Record Losses For All

by Mark Goldwich

Image by commons.wikimedia.org

The Weather Channel’s website, weather.com, recently published an article, “Eight Billion-Dollar Weather Disasters Have Hit the U.S. So Far in 2016”. The article noted this was only for the first 6 months of 2016, and that just one of the storms alone accounted for over 3.5 billion dollars of that damage. Also of note were the facts that 5 of the 8 weather disasters occurred in Texas, including 2 flooding events, and the damage totals did not even include late June flooding events in West Virginia. All told, at over 12 billion dollars, this could end up being the costliest January to June weather disaster period in recent history (it is already ranked #2, behind 2011’s tornado superoutbreak in April).

Now let’s try to break down who has to pay for all these damaging weather events, and how this could translate into insurance terms. First, remember that not all such losses are covered by insurance. Some properties are uninsurable, some properties are insurable but the owner chooses not to insure, can’t afford to insure, or decides to self-insure, and still others are insured, but not all the damages are covered by insurance. For example, if a 50-foot tall, 100 year old oak tree comes down in a storm, and does not land on covered property, there is no coverage for cutting up the tree and hauling it off of the property – and the bill for that could be thousands of dollars. Now, consider how many trees come down in all of these storms without landing on anything. As another example, flood insurance only covers certain types of buildings, and only up to certain limits (it is not like other types of property insurance where you purchase the amount of insurance you need).

So, out of the 12 billion dollars in damages, let’s say only 7 billion dollars are covered by insurance – that is still a great deal of money. Fortunately, the insurance companies have that money sitting in reserves, collecting more interest than you or I can get. And, let’s not forget that just because the damages are covered by insurance, and the policies are in place, and the premiums are paid, that doesn’t mean the insurance companies are going to willfully pay that money to their insureds, who have now crossed the line from (pre-loss) “customers”, to (post-loss) “legal and financial adversaries”.

Small change image courtesy of flickr.com

Care to guess how much I would predict insurance companies would offer premium paying customers with covered losses, if the covered damages were actually 7 billion dollars? Don’t read ahead. Just think about it for a minute before scrolling down. Don’t peek! If they owe 7 billion, how much would they pay without question? Should be 7 billion, right? OK, maybe they try to hold back a little – after all, some people probably try to inflate their claims, and mistakes happen, but they would probably pay at least 5 billion, don’t you think?

Well, I don’t. My experience tells me they would try to pay a mere 1.75 billion dollars of the 7 billion dollars owed. Good thing we’re a litigious society, with tons of lawyers at our disposal, and we won’t let anyone take advantage of us like that, huh? Don’t count on it. Accounting for the small percentage of policyholders that would fight their claims – either on their own, or with the help of a professional public adjuster or attorney – I would doubt the figure would rise above 2 billion dollars. That makes for a nice additional profit of about 5 billion dollars on covered losses owed, but not paid.

Why do I think the insurance companies would offer so little? That would be based on my own experience, supported by a governmental agency, the Florida Office of Program Policy Analysis and Government Accountability that published a report in January 2010, which showed insurance payments were up to 747% higher when policyholders were represented by public adjusters for claims related to hurricanes (catastrophes). This report supports my own experience when dealing with insurance claims, and especially when dealing with catastrophe claims.

Exhibit 6

Public Adjuster Representation Typically Resulted in Larger Payments to Policyholders

Source: OPPAGA analysis. Data refers to the median (50th percentile or typical) payment.

Consider these two examples of actual claims I handled recently:

In one case, an insured was paid just over $2,600 for damage to his roof from a storm. The insurance company acknowledged that about 50% of the insured’s roof needed to be replaced due to a covered wind event, but decided not to pay to replace the entire roof as was required by building code (and the insured had the proper endorsement to address this). I thought it would be a simple matter of letting the insurance company know of their mistake. Instead of quickly paying the correct amount, an adjuster blustered about the amount I had estimated, misrepresenting a number of facts about the size of the roof and the cost of the repairs. It took a few months to get someone else involved that agreed the prior adjuster did not respond properly, and an additional $7,750 was paid, on top of the $2,600 initially paid.

