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Rj (Rj)
Posted on Sunday, August 27, 2000 - 12:45 pm:   

Linda:

First of all my posting was more directed towards the carriers than adjusters. You see under current standard procedures an adjuster does not prepare a scope of loss for any damages when it appears that there may be coverage questions about the claim without conducting the following steps first.

1. Obtain a non-waiver from the insured before you scope the damages. This is to avoid any possible liability to the insured by you or the carrier to pay the insured for these damages should they be caused by a non-covered peril or other policy conditions.

2. Make sure the carrier first authorizes you to scope the damages in question and is going to compensate you for your efforts. You are there to make a living. The only commodity that you have is time. If you are not being pay to do something don't do it.

3. In the case where the risk is under insured and you know without doing anything that the damages will far exceed the coverage policy limit contact the carrier for instructions. Again don't spend your time preparing a $100,000.00 estimate when the risk is only insured for $20,000.00. The carrier may decide that a full scope of damages is desired in this case and may authorize you to prepare a complete scope of loss.

Now the real point I was trying to make was that the carriers, both the flood and homeowners, are leaving there liability exposure open for future claims by an insured if they do not document the condition the risk is in at the time of any claim inspection. The question I was posing to the carriers was "What better time to determine the condition of a risk than when a qualified adjuster is on site for what ever reason".

Under the current unwritten adjuster guidelines is common to just verify the minimum facts, make your recommends to the carrier and move on. At this point you have protected your self & have provided the basis for the carrier to deny the claim.

I just carried the situation to the next level because I have been in those situations where after much time and effort went into investigating a claim the carrier was finally force to pay an insured's claim because the carrier did not document their insured's prior loss completely, therefore, found itself in the position of having to pay the subsequent loss.

Linda, the National Flood Insurance Program (NFIP) while under FEMA is a totally separate division from the FEMA aid & grant programs that are conducted in the community after a natural disaster event. It is the FEMA aid & grant programs that require the letter of denial from the HMO's & NFIP. A HMO and/or NFIP policy holder is not required to obtain a denial of coverage or permission from any one prior to submitting a claim.

Carriers do conduct periodic risk inspections through their underwriting departments. However, these inspections are only exterior inspections of the risk and they are only looking for anything that might increase their risk exposure. Underwriting departments rarely if ever get as involved with a risk as an adjuster would.
Linda Asberry (Linda)
Posted on Sunday, August 27, 2000 - 10:07 am:   

RJ, I have been giving your post a great deal of thought.

If we use your example of non-covered flood damage, then is it really the adjuster's responsibility to prepare a scope of damages for the carrier for which we will not be paid? We only get paid for covered perils. Right? Maybe.

Let's say there is no flood coverage and the Insured wants to file a claim with FEMA. They cannot apply to FEMA without first obtaining a letter of denial for non-covered peril from their HO carrier. We have to inspect to insure there are no other covered damages, i.e. wind, but at the same time we know it was only flood. Are we, as adjusters obligated to scope the flood damages? I personally feel it is the responsibility of the carrier to have their underwriting do their own inspection to insure the non-covered damages are repaired and that the structure is not compromised and also for future claims documentation.

The adjuster will only receive the minimum inspection fee because there is no covered peril. Therefore, if we properly document the file as to our findings, submit photographic documentation and send it on to the carrier's underwriting, have we sufficiently COA? I think so, but would really appreciate other opinions.
Russ Doe
Posted on Friday, August 18, 2000 - 11:13 am:   

Write an estimate that reflects the damage to the Insured. I guess I dont understand the Minnesota sewer backups.If there was no wind involved in the area,then it would be up to the storm manager to make the call on roof inspections.I certainly would expect compensation to do a roof inspection Knowing no wind or hail was reported for the area.If my storm manager expected it,I would do it.Even if it was the Adjusting Companies way of doing a little extra for the Carrier.I firmly believe customer service is our number one priority.Writing the total estimate shows the Insured,Carrier,Adjusting Company,Agent that you gave quality service to everyone!It would seem difficult absorb a deductible without knowing the complete extent of the damages.We all have to do the claims that we are given,some are money makers,some are not.All our claims deserve the best adjustment!BE SAFE!!
Rj (Rj)
Posted on Thursday, August 17, 2000 - 1:13 pm:   

Over the years carriers have been flip flopping on this issue. While carriers would like to have a complete detailed scope of damages when the loss exceeds policy limits, they generally are unwilling to pay the adjuster for this extra work. Even during the occasional event we have had staff supervisors request this extra documentation without providing any additional compensation to the adjuster.

Personally I believe that all damages should be included in your scope of damages regardless of policy limits or coverages. Separate covered & non-covered scope of damages should be prepared.My reasons for this position go both to underwriting & claims concerns.

First lets start with underwriting concerns:

Should the damage to the structure occur as a result of an uncovered loss the insured may not have the necessary financial resources to make the necessary repairs. This could leave the structure in a weakened condition as it relates to possible damage from a covered loss. This condition creates an increase in the risk exposure to the carrier. If the adjuster does not provide detailed information on this uncovered loss to the carrier, underwriting will not have a proper basis to evaluate the risk factors in determining the policy premiums or give the carrier the opportunity for further investigation to determine if coverage should be terminated due to this increase in risk exposure.

