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JimF
USA
1014 Posts |
 Posted - 02/10/2003 : 12:02:40
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In the interest of CADO providing educational resources and offering adjusters training in various aspects of claims adjusting they will encounter in the field, this thread is opening to provide the skills necessary to understand and properly complete the Coverage D Additional Living Expenses portion of insurance claims.
I am asking that one or more of our seasoned experienced adjusters please jump in and monitor and lead this timely vital topic, which is often misunderstood in practice by many newer adjusters. I will monitor the thread as well and contribute as needed.
Thanks for sharing so others may learn. |
Edited by - JimF on 02/10/2003 12:04:58 |
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inside man
45 Posts |
Posted - 02/10/2003 : 13:26:12
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1. Verify the home in question is untennable and determine how many insured's are in the house that will require ALE.
2. Determine the period of restoration. This is going to be the shortest time period possible and this is not going to be an unlimited amount of time. You must take into consideration various intangibles such as weather condtions being suitable for construction, availability of contractors in the area and anything else that may delay construction that is outside the control of the insured and/or the contractor. If these factors warrant it, the time for restoration may need to be extended.
3. Determine the insured's normal living expense. How much do they spend per day/week/month for food? This will need to be deducted from any restaurant bills that are submitted for any time the insured spends in a hotel/motel that does not have cooking facilities. Assuming the insured is moved to a temporary housing unit (corporate apartment, executive suite etc) you will no longer have to pay for outside meals.
4. This brings up the next point: If the period of restoration is going to go beyond a month or two, move the insured into a short term leased apartment. There are various resources to help you located furnished apartments for short term lease such as Kline & Co which does this on a national basis.
5. Explain what ADDITIONAL LIVING EXPENSE coverage is for to the insured and what it's limitations are. Explain that unnecessary delays in the restoration process by the insured or the contractor are likely going to curtail the amount of ALE that the carrier is going to allow. Many insured's think that the carrier is going to pay for everything once they move into a hotel and that it is a blank check for them.
6. Complete an ALE worksheet and submit it to the carrier as soons as possible. This will give the carrier the insured's normal expenses and the projected ALE exposure.
7. ALE includes any additional expenses that are required for the insured to maintain his normal lifestyle durint the time period that his/her house is untennable. This may include such things as:
pet kennels expenses (many hotels and apartments will not allow Fluffy and Fido to stay at their properties), additional mileage expenses incurred by the insured because the insured has to drive furhter to work, school, daycare or whatever because of the additional distance from the temporary location vs. their normal commute fromt the home.
This is a good time to mention that the insured who lives in double wide should not be expected to be re-imbursed for staying at The Hilton. You owe the insured the cost to maintain his "normal" lifestyle and must use good judgement here.
8. Continue to monitor the restoration process even after all the ACV payments are made to make sure the project stays on track. There is nothing worse then 8 or 9 months going by and the carrier calls you to find out when the repairs are going to be done and you have no idea only to find out the contractor has walked off the job and the house is only half done and the insured is out of money. Meanwhile the insured is happy as a clam staying in his cozzy little hotel room and hasn't said a word to anyone about the problem (believe me this happens!!!)
Remember ALE is for incurred expenses and any advances made by the carrier are probably going to be against the contents poriton of the loss. This will be reconciled later on in the claims process once the ALE bills start coming in. Additional advances can be considered once the insured starts submitting the ALE bills.
These are some of the things that come to mind and I am sure I have missed a few. I know that others will fill in the gaps. |
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fivedaily
USA
258 Posts |
Posted - 02/10/2003 : 13:32:07
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The most basic principle to remember about ALE:
ALE is provided if there is a covered loss, to covered property, that makes the home uninhabitable.
And as InsideMan pointed out, ALE is for the additional cost of living while maintaining the lifestyle.
Jennifer |
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ckleisch
USA
46 Posts |
Posted - 02/10/2003 : 13:59:26
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Homeowners policies cover Additional Living Expense(ALE) which by definition:" is the NECESSARY INCREASE in living expense resulting in loss from a covered peril and incurred by the insured." Same, must effect the insured's standard of living
The described property ie dwelling and including appurtenatnt private structures in a majority of states must be non-habitable for ALE to take effect.
Its purpose is to maintain the insureds standard of living and take care of expenses above the norm resulting from the coverd claim.Expenses normally include Motel/hotel, electric, telephone, meals,laundry gas and oil. It is extremely important on the initial meeting with the insured to agree on a repair period discuss normal and irregular increase in expenses and those no longer necessary during the repair period and advise what the limit of coverage is. Failure to do so may come back to haunt you later as an excessive claim. Progress checks and review of incurred expenditures also recommended. Watch out for the fair rental allowance for any part of the structure held for rental. Same, would be owed for the time necessary to complete repairs. Also, has to be reasonable in such an event could property actually been rented.