In another case, a woman had a pipe leak inside a wall between her bathroom and laundry room, damaging some drywall, a vanity, floor tiles, and some of her daughter’s shoes. The insurance company adjuster was very difficult with her, suggesting the leak must have been occurring for an extended period of time, and questioning the insured about some items that were completely unrelated to the claim. She said she could tell there was going to be a problem within just a few minutes of him entering her home. Sure enough, she soon received a letter denying the claim altogether. She then hired me, and I recently met with another adjuster, who agreed to pay for the damages, totaling over $6,000.

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Keep in mind these are small losses, not resulting from major weather catastrophes, yet the amounts the insurance companies were attempting to avoid paying were relatively significant for such small claims. If you consider the hundreds of thousands of claims that would have been filed for the weather related catastrophes in the first 6 months of 2016, and have confidence as I do in the amounts that could be recovered with professional representation, you can begin to see why I believe the insurance companies could be avoiding as much as 5 billion dollars or more in covered claim payments.

Yes, the insurance industry might be making record payments on record numbers of weather disasters, but their insureds are also suffering record losses as well. The difference is, the insureds paid their full premiums with their hard-earned money, and don’t have the 5 billion dollars I believe is being shorted, and the insurance companies do have the money. The insureds who refuse to settle for less than everything they are owed are fully compensated – I hope that includes you.

Mark Goldwich is president of Gold Star Adjusters, a group of public insurance adjusters dedicated to helping citizens get the maximum settlement for any insurance claim.

Seems Absurd, But It Must Work

by Mark Goldwich

Today I wanted to highlight a pair of recent claims that provide great insight into the strategies employed by property insurance companies (I could do a lot more than two, but for the sake of brevity I’ll just use the two). As we go through these together, you will note a few things both have in common, even though they are being handled by different adjusters at different insurance companies. And one thing is for sure, you don’t want to be treated like any of these people.

Image from en.wikipedia.org

In the first claim, a family experienced a failed supply line to an upstairs commode. This is fairly common, as all toilets have supply lines that remain under pressure, just waiting for the next flush, and these supply lines tend to be made of fairly inexpensive material with very simple connections. These lines can easily go unnoticed for decades (until they fail). When they do fail, the water does not usually drip out. Rather it pours out at a rate that can be measured in gallons per hour. And I’m not sure how these plastic lines know, but they seem to prefer to rupture in the middle of the night, or when people are away on vacation. Devious little suckers, right?

In this case, the line failed during the night, and spewed water for hours until the next morning, when both the upstairs and downstairs were inundated with water. And wouldn’t you know it; the upstairs bathroom where the line broke was right above the kitchen, where all the cabinets became soaked as well.

Sounds pretty straightforward - and it should be. But for some reason in this case, the insurance adjuster who initially inspected the loss only estimated about $18,000 in damages, and the insured wanted a second opinion after we were recommended to her by a co-worker of hers. It turns out her co-worker friend was right, and our estimate was more than double that of the insurance company.

Weeks turned into months as the carrier dragged its feet at every turn. First they wanted the adjuster to go back out to try to correct the estimate; then they wanted a national contractor to complete what they call a “peer review” estimate. The idea is the national contractor will write a fair estimate for what they would do the work for. In reality, the contractor knows they are usually not getting the job, and even if they do get the job, they know they can always submit a “supplemental” invoice to their pals at the insurance company so they can make a good profit. In this case, the national contractor rep told me before coming out that they will never do a job when a public adjuster is involved. Company policy. So, what do you think that does to the value of their estimate? If you guessed, “they write a low estimate”, then your intuition matches my experience. The rep was there for less than 20 minutes, mainly taking photos, and rarely measuring the room sizes, since we were giving him our estimate as a reference.

Image courtesy of flickr.com

Low and behold, the national firm generated an estimate that was much higher than the insurance company adjuster’s estimate, but it was still $12,000 less than our estimate. It is now 4 months since this loss took place, the insurance company has paid less than half of the contractor’s estimate, which is still $12,000 less than our estimate, and the insured is seriously considering accepting their offer, as they are tired of the claim dragging on. And trust me, if we were not helping her, she would have already accepted much less, just to get on with her life. Absurd, but it works.