Second lets address claims concerns:

The first thing an adjuster looks for when inspecting insured's damage to the building or personal property is to briefly look at the damage, then before determining the scope of damage investigate the cause of loss. While many types of damage can be caused by covered as well as none covered causes of loss, the claims department may not be able to prevent payment for unrepaired previously caused non-covered damage unless they have a detailed scope of the prior damage that was caused by a non-covered cause of loss.

For an example: Nothing prevents the insured from filing a claim for water damage to the interior of a building. Now lets say that the insured had a flood a year before and the homeowners carrier's adjuster came out, determined flood as the cause of loss and filed his report recommending denial of the claim without any scope of damages. This time a water pipe burst filing the structure with water to the same level as the flood did the year before. The insured claims that the previous damages were repaired and were only minor which he repaired himself.

Now the carrier may be prevented from defending their position for possibly denial of insured's claim. The basis for this is due to the inability of the carrier to prove the difference if any to the amount of damage caused by the flood (non-covered cause of loss) and the burst water pipe (covered cause of loss).

The same holds true if the first loss exceeded policy limits. Without the first loss being fully documented the carrier may have to pay for these additions damages should a second covered loss occur.

As adjusters we provide a service. Our compensation is based on the time it takes us to perform our evaluations & reports. While T & E is self explanatory the fee schedule is tier based on the size of loss. The larger the loss the more time it takes to inspect, evaluate & report, therefore, the fee schedule increases based on this time factor. When the policy limit is reached under a fee schedule arrangement the adjuster will not receive any addition compensation to continue his evaluation beyond that point. Therefore, the carriers by their own design are not receiving a complete evaluation of the damage to the insured property.

The importance of having non-covered as covered causes of damage fully reported to the carrier can not be empathized enough. However, adjusters can not perform these tasks without being fully compensated unless the adjuster wishes to work for free. Before preparing a scope of damage for a non-covered (complete or partial) loss the adjuster will be require to first obtain a non-waiver agreement from the insured. This takes time & should be an add-on to the fee schedule. Additionally the fee schedule should be tied to the total amount of damages & not limited by the policy coverages should the carriers decide on having the adjusters provide a complete damage report.

In the long run the normal position of the carrier claim departments is to reduce the claims expense and take their chances with possible litigation. As long as the claims are being handled in the current manner payments for non-covered damages as covered damages are probably being passed along though the system undetected. Just how large a problem this is One can only speculate. Until the industry as a whole realize this situation & think the whole problem through adjusters will continue to stop writing losses at the policy limits including the deductible & any limiting clauses.

The bottom line is CYA in all situations. Do not hesitate to ask a supervisor for guidance should you find yourself in a situation like this. There are some carriers that will flip a file over from a fee schedule to T & E. Then make sure you have detailed instructions for handling that particular file.
Hsmith (Hsmith)
Posted on Thursday, August 17, 2000 - 10:16 am:   

First, I do not believe the adjuster has any
type of legal obligation to furnish the Insured
with material specifically and solely for the Insured's use in their dealings with IRS. Of course the Insured is entitled to a copy of any estimate the adjuster does prepare for whatever
use the Insured wishes to make of it.

An example: You go to inspect the Insured's home.
You are representing the homeowners' carrier. The damage is entirely from rising water that has come in under the doors. Flood damage, but there is no flood coverage. You explain to the disappointed Insured that she has no coverage. She asked if you will go ahead and give her a detailed estimate anyway for her dealings with IRS and perhaps FEMA. The answer is no, in my opinion. You are there to scope and appraise covered damages.

Next, in the sump pump situation, since this is covered damage, I would recommend estimating all of the sump pump damage. The carrier may not pay your fee based on the gross estimate but completing the estimate is the professional thing to do. What if there is an error in pricing, etc.? You would still have the complete picture and know that the Insured had met the sublimit.
Through the years homeowners coverage evolves and gets broader and the day will come when this particular sublimit will be eliminated.

Next, as to inspecting the roof. If the carrier requires you to do this in all instances, even when the Insured says the roof has been checked and there is no damage, the carrier should certainly pay you a roof inspection fee. Even so, if no roof damage is anticipated or observed, the adjuster can walk the roof, take pictures, leave his card in the flashing, and say charge an inspection fee of $50.00. Detailed scoping and measuring would occur only if you find damage.

Back to IRS. Since the adjuster deals with limits, sublimits, deductibles, depreciation, and ignores non covered damages(example flood damage) the adjuster's appraisal/estimate is not the ideal vehicle for the Insured to use in dealing with IRS.
Moderator (Jf)
Posted on Wednesday, August 16, 2000 - 11:58 pm:   

I received a private email from a CADO reader who suggested that we set up a new thread to allow discussion about a topic which was mentioned under the "Inside Adjuster" thread. I agree with the reader that this is a timely and warranted topic for discussion.

To wit, when there is damage which is in excess of policy limits or policy sub-limits (sump pump failure) should the adjuster write an estimate to a point just beyond the coverage limit so as to absorb the deductible and depreciation, or should the estimate be written to describe the totality of damage?

Do adjusters have any obligation to provide the insured an estimate to establish a "basis" for a loss for income tax purposes?

What role does the fact that most carriers will not pay staircased service bills for estimates beyond policy limits or sub-limits play in all of this?

What are the pros and cons of writing the estimate either way?

I have my own opinion about this, but will save it for later until after many of you have had a chance to share your views.

Jim Flynt

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