, a deductible is applied only once per occurrence. Nothing in the CP 00 10 addresses a situation where different deductible amounts apply to each location. There are other forms that state only the higher deductible will apply, which could be the case with your situation. But absent any other policy language pertinent to the application of deductibles, only one would apply.

Subscribe to the FC&S and do not solely depend on judge made case law to interpret insurance contracts.
1 Sandia Partners, LLC v. Foremost Ins. Co., 2016 WL 5661717 (E.D. Pa., September 30, 2016).

Insurance companies have turned the property insurance world upside down by denying claims based on engineers who claim that no "functional damage" occurred and only "cosmetic damage" was sustained at the insured property. Most of us in the property insurance claims business have been taught that any "physical damage" is covered by a property insurance policy. This concept of "physical damage" as the bell weather proof of the type of damage covered under property insurance policies is changing and challenged by some insurers and their forensic vendors who claim that "cosmetic damage" is not really the type of "physical damage" covered under insurance policies.

I have previously written about this issue:

• A Hail Dented Roof is Covered Direct Physical Damage and Loss
• Cosmetic Damage is Physical Damage
• Cosmetic Damage is "Physical Damage" and Recoverable Under a Property Insurance Policy

Some insurers have added new language into policies attempting to only pay for "functional" damage to a building structure and exclude cosmetic damage. Will Wind/Hail Cosmetic Damage Exclusion Endorsements Become the Norm? discussed this:

AAIS’s “cosmetic damage exclusion” was filed in most states...and works as an optional policy endorsement for homeowner insurers. The endorsement excludes coverage for exterior surfacing of walls, roofs, and/or doors and windows if wind and hail damage just affects the appearance of these surfaces but not their ability to keep weather-related or other elements from entering.

* * * *

[The insurance spokesman] says even if a policy has the endorsement, the insured is still covered for any functional physical damage to these exterior components because the endorsement only applies if the damage is cosmetic.

Neil Hall presented an academic paper at the First Party Claims Conference this week. Interestingly, Hall notes that one of the first papers on this issue was published by one the insurance industry's leading vendors, HAAG Engineering. He then notes how HAAG's research was flawed and even indicated that as a result of not conducting enough in depth research, HAAG's researchers are like the last person getting verbal information about a story in a long string of descriptions.

While there will be a Part Two to this paper, Neil Hall succinctly states the issue for forensic engineers asked to comment about "structural damage" from an insurance adjuster:

It is curious to hear FEs pontificate about “cosmetic” and “functional” damage when rarely do the same speakers acknowledge the broader term “direct physical loss” which (it can be assumed) is the etymological root of the neologisms they so warmly embrace. Most FEs assert “functional” damage (and by association “cosmetic” damage) as engineering terms yet hold “direct physical loss” taboo because it is an insurance term-of-art used to establish coverage. The mere utterance of “direct physical loss” by a FE can raise eyebrows among peers, let alone accusations of collusion based on the preposterous notion that FEs best serve their clients when they are ignorant of their client’s workaday vocabulary.

The lack of communication is a two-way street. Consider an Insurance Adjuster who retains a FE to identify “structural damage” to a given property. The Adjuster means direct physical loss to the building’s structure as opposed to the building’s contents, but the FE presumes this to mean “structural damage” as opposed to “non- structural” or “cosmetic” damage. With her head buried in SEI/ASCE-7, the FE tediously investigates the Main Wind Force Resisting System (MWFRS) while ignoring the cracked Venetian plaster. The FE reports “no structural damage”, the Adjuster hears “no damage”, the claim is denied, and all Hell breaks loose.

I encourage all of my nerdy insurance friends to read Neil Hall's paper. I did not find it a "snoozer" and it adds a lot to this hot debate in the property insurance claims world.

Positive Thought For The Day

The best engineer a few decades ago was someone who could create the most beautiful beam or structure; today it’s to do a structure you cannot see or understand how it’s done. It disappears and you can talk only about color, symbols, and light. It’s an aesthetic of miracle.
         —Jean Nouvel

Colorado Springs was hit by epic hail storms this past July. Reports noted tennis ball size hail and citizens shoveling away hail as if it were a snowstorm. A massive number of hail storm insurance claims resulted. As sure as the sun rises, disputes about how much is covered and the amount owed under the policy are now topics of heated debate.

We are hosting a seminar next Thursday in Denver regarding the most important issues of these claims. I will provide tips to help policyholders ensure that they are getting the best representation from, and claim presentation by, public adjusters. We have found that new insurance policy forms have often changed the method of damage evaluation and even duties after loss. Sometimes, public adjusters as well as insureds are required to be examined under oath and elements of how to prepare for and provide testimony to insurance company attorneys will be analyzed.

Reference materials specific to Colorado hail claims are important and we will provide those to attendees. The meteorological science of the particular hail storm that hit Colorado Springs on July 28, 2016, will be discussed by experts. Techniques to demonstrate damage caused by wind and hail from the hailstorm will be shared. We will also show how the insurance company vendors and adjusters sometimes "miss" hailstorm damage and list each common objection to hailstorm payment with an analysis of those topics.

If you are a public adjuster working on these claims, I hope to see you in Denver next Thursday afternoon to learn how to better serve the insurance customer and make certain that policyholders are obtaining the full benefits promised by their insurance carriers.

You have to RSVP to attend, and you can click here to sign up online.