In the next case, someone I have known for years recently asked me to look at his insurance settlement, admitting he had no idea whether it was fair or not. He had suffered wind damage to his roof, and the insurance company quickly paid to repair the damage, which totaled about half of his entire roof. So far he (and the insurance company) was lucky, as no water had leaked inside despite a number of severe rainstorms.

Immediately upon inspection of the roof and the paperwork he had received from his insurance company, I could see they were not just off on the amount being offered, they had failed to bring to his attention key facts which clearly warranted their paying for his whole roof to be replaced. They must have made a mistake, I thought, and this should be easy for them to fix. I told the insured I would let the insurance company know of their mistake, and if they simply corrected it and paid him in full, I would  charge him nothing.

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So I wrote the insurance company a half page letter, clearly explaining what their error was, why it was an error, and I even provided them with an estimate for the proper amount. After days of no response, I called the carrier, and was told the adjuster no longer worked for the insurance company. OK, I said, but didn’t you get my paperwork? Isn’t someone else going to handle this now? The rep politely said the claim was closed. I understand, I answered, but when you received my paperwork asking for the claim to be reevaluated, why wasn’t it reopened and given to someone else to handle. I could tell that if I never called them, they certainly were never going to call me. She then stammered a bit and suggested they just received my paperwork the day before(this had in fact been faxed and emailed to them about 10 days prior). Then she said she would get the claim to a manager to review it. When I asked how long it would take for someone to contact me, she admitted she had no idea. You could hear the embarrassment in her voice.

A few days later, I received an email from the new claim handler. It was very brief, and simply said he wanted to offer an initial compromise settlement of about $4,000 more than what was previously

Image courtesy of pixabay.com

paid. A compromise?, I thought, this was very straightforward. They completely ignored their own policy and state statutes calling for a full roof replacement, which meant they owed about $10,000 more. What was there to compromise? So I responded in considerable detail, showing my math for exactly how I reached the amount I claimed was due, and asking him to point out any error in my math or in my reasoning. He responded by suggesting I was inflating my measurements, and overestimating the costs. He did so by misrepresenting actual numbers presented by myself, the original adjuster, and our local property tax appraiser’s website. His misrepresentations were clear and obvious. If he thought he was being tricky, he was quite mistaken. So I factually pointed out each and every misrepresentation that he made, and again offered him the opportunity to do the right thing.

You would think at this point, seeing that I was not falling for any of his tricks, let alone all of them, that he would just give up and pay the claim in full. No, he simply dusted himself off, and in another very brief email, offered another $1,000 to settle the claim. He was still about $5,000 short. I am certain here too, that if I were not involved, this insured would in all likelihood have accepted the additional money.  This would have forced the homeowner to take out a loan to get the roof replaced. Another absurd attempt to get an insured to settle for less than what was owed. I can’t help but believe that it must work on the vast majority of insureds, or they wouldn't resort to these tactics so often.

Mark Goldwich is president of Gold Star Adjusters, a group of public insurance adjusters dedicated to helping citizens get the maximum settlement for any insurance claim.

Don't Let Your HVAC System Spell HAVOC

by Mark Goldwich

Image courtesy of en.wikipedia.org

Tucked away in hallway closets or in corners of garages, air conditioner air handlers quietly go about their business of keeping the temperature of your living space at a comfortable level. Year after year they go about their duty, all while out of sight and out of mind. Wrapped in an unassuming metal box filled with wires, tubes, and fans they use gases that convert warm air to cool air. In the process they create a surplus of condensate (water), that must be carried away by a drain pipe (if all goes according to plan).

You might not expect this to be the case, but air conditioner leaks – especially from the inside air handlers on central air units – are a very common source of water leaks that result in millions of dollars in property damage every year. 

Now, I am not an expert on WHY central air conditioners leak, or even HOW they work, but in my experience, both as a homeowner and also as a property damage insurance claim adjuster for nearly 30 years, these A/C leaks are typically the result of two main problems: 1) algae forming in a condensation line; and 2) ice forming on air handler coils. To really understand the whys and hows better, you need to talk to an HVAC professional.

