I have been debating whether or not to write this article but after this week I feel I must. Homeowners are getting low ball incomplete estimates and contractors are being told they have to accept Insurance Industry backed Exactimate pricing.
Both are getting the short end of the stick in Massachusetts from insurance companies and their claims adjusters.
1. A few days ago I was asked to help a contractor client and their customer deal with a grossly low on scope and price insurance estimate. The home is a beautiful well kept property insured for over 1 million dollars. There is damage in 8 areas of the home including significant damage to the exterior and the roof. The insurance company adjuster from a southern state wrote up an offer of $8,000.00. After a careful inspection of the property damages we found numerous omissions and discrepancies.
I have run the numbers for the visible damage and it will be close to $80,000.00.
2. On another claim there is damage to the entire front and rear walls on two floors requiring that all the walls be ripped out. The rip out will include two baths and the kitchen. The home will be uninhabitable. The insurance adjuster from a southern state said the claim offer is $25,000 and did not send and estimate detailing what it was paying for. Our estimate will be over $80,000.00 for actual damages and there will be 15,000 in Code Upgrades triggered by the work.
On this claim I asked the insurance adjuster to approve Loss of Use or Additional Living Expense so the homeowner can move out before we demolish the wet areas of their home. The insurance company said they will look into it and get back to the insured.
3. Another claim on the Mass South Shore has 6 ceilings, two baths and a kitchen ripped out right now. They are living in this ripped out home and they were not told they could use their Loss of Use coverage. We let them know that they can call the insurance company regarding the additional living expense coverage. They called and the insurance company said they will get back to them.
My thoughts, ARE YOU KIDDING ME? If Loss of Use is covered in the policy why doesn't the adjuster tell the homeowner that they can seek comparable living arrangements?
I fear that this is just the beginning of many cases where homeowners will be left out in the cold with insufficient estimates to repair their homes and no compensation for covered items.
Some tactics insurance companies use to pay less on claims
1. The adjusters do not assess all the damage and leave things out on purpose. Homeowners who are not familiar with the complicated claim process do not always know what is covered in the policy. If they don't mention it maybe the homeowner will never know.
2. The insurance adjusters are told to only write for the damage area and leave out connected walls, ceiling and finishes. Last week an adjuster wrote to replace a tiled bath tub and left out the connecting wall tile.
3. Writing scope of work that no one does. I have been seeing in many estimates patch ceiling and scrape plaster texture on rest of ceiling. Then re plaster the entire ceiling. Try finding a plasterer who will do this!
4. Only paint one wall and not the rest of the room. Also only apply one coat of paint when professionals apply two.
5. Power wash the siding when the siding has brown water streaks and bulges from ice behind the siding.
6. Only paint one exterior wall and leave out the rest of the house which will not match. The homeowner will have to live with a condition different then their pre-loss condition.
7. Patch the shingles that came off with the snow, ice or tree limb. No reputable roofer will guarantee a patch so the homeowner will have to find someone else who will.
8. The insurance adjusters leave out the costs of mandated permits forcing the homeowner to come up with the money upfront.
9. EXACTIMATE; the insurance companies are using Exactimate a company whose major customers are insurance companies. I wonder if this is a form of collusion? There are on line references that many major stockholders of the parent company are insurance companies. The software pricing is fixed by category and geographic area and companies who carry the legal costs of doing business usually cannot work for the rates that usually attract illegal operating companies willing to work while bending or ignoring the rules.
These costs are;
- Legal workers on the payroll with social security and payroll taxes
- General Liability and Workmen’s Compensation coverage for workers
- EPA RRP and OSHA required safety to protect workers
- Registered and Licensed Contractors.
If the homeowner wants a professional and accepts the low ball Exactimate offers they will be forced to take work out or put in their own money.
Or they can forgo the professional and hire a contractor who will work for a low amount. Which choice do you think is best? My answer is NONE.
You (contractors) have shared with me over 40 claims in the past two weeks where the insurance offer is less than 50% of what it will cost to repair visible damage.
The insurance companies are suppose to act in good faith, make their insured whole and bring them to their pre-loss condition. They take the premium and provide a contract (insurance policy) to cover named perils and damages.
Share your story;
If you have any insurance claim stories where homeowners are getting low ball offers please respond to this post. Just tell us the details leaving out the homeowner name, town and insurance company. Many people in government read this blog and the news will travel.
We need to get the word out to help homeowners receive fair insurance claim settlements that represent the actual damages they sustained. I believe the best people to help homeowners are legal professional remodelers and contractors who are licensed, registered and insured and have knowledge of the insurance process.
Last week in our Insurance Claim Workshops we helped many contractors learn the ropes of how to effectively handle insurance claims to help their homeowner clients. To learn more click here.
Lumberyards and Material Suppliers; If you want us to provide this workshop for your contractor clients to help them handle insurance claims call Mark at 508-847-0162 or use our contact page.