Is the insured eligable if he moves out before the hurricane, tornado or fire hits? NO
loss has not been incurred yet.
If a civil authority orders removal of insured from premises due to a covered loss? Yes there is coverage.
good computation formula is:
Repair period Expense--less normal expense= Gross over normal expense.
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inside man
45 Posts |
Posted - 02/10/2003 : 14:08:13
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Be careful with that last bit Bill. If there is a mandatory evacuation due to an impending storm this does not mean that ALE will apply. There must be damage to the property from a covered cause of loss.
The policy also may allow the insured the option to collect fair rental value for his property in lieu of actual additional living expense:
If a loss covered under this section makes that part of the residence premises where you reside not fit to live in, we coaver, at your choice, either of the following:
1. Additional living expense
2. Fair rental value |
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Newt
USA
657 Posts |
Posted - 02/11/2003 : 07:01:47
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Do we make up our own ALE work sheet or are they normally furnished? I made one up as a project.
It has been a few months ago,and I never kept it
Normal living expenses:
Home____.00_____________Do not include mortgage payment_
Subsistance______________
Utilities________________list the difference between before the occurance and present if left on.
Transportation___________
Laundry__________________
Phone____________________
List other_______________
Total__-__________________Neg. number
Displaced cost of living:
Quarters__________________
Subsistance_______________
Laundry___________________
Transportation____________
Utilities_________________
Connection Fees___________deposits are returned to insurer when disconnected.
Other costs_________________list
Total___________________________
Subtract Normal living expenses from displaced living expenses= ALE
This is not exactly like the one I made up but it gives an Idea of the way I thought it worked.
If any one uses a form I would like a copy. newt@webshoppe.net
I am trying to load as many forms on my master computer as possible. I can always network with it, plus it has 61 gig storage. |
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CCarr
Canada
1200 Posts |
Posted - 02/11/2003 : 10:52:05
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| Newt, from recalling your mentioned of yourself going through the FWUA processes and getting the SF texts, you may want to look to those for good ALE forms, and insight into the ALE process. |
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Newt
USA
657 Posts |
Posted - 02/11/2003 : 11:19:39
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They were good sources of info, and I never had it laid out for me as well as they did. That is why I tried to make up my own for practice. If I leave something out and catch it or someone catches it for me, I profit from it. Call it doodling. I have to practice on a subject to learn.
Unless I have some system my memory is ZIP. |
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ChuckDeaton
USA
373 Posts |
Posted - 02/11/2003 : 18:11:32
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| Newt, I think I have an Excel work sheet that does ALE. If you or anybody else wants one send me an email and I will send it to you. |
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Linda
USA
127 Posts |
Posted - 02/26/2003 : 14:14:49
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The, elderly and handicap sometimes present complex situations when dealing with their "normal" expenses and facilities. Some home health care providers will not allow their employees to go to the Hilton to assist the Insured. Do we owe for a special assistant to help them? Most of the legal minds say we do because they had it at their home and now they don't. Some opt to go to an assisted living facility during repairs. Interesting coverage questions do arise in the ALE process. Certainly tests our communication skills when we attempt to justify coverage payments in our files.
In reality, it is not our "job" to find them a place to live nor are ALE expenses owed up front by most policies. Our job is to apply indemnity to a covered loss. The majority read: "incurred", meaning the insured will be reimbursed after expending the monies. In my mind, ALE is the greatest single area of "customer service" we can provide. I know of few adjusters who are not willing to assist in the process.
Another "time eater" of the repair process is the extras or "might as wells" the Insured contracts to have done while the residence is being repaired. You must know what the contractor is authorized to do and make sure the ALE period is not extended by non-covered repairs, upgrades or remodeling. Yes, we owe to put the bathtub back but we don't owe for the extra 3 weeks it takes to upgrade to a special ordered tub when the LKQ was readily available. Mrs. Smith got her tub but Mr. Smith paid the extra 3 weeks in the hotel.
Assuming the repair period is an extended one, once you have explained the process to the Insured so they thoroughly understand it, it can be the easiest part of your claim to maintain. I once had an Insured draw smiley faces beside the restaurant receipt charges for alcoholic beverages he was deducting after the carrier refused to pay for alcoholic beverages. Understanding on the part of the Insured is the whole ball game. Explaining it so they do understand it is your job.
Good Luck
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CCarr
Canada
1200 Posts |
Posted - 02/26/2003 : 21:40:05
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Linda raises some good points considering the ALE processes. I agree, that if the required time is spent up front with Mr. & Mrs. Insured regarding this coverage; it can be just a simple math exercise to maintain and present to the carrier.
