Well, they say if you don’t like the weather in Texas – wait a day. From Hurricanes in 2008 to the present day drought, Mother Nature has surely shown us what she’s got. In years past, I have written articles about the challenges and the differences in property insurance claims resulting from windstorm, hurricanes and floods. Now, it is my time to write a few tips and advice on how to address an insurance claim as it relates to the peril of fire and smoke.
First, I believe that most who suffered the massive property loss from the recent wildfires should not experience the same insurance claim challenges as they did in Hurricanes Dolly or Ike, and from the flood event of Tropical storm Allison. Why? Well, for the most part, and from what I have seen, the fire losses in Bastrop and Montgomery should be considered total losses. As many know, the spreading wildfires moved quickly and the firefighting defenses could not keep up. In many cases, the firefighters were forced to let the engulfed homes burn to save others, or were not able to access the burning homes for safety reasons. This resulted in homes that were completely destroyed, two story homes are now two feet tall; a pile of unrecognizable debris.
If there is any good news from all of this, fighting an insurance claim when the losses are this severe should be less challenging. Even the most ornery adjuster will do the right thing when the obvious is in front of him or her.
Assuming the insured has a good policy in effect, they can anticipate recovery for their property as shown in table I.
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Table I
COMMON PROPERTY COVERAGE |
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* Coverage A-Dwelling
* Coverage B-Personal property/contents
* Coverage C-Loss of use (additional living expenses) |
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YOUR DWELLING CLAIM
The coverage amount for your dwelling will be shown on the first few pages of your insurance policy, commonly known as the “declarations” page. The declarations page will also show coverage for the personal property and the loss of use coverage. Most policies written for homeowners are on a replacement cost basis which many individuals may not fully understand.
• REPLACEMENT COST: The cost to replace a dwelling or personal property with like kind and quality, at today’s values.
So, if you look at your policy and you see you have $100,000 in coverage for your home, and it is burnt to the ground, you should arguably receive the amount from your carrier, less your deductible. However, in the State of Texas, we have what is known as the Texas valued policy law. Texas is one of 20 states that have valued policy laws, which generally require insurance companies to pay the full amount of insurance in case of total loss regardless of the actual value of the property at the time of loss. This law applies only to the dwelling and basically, if the loss meets the definition and all agree to the total loss, the insurance company should pay the face value of their coverage liability without consideration for depreciation and deductible. The valued policy statute in Texas, which has changed very little since it was enacted in 1879, is limited to fire losses to real property. This provision applies only to the dwelling coverage, and as provided in the Martin Disiere, Jefferson and Wisdom Law Newsbrief, the law is as follows:
FIRE INSURANCE:
TOTAL LOSS OF REAL PROPERTY.
A fire insurance policy, in case of a total loss by fire of property insured, shall be held and considered to be a liquidated demand against the company for the full amount of such policy. This subsection does not apply to personal property. Tex. Ins. Code § 862.053.
If any arguments with insurance carriers arise, they will be regarding the definition of a “total loss”. If a reasonable insured cannot reasonably build upon the remnants of the structure, then it should be considered a total loss and the liquidated demand provision would apply. There may be arguments that the home’s concrete slab can be built upon and as such, the loss is not a total loss. It is our finding though, for these wildfire claims, that the insurance carriers are not arguing slab issues and are paying the full amount of insurance on totally destroyed homes. The feedback my firm has been gathering is that homeowners are being paid quickly on dwelling and are being paid a portion of their contents claims up front, before an inventory has been compiled.
YOUR PERSONAL PROPERTY CLAIM
Depending on the insurance carrier, we have seen adjusters offering anywhere from 50-80% of the amount of personal property coverage up front without the need for an inventory. In many cases, homeowners are taking the funds and not bothering with the difficult task of putting together a complete inventory to recover the remaining portion. Recreating a contents inventory for even a modest home can be challenging.
Our recommendation is to put together your inventory and recover all of the funds you may have coming from your insurance company. If you do not want to bother with the task, you may consider hiring a public adjuster to assist you in the inventory. A public adjuster will rely on your memory to create a good inventory to a completely destroyed home; however, they will input, itemize and value the claim once the inventory is complete. Furthermore, a trained public adjuster has methods and “tick sheets” that will assist in recreating the inventory and your claim should be more complete than if you do it on your own. Public adjusters are not Attorneys and do not practice law; however they are licensed to adjust first party property claims for insured owners through the Texas Department of Insurance.
If you want to handle it yourself, remember the definition of replacement cost (as shown earlier) and don’t forget taxes, delivery and set up for items that may require these costs to get them to your property. Also, don’t forget the small stuff. Everything in your home, from foodstuff to toothbrushes had a value and has a replacement cost value. The insurance company contract is designed to indemnify you for your loss. This means putting you back to exactly the way you were before the loss, less your deductible, within the definitions of the policy. Ask your friends and family if they have photos of special occasions that were held at your home. Reviewing the photos can help you remember simple things that you may have overlooked. The internet is a great source in valuing like kind and quality items.
LOSS OF USE/ADDITIONAL LIVING EXPENSES
The other area of coverage available in a homeowner’s policy is loss of use. Loss of use coverage is typically 20% of the amount of your dwelling coverage and is available to pay your out-of-pocket expenses that you have incurred due to the fire. You are entitled to lodging and meals, additional mileage, pet kennel expenses and other expenses that are reasonable and necessary for you to maintain a similar lifestyle. These expenses would otherwise have not been incurred if the fire did not take you out of your home. These expenses are only recoverable if the property receives actual physical damages. Power outages and restricted entry do not meet the definition of actual damages; however, if your home is intact but needs to be cleaned due to smoke damage, smoke damage meets the criteria.
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Table II
DUTIES AFTER A LOSS FOR THE INSURED |
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* Notify insurance carrier
* Allow insurance company access to insured property
* Protect property from further damage
* Separate damaged and undamed property
* Provide inventory of all items and cost
* Present a proof of loss
a. Time and cause of loss
b. Financial interests to property, encumbrances
c. All other insurance contracts
d. Replacement cost or actual cash values of each item
and quantity thereof
e. Building occupancy |
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CONTINUED NEXT TUESDAY:
"UH OH, WE STILL RAN INTO PROBLEMS"
