INSURANCE

Prior to filing a property insuranc claim, you should take steps to be confident you have a valid claim to file.  This means that you have incurred a loss and that the loss type is covered by your policy.  You should consider using the services of a professional such as a property contractor to evaluate the extent of any damages.  In most cases, contractors will offer this type of an inspection without charge.  You need to be careful in choosing such a contractor.  Unfortunately, some contractors will tell you most anything just to try to get a job.  Using a reputable contractor, experienced in the insurance contracting industry is very important.

You should be mindful that the amount of the loss is sufficiently over your deductible to be worthy of a claim being filed.  In some cases, it may not be entirely clear whether the damage is sufficient or a valid claim.  A trustworthy contractor will discuss the issues found show you photos, and give you needed information as to your options.  In the end, it is entirely your decision to file a claim or not.

Once a claim has been filed, the typical scenario will be for the insurer to arrange for an adjuster to visit your property and conduct what is known as a scope.  This investigation allows the adjuster to examine the damages as well as the policy coverage. A determination of covered loss will be made and a detailed report produced. Remember, in Texas the adjuster works for the insurer, not for you.  Sometimes it is an advantage to have the selected contractor present at the adjusters scope and sometimes not.  Your contractor will discuss this issue with you.

After the insurer has reviewed and approved the adjusters scope and report, they will issue a report copy to you.  If the damages are covered and are in excess of your deductible, they will likely issue a check to you for the ACV amount of your claim.  This report is the insurers first version of a settlement offer; it is the specifications for the  contractor of the approved work and it is the insurers’ price schedule subject to agreement.  As such, it is important for you and your contractor to review this report together and carefully, to ensure that the line item report authorized will in fact allow your contractor to properly and completely restore your property to it’s pre-loss condition.  Any errors and/or omissions may be addressed directly by the contractor through the supplement process.

ACV stands for Actual Cash Value, while RCV stands for Replacement Cash Value.  In short, Actual Cash Value is determined by taking the entire value of the loss, subtracting your deductible, subtracting the appropriate assigned depreciation, and the remainder is your ACV.  If you have an ACV policy, this is the total amount you will receive.  An RCV policy will allow for the depreciation to be paid back to you after the work is completed, subject to certain terms and conditions

Many people will be confused by the depreciation.  Often they think that the ACV check they received is the end of the line, not realizing that with an RCV policy, the depreciation (in most cases) is recoverable.  The depreciation is a reflection of the life expectancy of the product already used.  If you are handling your own insurance claim, you may be responsible to pay the full cost of repairs to the contractor prior to receiving the full amount of the insurance proceeds.  If, however, you are using a solid, experienced insurance contractor to process your claim, they will likely wait for the final proceeds of the insurance for their final payment.

Price, Price, Price; get three estimates.  This is the old school rule of thumb and is still quite applicable to a non-insured project.  However, when it comes to an insured project it is no longer valid.  Contractors credentials, experience and expertise, particularly in the insurance field are highly important.  Typically, your price (out of pocket) is the amount of your deductible.  If the contractors are insurance and legal compliant, then they should all have the same price to you — your deductible.  When a contractor is reviewing the insurance estimate, if they are concerned about adding dollars, you might want to take a closer look.  They might be wanting only to pad their profits and not perform the additional work or use the correct products.  The contractor should be looking for errors and omissions in the insurers’ estimate.  These e&o’s will lead to a lower quality and performing finished product.  It is important that the contractor identifies each and every item that needs to be replaced/repaired and meets your coverage.  This also may include code required upgrades (paid for by your insurance if you have the ordinance & law coverage).  So as you can see, it is not about increasing the dollars, but rather ensuring that everthing that needs to be done to restore the property to a pre-loss condition is included in the claim.  

The pricing itself is typically done in a program called Xactimate®.   It is the insurance and contractors mutually accepted standard of practice.  The pricing is done by each specific line item and represents the middle of the road price one should expect for each items labor and materials for that given location.  So there is usually no contention in regards to the price, only the covered or not covered items (the scope) to secure a proper restoration.

Remember that property claims, auto claims, personal injury claims settlements are the product of negotiations.  Your insurer does not want to pay more than they must.  Property claims are subject to negotiations for legitimate and necessary items to restore the property to a pre-loss condition.  Your contractor can help ensure that the insurer is including all necessary items in the scope.

This article outlines a basic approach to the claim processing.  Let me add the following:  either you or your selected contractor will be responsible for the claim processing.  It is a very bad idea to have both involved in the processing as this is likely to lead to confusion, delays, bad results, denial of claim, denial of supplements, and investigations of possible wrong doings even when none were intended or occurred.  If you choose to handle your own claim, then be responsible for and handle it all, though your contractor may be able to give you some insight.  If you have your contractor handle your claim processing, then you should be kept in the loop so you are aware of everything happening and being submitted to the insurer, but allow the contractor to handle the process. Since the average homeowner is not familiar with all of the issues involved in an insurance claim or in the construction aspects and details, this is typically the better option.  The contractor should have access to and expertise in the Xactimate® program, the documentation requirements, photo evidence requirements, processing procedures, etc.  A well handled professional processing will result in a better outcome.

Selecting a contractor can seem like a daunting task.  In the case of an insurance claim project, you are definitely not looking for the best price contractor.  This will only lead you down a very bad road of poor work, low quality materials, short cuts, and possible criminal complications.  It is important to share the claim estimate report with the contractor.  If a contractor doesn’t review it, you should consider looking elsewhere.  Reviewing this report is the only way the contractor knows what specific items have been approved and what have not.  Reviewing this report is where you have the meeting of the minds of the insured, contractor, and insurer.  For a successful project, everyone must be on the same page.  Your contractor selection should include at least the following criteria:  licensed (locally registered); bonded; insured; in business over 2 yrs; BBB/a+; top Angies’s list rating; local contractor (verified); zero or low complaint experience; strong references/testimonials; experience with the insurance industry; experience with the Xactimate® program; demonstration of full insurance and legal compliance; in most cases no money paid until either material delivery or work completion and the contractor waits for the final insurance check for the final payment.  Also, if you have multi-trade damages, a general contractor meeting the above requirements can save you tremendous headaches and time by getting all the restoration done through one contractor. This also allows for one contractor dealing with your insurer for all damages to be fully restored to a pre-loss condition.

Absolutely!  First realize that just because your claim was denied or is a partial claim, does not mean it is incorrect or unfair.  However, if it is unfairly or inappropriately denied or under paid, there are options you may consider.  You may contact your insurer for a re-adjust (which may also be handled by your contractor through the supplement process); you have the option of the appraisal process; you have the option of involving a certified inspector; you also have the option of contracting with a public adjuster (this adjuster does work for you!): and you have certain legal options ( use of a lawyer) such as mediation and others.  These are usually approached in a stacking order of necessity.