This is a coverage that 'separates' carriers and distinguishes those who apply their claims philosophy and attitude fairly, and those that do not.
A quick look at the coverage (HO3), makes it look so simple. By the way, has anyone ever had an insured choose option (1b)?
(1a) is the typical 'incurred' ALE claim, while (1b) is the rental value of the dwelling (given they are the only occupants). I've had a few take the (1b) option, and they moved in for the restoration period with family for free and collect the rental value, as defined in the wording.
I get really irritated when I have to 'push' a carrier past the first issue of this coverage, "not fit to live in". Some cases are clearer than others, but some Shiela or Johhny examiners, sitting in a carrier office who have never been in a dwelling damaged to the point of it 'not being fit to live in'; can not at times appreciate just what that can entail.
Then the struggle over the many variables of, "so that your household can maintain its normal standard of living". If the elderly or handicapped were assisted in their dwelling pre-loss, that is normal to their standard of living and should continue to be provided; and the same applies to boarding of pets if that is applicable.
I try to put myself in the 'picture' when dealing with "normal standard of living". I've been at the site, I've got a feel for the general well being of the household pre-loss - type of home and furnishings, what's in the fridge, wine cabinet, clothing, etc. Aside from the attempt to clearly explain the normal weekly grocery bill versus restaurant costs, I apply that "normal standard of living" to wine and other things usual to that household. I drink wine with dinner 3 or 4 nights a week at home, and if I had to eat dinner in a restaurant for a week, I would have wine there 3 or 4 nights a week; and would expect to be compensated as per the wording for it - why should I or a carrier, treat an insured any differently.
I don't find too much trouble with dealing with or explaining, ".... incurred ....". However, I have found from experience that it is worth the time to find a place for them, or help in some way; or direct them to the carrier's PV for ALE housing.
Overall with this coverage, the majority of times any issues have arose, they were with the carrier and not the insured. This coverage is not a clear tangible commodity, the following words from the wording are 'socially interpretative' and hence more open to different views; ".... living expenses .... household can maintain its normal standard of living ....". |
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Newt
USA
657 Posts |
Posted - 02/27/2003 : 10:42:40
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This problem is compounded by the "Normal Standard of Living" statement. The shacks I have seen, anything short of a cardboard box would be an improvement. Linda's comments on the disabled are very important. I would think every adjuster would make every attempt to see that these problems are addressed.
It would seem the single person dis-abled would be less of a problem than a family with one dis- abled. Most assisted living places do not permit whole families. I would know what to reccomend here, but in a strange place you may have to do some homework. With children there would be an even bigger problem in my oppinion.
This is a great point and something I had not considered, of course thats nothing new. I am sure I would have done something, however its better have a plan than get hit with it at the site.
Would it be proper to get the agent involved in this? They have a vested interest and know the area and the customer. I will get flack for this but I sill think the Agent can be an ally. I don't worry about someone stealing my thunder, I am for what ever it takes o get the job done as quickly as possible. I think more than a few days to much to long in situations where people are without a temporary home or quarters.
ALE is a cloudy situation that shouldn't be, it should be the first thing we address to show concern for the welfare of the client. In case a home is unsafe, not secure or sanititary I am sure most carriers will go along with ALE. The objective I guess is to build a strong case for any of the items mentioned and submit it with the request. I am just asking and pondering the course of action, I don't have the experience, and rely on the opinions of those who do.
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Linda
USA
127 Posts |
Posted - 02/27/2003 : 13:46:15
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Newt, you are correct. The agent can be your greatest ally or your worst enemy. The agent who calls you first is normally your ally--the one who automatically calls your supervisor first is your biggest pain. During Hurricane Floyd, I couldn't locate many of my Insureds, their homes were still under water or the bridges were gone and sending them a letter was a joke--the mailboxes were gone. You send the letter anyway to document the file and hope they will have the presence of mind to go to the postoffice to retrieve their mail. But most are not thinking about mail--they are more concerned with a roof over their heads and food and clothing for their children. The one person whom they normally will contact is their agent.
Fortunately there was one agent in that area and she knew most of her Insureds or some of their relatives. I parked myself in her office, gave her a list of her Insureds whose claims I had and enlisted her assistance in contacting them with the message that I was sitting in her office with $5K drafts for each of them, (prior authority had been granted). About 6 hours later, they all had managed to get to her office one way or another. That agent went above and beyond because most of those Insureds didn't have checking accounts and couldn't cash the drafts so she called her local bank and personally guaranteed each of those drafts. Most of those folks worked in the poultry or swine industry and they received the brown payroll envelope with cash every week. Not only had they lost their homes but their livelihood as well.
