The public insurance adjusters at Tutwiler & Associates work extremely hard to prove why our industry profession is so valuable to policyholders. We work with potential clients and share our knowledge to guide them in their property insurance claim decision making. We strive to educate policyholders after a serious loss when they are the most vulnerable.  Case in point involves a massive electrical fire that occurred at a Sarasota condominium last August.

As with most major fires, there was significant fire, water and smoke damage to the building structure.  Sadly, one person (who happened to serve on the condo’s Board of Directors) perished in the blaze.  We have seen this happen on two major fires this year. Property Managers and Associations can help avoid these disasters simply by installing, routinely checking and changing smoke detector batteries.  The American Red Cross is very active in this area and they often canvas communities to pass out thousands of free smoke detectors throughout the year.   

In today’s ever changing insurance claims environment, an unfortunate situation occurs when a major fire hits the mainstream media. Countless contractors and restoration firms desperate for insurance work bombard the scene offering all types of promises and sales pitches. This only adds to the confusion and stress for property owners and tenants who have just lost everything.  Property owners need to realize that it is in their best interest to stay away from the majority of these people until the Condo Board of Directors has time to think, digest the situation and put a coordinated plan of action in place before signing any paperwork or contract for services. Unfortunately, that didn’t happen in this case.

After reporting the claim to the Master Association’s Insurance Company, the insurer advised the Condo Board to do nothing, advising that everything would be taken care of.  It is no secret that following a loss, it is the responsibility and duty of the insured policyholder to “mitigate” their damage to prevent any further damage from occurring.  An example of this would be to tarp the roof so the next rainstorm does not cause additional damage to the building.  The carrier advised that they would send their “preferred contractor” (a local restoration company) who would perform that task and take care of everything else.  However, the Condo Board was not comfortable using the insurance company’s contractor, first because they didn’t know them and second because they routinely used a trusted contractor who was reliable and performed to their standards. This created an adversarial situation because the insurance company wanted to send their contractor of choice to keep their repair and claim settlement costs to a minimum.  The Condo Board had a trusted contractor they felt would look after the Association’s best interests and felt they had a right to pick the contractor of their choice under their insurance contract. The stage was set and the battles began. 

The contractor sent by the insurance company (which just so happens to be one of Florida’s largest writers of property insurance) wrote a repair estimate, which totaled roughly $293,000.  The Association’s contractor saw things much differently and wrote a repair estimate which totaled roughly $750,000.  For many months no agreement was reached and the two parties were at a standstill.  Not only were the parties at a stalemate regarding the value of the loss and damages but they also faced another very big issue – discussing coverage.  You see, in the State of Florida contractors are only allowed to discuss repair estimates amongst themselves. But when it comes to separating Master Association damage versus Unit Owner damages as outlined and in accordance with the association’s governing documents and Florida Statutes Chapter 718.111(11) Insurance they essentially are discussing coverage. 

This is a big deal because according to Florida law, a contractor cannot act in any capacity as an insurance adjuster and they cannot negotiate on the behalf of the condo association or they could be subject to arrest and may be charged with a third-degree felony as provided by Section 626.8738, Florida Statutes.  While some contractors may also hold a public adjusters license, they cannot act as both the contractor and public adjuster on the same claim since it represents a conflict of interest.  Therefore, the condo must have some board member or members appointed to step-up and handle this function as it is their fiduciary duty to act in the best interest of their condo members.  This is a very difficult and time-consuming task and in some past cases we’ve seen it become costly, especially if the Board of Directors makes a mistake in handling the claim. 

When a Condo Board tells us they want to handle a claim themselves, we take a deep breath and then recommend that all board members have a separate insurance policy that covers the Board for handling an insurance claim.  This policy, otherwise known as an Errors & Omissions Policy should have adequate coverage and enough limits in the event mistakes are made and condo members take legal action against the Board.  Hopefully this will never happen but this too is becoming a recurring theme we see and is a potentially costly deal.  

With a $457,000 unresolved estimate gap going nowhere fast, the appraisal process was invoked and the Association, after two separate recommendations took a vote and decided to hire me as their Appraiser.

Being hired more than three months post-loss required some quick action. Specifically, we coordinated multiple inspections on-site with our building consultants and prepared a detailed Repair Estimate and Appraisal Binder.  We also started a dialogue with the insurance company’s Appraiser and coordinated a joint inspection of the fire loss and resulting damages. 

When I found we both were attending the Windstorm Insurance Network’s Annual Conference in Orlando, Fl. I was able to set-up a private lunch where we were able to work through the settlement details.  In the end, I negotiated a final settlement in the amount of $700,000 which was approved and accepted by the Board of Directors.  The settlement represented an increase of 139% or $407,000 in new money. In addition, I was able to save the Condo Association additional money by negotiating a favorable resolution without the use of an Umpire.

This exact type of situation is becoming more frequent as insurance companies are initiating managed repair programs and aligning with their “preferred contractors” to help them battle restoration contractors who are trying to do a good job for their client.  It appears the goal is to reduce claim payments and costs rather than adequately repair and satisfy the policyholder.  This, coupled with the fact that contractors cannot discuss coverage or negotiate claims often sets the stage for a nightmare dispute and a situation that can potentially cost the Association and Board of Directors much more in legal fees and costs that they may not have adequate coverage for. 

If you have questions regarding any property insurance claim related issues please call 800.321.4488 or contact us to submit a question to one of our public adjuster insurance claim experts.