When algae forms inside a relatively narrow condensation line, leading from the air handler to the exterior of the property, it eventually blocks the line, causing the condensed water that is trying to escape, to back up (technically, this is a “fill up”, not a back up). This creates an overflow inside the limited space inside the pan. From there, the water having nowhere else to go, winds up on the floor, and depending on the location of the air handler, and how long you go without noticing, you can have anything from a small puddle, to gallons and gallons of water everywhere.

Have you ever gone outside and watched water stream from a condensation line for a few minutes? If you have, you know the stream can be fairly heavy, and surprisingly steady. Now imagine how much water would drain from that line over the course of an entire day (or several, if you are away from home). It could be a lot of water. Finally, imagine the damage all of that water can cause inside your home!

Think about the damage that could create on flooring, baseboards, drywall, paint or wallpaper, vanities and kitchen cabinets, furniture, and anything else placed on the floor (from books to clothing to electronics, and more). If you are lucky, the cleanup can begin before mildew and mold start to grow, but the costs can still be in the tens of thousands of dollars.

Image courtesy of http://ptac-parts.com/

The same can be true for ice forming on the coils, usually because the air filter is not changed as often as it should be, and the coil fins get clogged and fail. Once the frozen ice thaws (and it always will), the melting water usually ends up on the floor, causing the kinds of damage noted above, but usually in smaller amounts.

Fortunately, there are ways to greatly reduce the risk for having one of these air conditioner “meltdowns”. Proper maintenance is key. Replace the air filters regularly, and check the coil fins for dust and dirt. You can also have a shut-off switch installed so water won’t continue to back up if the condensate line is blocked, and regularly use a solution to keep algae from building up in the drain line to begin with.(Check out a blogpost by an HVAC professional at 

http://bestacparts.blogspot.com/2015/04/spring-cleaning-your-ptac-unit.html)

If the A/C unit is in a rental property, don’t assume the tenant is maintaining it properly. Either you, a property management company, or a professional HVAC firm should be inspecting the unit regularly to ensure it is being well maintained.

But let’s say you do have an A/C leak, which is almost always a covered loss (unless your insurance company has added an endorsement to exclude water loss claims, as more and more seem to be doing) – what can you expect as a result of submitting this type of insurance claim?

As is too often the case, the answer is…that depends. It depends on the type of policy you have, the extent of the damage, and the insurance adjuster assigned. It also depends on whether or not you are skilled and experienced in handling claims like this, or if you have professional claim representation to assist you in getting all the policy and claim benefits you are entitled to.

I have personally seen cases like this denied because, as you can imagine, A/Cs may leak some water from time to time, and sometimes it appears as if the A/C was leaking for a prolonged period of time (which is often excluded), rather than leaking small amounts at various times over the years, and then suddenly leaking a large amount of water all at once (which is usually covered).

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The claim adjuster for the insurance company make look under or behind the A/C, see what appears to be long-term damage to flooring or baseboards, maybe even some rot or mold from years ago, and quickly conclude the loss is denied based on it being a “continuous or repeated leakage or seepage of water which results in wet or dry rot or mold”. This happens all the time, and not just with A/C leaks, but all types of water leaks in various places in the home or property.

And while the insurance company will send out an official denial letter on company letterhead, with all kinds of technical language captured directly from your insurance policy, that does not mean you have to accept what they say. We get these types of claims paid in many cases – most of them, actually! Oddly enough, what can look like a slam-dunk denial to an insurance company, very often ends up being a paid claim when an experienced public adjuster is involved.

Mark Goldwich is president of Gold Star Adjusters, a group of public insurance adjusters dedicated to helping citizens get the maximum settlement for any insurance claim.  

Why Buy Insurance?

by Mark Goldwich

Just this week I got asked a question I am asked several times every year. I was speaking with a woman who had recently had a water loss at her home, and she was considering whether or not she needed our assistance with her homeowners’ insurance claim. Along the way, as it tends to happen, we talked about her insurance policy, what it generally covers, and what it generally doesn’t.

While homeowners insurance policies vary from company to company, there are many similarities when it comes to coverages and exclusions. Most policies cover by one of two methods – “all risk”, which certainly sounds like it covers the insured for just that, all risks, or anything that happens. Does anyone really believe an insurance company will pay for anything that happens to your property? Of course not. What they really mean, and what you should hear (in your head) when they say “all risk”, is that the insurance company will cover you for all risks that are not later excluded in the policy.

