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

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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.