The Shortest Distance

by Mark Goldwich

Image courtesy of en.wikipedia.org

There’s an old saying that is also a scientific fact – “The shortest distance between two points is a

straight line.” I was thinking about this because I wanted to present another real case scenario, where the insurance company quickly denied a valid claim based on an incomplete or otherwise flawed investigation. And I was then struck with the obvious question of “why do they do this time and again?”

First I’ll present the scenario, and then I’ll make a case for why it happens.

In this case, a couple was moving from Jacksonville to Gainesville. They found a home in Gainesville, and got it under contract before selling the home in Jacksonville. And besides, the home in Gainesville still needed some work, so the husband was going to go back and forth, doing the needed work, until the Gainesville home was ready, and the wife would remain in Jacksonville until that time, or until the Jacksonville home was sold.

So they took out insurance on the Gainesville home, and then something happened to delay the closing, and the insurance policy was canceled. The policy was then reinstated prior to the second scheduled closing, which went off without a hitch. After the closing, the husband spent a week in the Gainesville home they just closed on, doing repairs and getting it ready. At the end of the week, he drove the 2 hours back to Jacksonville, and about 2 weeks later they got a notice in the mail from the utility company in Gainesville, saying there was a spike in the water usage, indicating a water leak somewhere.

Mold image courtesy of en.wikipedia.org

Luckily (that doesn’t seem like an appropriate word here, but it fits), they knew a neighbor in Gainesville that they quickly called to check things out. The neighbor could not see any problems, there was no water leaking out the doors, so he shut off all water going to the house just to be sure. When the husband returned to the Gainesville home a few days after that, and went inside, there was water everywhere, and mold was already starting to grow.

So they called their insurance company, and told them about the loss. The insurance company sent someone out to the property a few days later, and took a recorded statement of the homeowners. And within just a few more days after that, they received a letter from the insurance company…drum roll…denying the claim in its entirety. The letter explained in detail that the policy had an exclusionary clause which prohibited payment in the event of a water leak, but only if the home was vacant or unoccupied for 30 days, unless the property owner shut off the water and drained all plumbing lines of water (this is typical in the North where plumbing lines left unattended in the winter tend to freeze and rupture). In this case, the water was not turned off, as no sudden freezes were expected in the middle of summer in Florida.

When I spoke with the property owners, they explained the facts to me, just as they did to the ^st, which was just a few days prior to when the insured called the claim in, after going to the property and seeing all the damage. And since August 1^st is more than 30 days after the property was purchased on June 13^th, they quickly concluded that the property was vacant or unoccupied for more than 30 days. Case closed.

insurance company and their representatives. So, why the denial? The main reason is the insurance company set the date of loss as August 1

Image courtesy of dreamstime.com

But why August 1^st, and if that is not the correct date of loss, what is? The insured told me they called the insurance company on or about August 4^th to report the claim. I have no doubt they were asked at that time “when did the loss occur?”, as is standard practice. Naturally, the insured did not know when the loss occurred, since they were not living in the property at that time, so they would have answered with, “I don’t know when it happened.” Everyone could agree it did not happen on August 4^th, and that it must have been prior, so I can only imagine the insurance representative input August 1^st as the date of the loss, simply for convenience. (If they did it because they knew the policy well enough to know this date would likely result in a denial, that would make them evil). This practice of approximating the date of loss is not at all uncommon, but it often makes for confusion down the road. As it did here.

The fact is, the property owners received the letter from the utility company on about July 23, meaning it was mailed a few days earlier, and the letter stated the meter was read on July 19. This proves the loss must have occurred prior to July 19. And since the homeowner left the property on June 24, and there was no problem with the water at that time, the date of loss must be between June 24 and July 19. No matter how you slice it, the property could not be empty for more than 25 days. And even in Common Core math, 25 is less than 30. Will the carrier agree with my position? We’ll find out soon enough, but for now, the insurance company and their hired adjusting firm are both playing dumb.

Now to answer the original question, “why does this happen?” Initially, I believe it happens by a combination of coincidence and convenience. They are not sure of the date, so they simply guess. Or, they are not sure of the cause of the loss, so they simply guess. Sometimes they base it on the opinion of the insured, or a witness. The problem is, the date might be wrong, or the insured or witness might not understand the difference between “flood”, “back-up”, or “fill-up” – heck, some seasoned adjusters don’t know the difference. But once they are shown the difference, you would think they would make the correction in their record, and re-adjust the claim accordingly. Alas, I don’t find that happens in most cases, and if it does, it only happens much later. Instead, the carrier insists their initial decision (or “instinct”) was correct, and they will fight any other position fiercely.

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When I was in my early days of training as a company adjuster, I was showed a diagram that looked like a baseball field. I was told that for every single claim, regardless of type or size, you had to go around the 4 bases of the “claim diamond”. First base was Policy – there had to be a valid policy in force. Second base was Coverage – there had to be coverage for this type of claim. Third base was Exclusions – if there was an exclusion for this event, you could not proceed to Home Plate, which of course was Payment – paying the claim (paying the appropriate amount is a whole other story).

It just seems now adjusters are not taught this same diagram, where you run from point to point, 

around what looks like a square, never running in the same straight line. Instead, they appear to go straight to third base, looking for that exclusion, so they can stop all that running around. Maybe it’s laziness on the part of the carrier in conducting their training, or maybe it’s laziness in the newer adjusters, or maybe they all just want to save a few million dollars each year. Whatever it is, it is working pretty well for them, and all insurance consumers need to be aware.

In this article I presented a real-life case scenario, where a valid claim was erroneously – if not intentionally – declined despite facts which refute the denial. I also offered reasons why this happened in this particular case, as well as why it happens regularly throughout the industry. And the moral of the story is…Having a professional guide you through the claim minefield will help you make it to home!

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.