Each of those drafts were advances toward the Cov. B (personal property) loss--not ALE. You can always adjust the the coding later. Had I made ALE advances, then reliance on the Insured to account for every penny of that money with documentation would have been paramount and my worst nightmare. Most were paid policy limits in the end but not all of them.
You can only hope they will listen to you and understand that manila envelope (with your card attached) you give them is to keep every receipt for every penny they spend. They may not remember everything you tell them or understand all the forms including a full written explanation of their coverages you give, remember they are traumatized from their loss and general devastation around them but they somehow hang on to that envelope. You will get receipts for a few totally unrelated items but it only takes a few minutes to sift through and find the related receipts you do need. The point is that they don't have to make the decision of "is it or isn't it?" while they are trying to put some semblance of sanity back into their lives and you don't have to deal with "I didn't understand that."
A loss of less severity even though covered can present more headaches especially if several Insureds covered by different carriers are staying in the same hotel or complex. They compare notes without all the facts, your phone starts ringing and your headaches begin. Worse than "neighboritis" in a hail storm!
While the ALE coverage seems so cut and dry on the surface it can become one of the grayest of areas depending on the carrier. |
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Newt
USA
657 Posts |
Posted - 02/27/2003 : 23:53:35
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That helps my understanding some of the things you go through, My agent was on good terms with the adjuster that did my house several years ago. They came together because I lived a ways out of town on a rural route. It was a good experience for me because we all understood what we had to do we did it, there were no disagreements and we all went to lunch and had bar-b-que on me. I refused ALE because I had a place to stay. I had a travel trailer in the yard so I was set for a couple of weeks. I was a GC at that time. I already had my estimate figured out and surprisingly his estimate was a little higher than mine. We had already closed out the claim when we went to lunch.
I already had the contents inventory typed up when he arrived. I missed a few items and he caught them, I didn't have food listed that spoiled. |
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canduss
USA
120 Posts |
Posted - 03/09/2003 : 00:46:50
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| Why don't we all take the assumed positon.........do not afford coverage unless pressed by the insured.....how many times do you you come across a situation where you feel coverage is afforded but the Insurance company seems to detail interpretation as no coverage exists as housing is liveable.......but wait...there seems to be 1 room you can sleep in and thats all that mattters....just my opinion but..I feel companies take advantage of vulnerable insureds....where should an insured seek assistance.......PA's?? |
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Linda
USA
127 Posts |
Posted - 03/09/2003 : 11:12:01
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In Texas some of the policies have been revised drastically but the old HO-Bs will not be totally phased out until Sept. 2003. Do not assume the ALE was not affected as well as other coverages.
The "old" HO-B read "If a loss caused by a Peril Insured Against ....makes the residence wholly or partially untenantable, we cover...." The total limit of liability for all loss of use is 20% of the Cov. A limit of liability.
The "new" reads "When a loss Insured caused the residence premises to become uninhabitable, we will cover the necessary increase in cost you incur to maintain your standard of living for up to 24 months."
The "old" had a dollar limit and applied to wholly or partially. So if any portion of the residence was uninhabitable ALE coverage could be extended. But you only had 20% of Cov. A to apply to the ALE.
This is only one carrier's policy language, however, it is the carrier with the greatest number of policies in the state. Please read the coverages carefully and know what the limits are. It obviously is no longer safe to say 20% of Cov. A. without first examining the policy now in force.
The "new" has NO dollar limit but does not include the language "wholly or partially." There is now the question of if it is habitable if only a portion of it is damaged. It now seems it would depend on what area(s) and the extent of damage. The limit is now 24 months without a specific percentage of Cov. A applied.
Read those policies carefully before you commit to the first dollar.
To take an assumed position is treading on thin ice. Most carriers do have some ALE guidelines but it is the adjuster's responsibility to make a reasonable determination and be able to justify it to the carrier and the Insured. Should we wait until the Insured starts screaming? NO, we have a duty to explain their coverages to them. If they opt not to leave their home, then send them a letter stating ALE was extended to them and under what criteria and limits but they chose not to accept this coverage at this time and remain in their home. Just because they opt out in the beginning doesn't mean they can't change their minds later on and accept ALE. It just means you did what you were supposed to do and documented it properly. Most Insureds are reluctant to leave their homes unless absolutely necessary. No matter how much the carrier pays there is still a great inconvenience to the Insured. There are the few who think they have just hit the lotto and now have a paid vacation at a resort. Unfortunate, but it happens.
I feel most determinations made by the carrier are based on past legal decisions and not off the top of the supervisor's head. I repeat--most not all.
Removing the "20%" factor will greatly reduce the number of "stacked" claims solely to extend the ALE coverage. I know of nothing that could prevent a residence from being wholly or partially rebuilt in 24 months based on a covered loss.
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How To Handle The ALE Claim
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