On this week’s episode of IAQradio we had a lively and educational discussion on current goings-on in Florida and Puerto Rico. Today’s guests included: Attorney Jayme Buchananis a partner in the Cohen Law Group where she is focused on client intake on first party insurance claims. Peter Crosa is an independent insurance adjuster and investigator with 30 years experience who has handled large and complex losses throughout the US and Latin America. Global Industry Watchdog, Pete Consigli.
Nuggets mined from today’s’ episode:
Update on Puerto Rico
Attorney Harvey Cohen has made several trips to Puerto Rico since the Hurricane. On his first trip he needed to travel through the Dominican Republic to get to Puerto Rico. On all trips thus far, he needed to stay with clients. Progress on the island is slowly moving forward, adjusters are getting into the field to assess claims. The damage is so extensive that some hotel properties will need 1 year to complete repairs. Contractors are busy assessing damage. Early stages of repair contracting is noticeable. A long road ahead for recovery.
For 25 years the insurance industry has been using a lean staffing model. Insurance companies are becoming more reliant on technology to handle claims. When catastrophes hit, it’s too late for them to train new adjusters. Insurance companies cannot quickly multiply their claims forces.
It’s a crisis. Due to high number of claims, some policyholders aren’t being serviced. Some adjuster’s voice mails are full and others aren’t answering their phones. Insurance companies are prioritizing losses: total losses first, substantial losses next.
The insurance industry was dealing with Nate, Harvey, Irma and the wildfires out west before PR suffered extensive hurricane damage. Florida was not hit as badly as Houston. Pockets of damage in Florida was scattered and spotty.
Even before Puerto Rico suffered damage, all of the insurance industries’ adjusting resources were deployed and working. Online adjuster training courses are available that prepare people for the Florida insurance adjusting exam. Nobody left to adjust claims except newbie licensed adjusters who lack experience, wisdom, depth of understanding, people skills, negotiating skills that comprise the art of adjusting.
Total losses and flooding have gotten most of the press coverage. Many policy coverage issues. Some homeowners don’t have wind or hurricane coverage. Those that have wind and hurricane coverage are subject to additional deductibles which can be up to 2% of the policy. When they purchase insurance, the public is often unaware of what they are buying.. Educating policyholders on insurance policies and coverage is important, so people know what they are buying. It’s important that policyholders report and file claims quickly.
- Ordinance or law coverage. Coverage for loss caused by enforcement of ordinances or laws regulating construction and repair of damaged buildings. Older structures that are damaged may need upgraded electrical; heating, ventilating, and air-conditioning (HVAC); and plumbing units based on city codes.
- Additional living expense (ALE) coverage. A type of insurance included within homeowners policies. ALE coverage reimburses the insured for the cost of maintaining a comparable standard of living following a covered loss that exceeds the insured’s normal expenses prior to the loss.
- Loss of use coverage covers any additional living expenses, meaning any necessary expense that exceeds what you normally spend. For example, you usually spend $300 per month for groceries. While your home is being repaired, you spend $400 a month since you have to dine out instead of cook at home.
Florida has a website which tracks policyholder satisfaction. Some mortgage companies don’t require their mortgagees to purchase wind and hurricane coverage. Mortgages may be paid off or property purchased with cash.
A moderate sized nonprofit (through which millions of dollars flow through annually) decided to save money (and gamble) by purchasing a first party policy that excluded wind coverage. The hurricane blew the roof off their building and didn’t damage surrounding property.
“The Widow Brown” is a representation of every property owner who comes out on the short end of the stick on an insurance claim. They are stuck in the middle of a conflict and don’t have the financial resources to sue the insurance company. Contractors and Widow Brown get roughed up by the bullying tactics of some insurance companies.
Adjusters based outside Florida and working there temporarily may not be familiar with Florida laws. Adjusters prioritize claims by size and severity, it may take months before an adjuster is on site. Even while proper insurance coverage is in place, a significant number of claims are being denied, deemed by the carrier as falling under the deductible. When claims are denied for falling under the deductible, it’s important that claims be properly and professionally assessed by the policyholder’s expert. Hurricane and wind claims have shorter statutes of limitations.
Sufficient numbers of contractors are available in Florida to do the repair work. Contractors are prioritizing their work by profitability. There are delays and shortages of some materials, along with higher prices.
Insurance companies have different personalities and philosophies which influence how they think and handle claims. The advertising doesn’t reveal the insurance carrier’s first action is to try and deny the claim, or if they must pay how to pay the least amount possible. If you research the awards on multimillion dollar insurance claim litigation cases, you’ll find that a few companies are involved in the majority of these lawsuits. Some courts and judges know the bad players.
If you compared 5 different insurance companies, using the exact same insurance policy forms and the exact same loss, you’ll find 5 different outcomes. One will provide a premium claims experience and another a poor claims experience. Chubb, AIG Special and Pure Insurance are noteworthy for excellence in claims handling.
Assignment of Benefits
Florida is the tip of the spear on the Assignment of Benefits issue.
Buchanan: AOB has been a principle of contract law for over 100 years. The legislative session will ramp up in January. The focus of AOB has been narrowed to property damage repair. Committees are currently at work. Lobbyists on both sides of the issue are working hard.
Crosa: Insurance companies want to control the claim. Insurance adjusters want to control the claim. Insurance companies are threatened because the AOB gives the opposition legal clout. As an adjuster he’s idealistic, trying to adjust the scales of justice in an honest and fair way. As long as there is communication there won’t be litigation on his claims. Some adjusters don’t feel good unless there is litigation.
Text question from a listener: What about contractors who first get a signed AOB, then do shoddy work and use attorneys to leverage payment?
Crosa: The insurance company and adjuster want to protect the policyholder and the mortgage company, which is why they place the policyholder and mortgage company on the check.
Buchanan: There are hiccups in every industry. We have restoration firms as clients. They do excellent work, have both certificate of completion and a certificate of satisfaction signed upon completion of work. I would allow any of them to work in my home. AOBs allow a client to have work done that they wouldn’t be able to pay for.
Buchanan: We prefer AOBs to liens. A lien is on the property. An AOB is for that part of the work that’s been performed. Obtaining proof that the general contractor has paid subs and suppliers.
Curve-baller Pete Consigli asked the guests to name names; of good insurance companies and bad insurance companies?
Jayme Buchanan: We litigate with all insurance companies. We are used to their strategies and tactics. What I may not like is the way they litigate, not whether they fairly pay claims. I don’t like Preferred Vendor and Appraisal clauses in policies. Appraisal clauses were meant to be mediation in theory but usually doesn’t work that way. Appraisal clauses cost policyholder’s money because they need to hire and pay out of pocket an arbitrator and share costs of the umpire whose decision is final. Florida Statute 627.428 allows policyholder to recover attorney fees when they prevail.
Peter Crosa: Declined to discuss publicly.
Z-Man- I opine that pictograms and understandable language should be mandatory on insurance policies.
Z-Man signing off
When Christopher Columbus landed in Puerto Rico in 1493, he named the island San Juan Bautista in honor of John the Baptist. What name did the Spanish give to the Island’s first capital?