Image courtesy of commins.wikimedia.com

If the policy is not an all risk policy, it is what is called a “named peril” policy. With a named peril policy, you are given a list of perils that are covered, and also a list of exclusions. Generally, there are exceptions to the perils, and also to the exclusions. If the event that damaged your property is a named peril, you still need to review the exclusions, but if the event is not one of the named perils, it doesn’t matter what the exclusions are – it’s just not covered.

It might surprise you then to hear both policies appear to cover similar things, such as fire, windstorms, accidental pipe leaks, and theft, to name a few.  Both types of policies tend to exclude similar things, such as wear and tear, mechanical breakdown, flood, pollution, rust, mold, repeated leakage, and more.

So what ‘s the difference?. There are two main differences. First, the all risk policy covers more items, simply because it covers the limited number of events listed in a named peril policy (and for that reason, it is both more expensive, and  it is easier to market as a better insurance product). The other difference, at least as how it has been explained to me, is that with the all risk policy, the legal burden to prove a claim is not covered is on the insurance company; whereas with a named peril policy, the burden prove a loss is covered is on the insured.

After we talked about her policy and the coverage and exclusions contained, that’s when she asked the obvious question: “Why do I even have insurance anyway?”

Image courtesy of en.wikimedia.org

There are a few answers to this question (even though it’s almost always said halfheartedly). If there is a mortgage on the property, as is usually the case, the mortgage company requires the homeowner to purchase insurance to protect the mortgage company’s financial interest in the property.  In that case, the homeowner has no choice, but it may be for the best.  If there is no mortgage on the property, the homeowner does have a choice, and a decision to make. They could purchase insurance, or not.

Most people in this situation decide to purchase insurance rather than saving the money they would otherwise be spending on insurance premiums to use that money to pay for any unexpected events that the crop up. They know it would take several, if not many, years to save enough money to cover the expense of even a relatively minor loss. And they also know a major loss, at almost any time, would leave them wholly unable to rebuild or replace everything lost.  This could mean financial ruin for them.

Ultimately, people buy insurance because they can’t afford to suffer a major loss without it. They prefer to transfer the risk of paying for such a loss to a company that is financially able to pay a large loss, or even a total loss. They can afford manageable monthly payments, and they can usually afford their deductible, but just as people tend to buy homes using a mortgage instead of paying cash, they use insurance to pay for repairs to the home instead of paying for those repairs themselves.

Even those who could afford to pay cash for their home, or who could pay cash to repair or replace their home in the event of a catastrophic loss, tend to use insurance to spread and share the cost, as well as avoiding liquidation of assets or conversion of  investments in order to generate the needed cash.

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You see, when people ask the question “Why do I even have insurance anyway?” it’s more of a rhetorical question. They know why they have insurance, they are merely complaining about paying higher and higher amounts of premiums for lower and lower benefits. It should also be noted this question invariably comes when a claim is not being covered, or not being paid completely. No one ever asks this question after collecting $200,000 for a large loss just months into their first year of insurance when they have paid less than $1,000 in premiums. No, it usually comes after 10 years of paying premiums faithfully and then having a relatively small claim declined.

It just goes to show, whether or not we have a mortgage, and whether or not we’ve been paying premiums for a long or short time, we buy insurance just in case, for peace of mind, to hedge our bets, to leverage another financial tool at our disposal, and for any number of other reasons based on our personalities, our risk tolerance, and our desire for stability. In other words, why ask why?

Mark Goldwich is president of Gold Star Adjusters, a group of public insurance adjusters dedicated to helping citizens get the maximum settlement for any insurance claim.  

Back It Up

by Mark Goldwich

Water damage claims are one of the most frequent and costly type of home insurance claim. Whether from burst pipes, roof or appliance leaks, flooding, or sewer back-ups, the damage from water can be fast and devastating. Not to mention the mold that can quickly grow if the property is not immediately and completely dried out.

