Hurricane Michael’s Insurance Policyholder Deductible Surprise
by Charles R. Tutwiler on 11/16/2018
By now folks in Panama City and surrounding areas hit by Hurricane Michael, are finding out how little they are going to get paid for their insurance claim damages. Our office continues to receive calls and emails from policyholders seeking help and answers about their property insurance losses. Predictably, a lot of the frustration from policyholders is about the fact that their claim file was closed without payment due to a subjective opinion by adjusters the insurance companies.
From the records made available online, it appears that the officials in Tallahassee are in line with this data as there are an awful lot of property claims being reported as closed. Not sure how this could be given the widespread damage and the initial reports of the number of claims that have been filed. And remember, the insurance industry successfully lobbied a change in payment protocol which should have a big impact on the status of insurance claims.
As I had written in a prior blog, in addition to big hurricane deductibles, policyholders are also having depreciation applied to any payment that may be due them which unfortunately in many cases means they may get nothing.
In any event, I am not sure I believe all the numbers being put out about closed files. Again, based on our intake of complaints, something else may be involved. If a consumer has a replacement policy and their loss exceeds the deductible, the file must stay open until the repairs are made so that the depreciation is paid back to the policyholder (that is assuming they are in the money after the big hurricane deductible AND after some amount of depreciation has been taken). So, are files really closed or is the reporting some kind of smoke and mirrors to make the industry and the regulators look and feel good? What about those hurricane deductibles? How are they affecting the adjustment process?
There is no question hurricane percentage deductibles are having a big negative effect on policyholders. From 2% to as much as 5%, deductibles are common on homeowner policies and we have seen 10% deductibles on commercial claims. So, what we are seeing are adjusters brought in from all over the country making a quick initial inspection and then turning in the claim file as a closed file because in their opinion, based on a quick walk through of the property, the loss does not exceed the deductible.
And then there are the pricing issues. We are constantly being asked by the policyholder to come up with a solution regarding cost of repairs. In their eyes, the damages are real and the prices being quoted by real contractors versus a computer program are not in sync. So, what to do? First I would suggest you find a licensed professional not associated with the insurance industry to thoroughly inspect your property and that includes going up in the attic to look for any signs of roof leaks. All exterior and interior spaces should be looked at for any signs of water intrusion as well as cracks and other areas of concern that were not there prior to the hurricane impact. Have this person check current pricing versus a computer-generated report and compare the insurance adjuster’s scope of loss paperwork IF you were lucky enough to get a copy of it. If the independent review of your loss by your professional includes things left off the estimate and if the scope and price exceeds the deductible, send this to the claims manager of your insurance company and request a re-inspection of your property by an experienced and qualified adjuster. If no response, you should seek out a licensed public adjuster to help you.
More Surprises in Your Insurance Policy
Hurricane Michael has exposed what I consider some very questionable underwriting tactics that recently have been written into some property insurance policies. A few examples are, limiting emergency service to a fixed cost or not to exceed a set amount which exposes the policyholder to higher out of pocket expenses. As an example, emergency services for mitigation efforts were not limited in Coverage A (your building limit of liability) in prior policy periods. Now we are seeing examples where only a small percent of Coverage A is being made available for emergency services.
The reason for this revolves around the failure of the legislature to pass meaningful legal reform of the assignment of benefits (AOB) problems covered ad nauseam in various forums all over the state. But the way these policies are now being written is nothing more than another deductible that hits the insured. As the legal abuse of assignment of benefits continues and the legislature fails to reform this problem, the solution for the insurance industry is to increase rates and at the same time shift more of the loss costs back to the policyholders. Nice huh?
Then there is another very clever way one insurance company came up with yet another deductible in the form of reducing additional living expenses. The way this scheme works is that in the event of a hurricane, this company will only pay 80% of your ALE cost. Clever, and they don’t even have to disclose this additional deductible as is required for a hurricane percentage deductible which has to be in bold print on the face of the insurance policy. Then, we hear anecdotally that one carrier in addition to the hurricane deductible is limiting coverage to $10,000 for the water peril in a hurricane exposure.
So, as you see, the insurance industry has been busy during the past ten years cutting coverages and in effect writing policy language which is nothing more than adding exclusions and additional deductibles on the backs of property owners. As you can see from some of these sly policy changes, you really have to look out for yourself. Otherwise big insurance will ensure that their profit is protected by increasing your out-of-pocket expenses.
Consumer advocates and groups need to fight back! Clearly, the regulators and the legislature is either incompetent or so heavily lobbied that big insurance always gets their way. Now is the time to get involved and make your voice heard before the Florida 2019 legislative session convenes.
How about making the insurance industry disclose (in bold print on the front of the policy) the fact that the policy has additional deductibles that will be your requirement to pay more as is required for the hurricane percentage deductible? How about requiring the insurance industry to pay the full replacement cost of hurricane repairs to homeowners who actually purchased a replacement cost policy for the same period of time as the statute of limitation for filing property claims, which was reduced from 5 years to 3 years? It seems unconscionable to me that homeowners have to pay big deductibles and then fund depreciation out-of-pocket at a time of economic and personal stress following a hurricane. Who in the legislature has the courage to shepherd a bill like this?
Let us know what you think! If you have questions regarding any property insurance related issue caused by Hurricane Michael, call our public adjuster office in Panama City, 850-888-8052 or contact a public adjuster to submit a question to one of our insurance claim experts.