The NHL Has Nothing on These Guys

by Mark Goldwich

With the bone chilling weather currently gripping the country the thought of ice hockey

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seemed particularly appropriate when dealing with today's topic of deflection.  If you have been reading my posts, you now understand the basic principles behind what may well be the insurance industry’s ultimate weapon. As you should have noticed, it’s pretty mind-boggling.

Unfortunately, the process now gets even more complex. In addition to playing a kind of shell game involving you, the adjuster, and the engineering firm, the insurance company may bring other outsiders into the picture. When they do, the outcome, in far too many cases, is a game at a whole different level, a game that most policyholders can’t understand, and much less win. Just like the gambling casino in Vegas or Atlantic City, certain industries tend to promote games that it knows the House will win. Today I’m going to share one example of the kind of “advanced” deflection game you may well find yourself up against after a major property loss.

Q&A: What you should know

• What is “advanced” deflection on the part of the insurance industry? It’s deflection that uses a separate company that appears to be acting on behalf of the insurance company, but in your best interest.

• Why “appears”? Because, ultimately, the company may not be acting in your interest at all. Just like the insurance company, this company is best regarded as your adversary.

• Can you give an example of this? There are many examples, but perhaps the most dramatic involves special building contractors known as “preferred vendors.” As the name implies, these companies are “preferred” contractors recommended by the insurance company following a loss. But you should understand why the insurance company “prefers” to use them. The insurance company uses them because they’re cost-effective from the insurance company’s point of view. From your point of view, though, there may well be very expensive problems.

• How am I likely to come in contact with such a “preferred service provider”? It’s a distinct possibility, especially after a major natural disaster. (Keep in mind, though, that different insurance companies call these providers by different names.)

Here’s how it might happen: Let’s say your home has experienced significant water damage from a burst pipe, and your floor is ruined. The adjuster, or a representative of the insurance company, may say something like this: “We’ve got everything covered – you don’t even have to look around for a contractor. We’re going to send out a repair firm. They’re on our preferred list. They’ll handle everything. Just sign the paperwork they’ll give you when they show up and give them your deductible.” Those may not be the exact words you hear, but the gist of the message will probably be the same. “Don’t worry, we’ll take care of you.” How convenient it all seems!

• Then what happens? The contractor shows up at your doorstep … and you probably make a huge mistake.

• What mistake is that? You imagine that the contractor is working for the insurance company to fix your floor. But in fact, the contractor is operating as an independent business.

From a formal point of view, the contractor is now working for you, which means you, not the insurance company, are responsible for resolving any problems that arise.

• Wouldn’t that be true of any contractor I chose? Yes.

• Why is this relationship different? Because, even though the contractor is (technically) working for you, it’s been referred by the insurance company. In other words, that’s where it gets a good deal of its business from. So its priorities about things like quality, workmanship, timeliness, customer care, and even respect for your belongings may not be based on how happy you are with the job they do. Even though they may be legally working for you, some of these providers act as if the insurance company is the entity they’re most interested in keeping happy. This can lead to some very unfortunate situations.

Getting Hit with a Cheap Shot

• For instance? In one case I worked on, the homeowner had sustained significant water

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damage. The contractor showed up on the homeowner’s door, handed over some paperwork, and told the homeowner to “sign here.” The homeowner signed and paid the deductible, under the impression that the insurance company was actually performing the repairs, and would hold the contractor accountable. Not so!

As it happened, the job took three weeks, not the three to five days the homeowner had been promised. The quality of the work was slapdash, with paint splattered everywhere

and sub-par finish work. And as if that wasn’t enough, the contractor placed all of the homeowner’s furniture in a portable storage unit just outside the home … a portable storage unit that happened to have a leak.

Then the rain fell, but nobody knew that the furniture was being ruined. The family sustained thousands of dollars of additional losses to their furniture!

• Which the insurance company covered, right? No! (well, not right away) The insurance company claimed that, because the homeowner had “signed here,” the work of the contractor --- and the oversights of the contractor – were entirely the homeowner’s responsibility!

Once again, the insurance company’s response was an unwelcome one: “It’s not our responsibility.” That’s advanced deflection.

• What did the contractor do? It stonewalled, totally ignoring the homeowners.

• How likely am I to be able to turn around a situation similar to that on my own, as an individual homeowner? In my experience, not likely at all.

• So did this homeowner lose out? Fortunately, no. They came to me, and I was able to convince the insurance company to live up to its obligations.

• What was the result? The homeowners were compensated for the shoddy workmanship (enough for them to have all the work done again - properly this time), and the loss of their furniture.

In the end, I secured a $47,000 settlement for them over and above the $25,000 the insurance company had initially paid to the contractor to do the work.

• How the heck did you do that? Well now, that’s the “secret sauce”, isn’t it! The short of it is, I know what is important to insurance companies, how they develop and maintain relationships with “preferred” contractors, and how it can used against them. If there is anything an insurance company hates more than paying too much on a claim, it is looking bad and losing credibility – especially when dealing with a senior citizen customer of over 50 years!

By the way, I remember this homeowner saying “I don’t understand, they’ve always treated me so well.” And when I asked, “How many homeowners claims have you submitted in the past?,” I’ll never forget his answer…”none.” Nuff said!!

image courtesy of nytimes.com

• Are there other kinds of deflection I should watch out for? Sure. Every claim is different, and the ways insurance companies are handling them (and introducing other parties into the mix) changes all the time, so we can’t get into every type of deflection.

Ultimately when it comes to winning the game you need to understand the rules if you hope to protect the goal before a hockey game breaks out as you fight for your next insurance claim.

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.