Image courtesy of commons.wikimedia.org

Water damage can be even worse in the case of commercial buildings. The large multi-national carrier Zurich (www.zurichna.com) says, “Water damage is the number one source of property claims for owners of high-rise residences, hotels, office buildings, retail establishments and other commercial structures.” They noted the total damages to commercial property caused by water is in the billions of dollars each year. In a 2010 study, Zurich found 62% of all water losses were caused by wear and tear or human error, which they suggest could have been prevented by water prevention programs.

However it happens, water can be fast moving, and not immediately obvious, traveling through wall cavities and other tight spaces before being noticed. If the water source is pressurized, and no one is in the property at the time of the leak, tremendous amounts of water can be released in just a few hours, let alone a weekend, or longer. All that water usually leads to damage.

Water damages all kinds of property, and does so relatively quickly. Many building materials and personal property absorb water on contact. Water causes items to stain, swell, sag, weaken, and to rust, and cause electrical components to short out or fail. Finished surfaces may bleed onto carpets, and oriental carpets may have colors run or fade.

The good news is most water damage can be covered by insurance, but you have to know what the insurance covers so you can get the right insurance, with the right endorsements. That is a whole other discussion altogether, and one that should be done with a good insurance agent.

I did want to point out something that demonstrates the level of complexity and subtlety that can be found in insurance policies, and the importance of knowing someone that can assist you through the process, especially when it involves something as frequent, damaging, and costly as water claims.

The example I am thinking of is water “back-up”, as opposed to water “fill-up”. In most insurance policies, damages caused a water “back-up” is not covered, in fact it is specifically excluded, unless you have a specific endorsement called “Back-up of Sewer or Drain”, or something similar, that gives you back the coverage. Since it is an endorsement, it comes at an additional cost. And because insurance is expensive enough, many people tend to decline such endorsements that increase their premiums. On the other hand, most insurance policies do not exclude “fill-ups”, so they can be covered.

Image courtesy of wikipedia.org

So, what is the difference between a “back-up” and a “fill-up”? As the name implies, a water “back-up” is when water backs up through your sewer or drain pipes, and enter your home, usually at the showers, tubs, and toilets. This water usually originates from beyond your drain line, and unless you have a septic system or drain field on your property, it usually originates away from your premises (community sewer system).

In a “fill-up” situation, there is a blockage in the drain line on your property (or common property in the case of a condominium or similar property), and the water “fills” up in the drain line until it enters the home, again, usually at the showers, tubs, and toilets.

For ease of understanding, I explain it this way…if localized heavy rains cause the city sewers to fail and water is pushed through the city lines and into your lines and it comes out of your drains and toilet, that is a “back-up”, and is generally excluded by homeowners insurance. But if your son is playing with a tennis ball at the same time he is using the bathroom and happens to drop the ball in the toilet as he is flushing (anyone care to guess how I thought up that scenario?), and the ball clogs the line and causes water to come out onto your floors, that is a “fill-up”, and is generally covered under most policies (currently). Obviously, there can be many different scenarios for each type of loss (especially the “fill-up”), but I hope you get the basic picture. If you do, you’re a step ahead of nearly all homeowners, and far too many insurance adjusters.

In the end, the damage looks exactly the same. Water (sometimes called “grey water”, “black water” or “category 3 water”) comes up from drains and toilets. But in one case, the resulting water damage is excluded, and in the other case it is covered. If that wasn't bad enough, I have personally handled several cases where the insurance company adjuster did not seem to know the difference, did not know there was a difference, or didn’t bother to determine whether it was from a “back-up” or a “fill-up”. They simply denied the claim, citing the standard “back-up” exclusion – that is, until I required they revisit the claim and correctly pay the appropriate claims as “fill-ups”.

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I have no doubt this denial scenario happens many times a week, every week of every year, throughout the country. This results in millions of dollars not paid to premium-paying policyholders who purchased the coverage, but did not understand why the claims were improperly denied, did not get adequate treatment from their insurance company, and did not get assistance from an experienced consumer advocate (usually because they did not know they could).

It just goes to show how a subtle difference in terminology, based on the understanding of how a specific loss takes place, can make all the difference in whether or not a claim is paid, and the importance of knowing who to use as a resource for a particular situation.

Mark Goldwich is president of Gold Star Adjusters, a group of public insurance adjusters dedicated to helping citizens get the maximum settlement for any insurance claim.