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sjk -> RE: "Isabel", is a Hot Potato headed behind? (6/11/2004 9:33:55 PM)
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To: Kile Anderson
From: Steve Kanstoroom
Re: Response to 5/8 and 6/5 posts; Nexus to non-flood claims problems; Specific examples of low payouts, Adjusters explain drive-by adjusting, 2nd lawsuit filed
Responding to your 5/8 post, Section V Loss Settlement sets forth three methods of settling the loss – Replacement Cost, Special Loss Settlement and ACV. In the case of a primary residence, with very few exceptions, each case I have been involved with was initially calculated as ACV only to be later changed to RCV. I believe if the policyholder qualifies for RCV, then that is what they are entitled to. To date, each case that I have seen handled in any way by senior FEMA or NFIP officials bears that out – the policyholder, after further review, was paid RCV.
Regarding your 6/5 post “we are only dealing with 24,000 flood claims, not 458,000 total claims” and your request for specific examples, I have some information.
Since my 4/27 post, many industry insiders, mostly adjusters, have contacted me in an effort to shed light on adjusting practices they feel are unfair. They have provided tremendously helpful information, including emails, documents and other information in an effort to help the victims, and in many cases, in an attempt to change their position, i.e. many feel at the bottom of the ladder in regards to the industry. These documents demonstrate a nexus between the low payouts in flood claims and similar issues with non-flood claims. As they explain, it works like this:
Many adjusting firms handle multiple perils, not just flood. In order for the adjusting firm to win the favor of a particular carrier or TPA, they agree to follow certain guidelines such that claims will be paid according to the carrier’s directives. For example, it is problematic if a flood claim pays 2.00 per square foot for sheetrock when the carrier wishes to pay a lesser amount for a non-flood loss, such as the synthetic price guidelines established shortly after Isabel stuck.
I have received many calls and requests for information regarding the non-flood claims. These claims are under increasing scrutiny as well. Based upon information provided to me by industry insiders that handled large numbers of claims, as well as information from the claimants, there is increasing attention to these claims.
Regarding your desire to learn of specific examples of low payouts on a line item basis:
24.30 per yard for premium grade carpet, pad and installation – no allowance for removal
R&R 6’ x 4’ direct glued mirror, polished brass double handle faucet, 6’ corian vanity top and back splash, $138.20
R&R 4’x16’ ceramic tile island counter-top $329.70
R&R high-end double oven from premium grade corner cabinetry - $32.82
I can give you scores of other such examples. In addition, I could provide many examples of erroneous denials of coverage, errant limitations, publications or interpretations, such as:
The policy only allows 8% for profit and overhead.
This is no coverage for mold cleanup.
The policy limit is $27 per square yard for floor covering.
The policy does not pay for moisture damage.
The policy only pays for 7 days of drying equipment.
There is no coverage for items not contacted by water.
Victim told that no coverage existed for six-figure loss by adjuster, later reversed by senior FEMA official.
Depreciation on the structure is calculated at 1% per year.
Perhaps one of the most insidious – “Under Federal Law the National Flood Insurance Program requires you to file these forms”, referring to an adjuster provided proof of loss for pennies on the dollar - even though the insured had previously filed their own proof of loss for the actual amount in accordance with the policy. The toll this single tactic took on victims, often the elderly already reeling from the tragedy of losing their home, is indescribable.
Suffice it to say, many people were systematically denied coverage – all of the above examples were included in printed letters, some were form letters.
Regarding your doubts that such events occurred in large numbers, I will share more specifics with you if that would help advance the situation. Just call or email.
It seems that many adjusters unfortunately did not have your skills or experience. With few exceptions, I have not learned of adjusters setting out to do wrong, but rather felt trapped in a situation of not wanting the proof of loss to be “kicked back to them”. They of course needed the proof of loss to be signed so that they could be paid. Many had been on the road for weeks with mounting expenses. It seems that lesser qualified adjusters have a difficult time justifying expenditures greater than guidelines. Also, adjusters with limited construction knowledge often feel forced to rely upon software to take the place of their lack of experience. This is sometimes coupled with a bias that comes into play perhaps from adjusting so many repetitive losses. Also, you are not alone with your concerns about an E&O claim. Many others shared the identical concern with me, yet these same feelings propel them to overcome concerns of being blackballed in an effort to improve the situation. Many are anxious to tell their stories in the proper forum.
At this time countless victims are at their wits end. Nine months of living in a camper with their entire family, or in a one-room apartment has taken its toll. In many cases these are elderly people or families with small children and those least equipped to understand the process or manage extensive repairs. While I understand providing a proof of loss is a courtesy, these are real people with problems just like everyone else. Only tragically, now they are homeless. Just imagine how they feel when everyone that touched their claim profited. Yet they are left in a hellish situation, in some cases more than $100,000 short, with no end in sight. These are not people with a recurring loss that get new carpet every year. These are people that paid their premiums for a safety net only to find out there was none. Industry tactics used to dissuade suspected cheats have been inappropriately and callously used upon honest people with devastating results. Heart attacks, strokes, separations, depression and thoughts of suicide have plagued people that in many cases were in their golden years with no mortgage. Now they find themselves with no homeowners insurance because their homeowner’s carrier takes the position that there home has no value, while their flood carrier claims, contrary to contractors, engineers and architects, their home suffered only minimal damage.
In regards to policyholders cheating the carriers, without a doubt we have all heard such stories. In addition, several victims reported to me that they received several thousand dollars more than they expected on claims under $10,000. Adjusters have explained the reasoning behind this to me as drive-by adjustments. They say some adjusters inflate a small claim to increase a meager fee. Of course this is wrong on all levels, however, that does not warrant the abominable treatment received by many victims and the sentiment that so easily rolls off the tongues of many examiners and industry officials, “you can sue us in Federal Court”. Well, they did and last week I understand they did again and it looks like much more is on the way. I suppose it falls under the category of, “be careful what you wish for because you just may get it”.
I have spent more than 1,600 hours on Isabel flood insurance related issues in an effort to help the victims. I have met with senior FEMA and NFIP officials on numerous occasions. I understand over the years many in the industry have formed strong feelings towards some NFIP officials in control of the program. Nevertheless, at this time I believe from my first hand experiences that these same officials and senior FEMA officials are making every effort to handle the situation, as they would want it handled if they were the victims. Anything you can do to help them would be greatly appreciated by the victims. If you or anyone you know have anything you believe would be helpful, I would suggest you call FEMA Deputy Director Trey Reid at 202 646-3595 or US Senator Paul Sarbanes’ office and ask to speak with Bruce Gilmore at 202 224-4524 or Sharon Farone. In addition, you can speak confidentially with Andy Green at the Baltimore Sun at 410 494-2935. Andy has a tremendous amount of information, including enormously helpful information on the record from a courageous examiner. During Isabel the examiner was responsible for a very large number of adjusters. The press embargo on that story will be lifted when it appears it will be most helpful to the victims.
Please feel free to contact me if you have any questions or if I can help you in any way.
Steve Kanstoroom
sjk@varidynecorp.com
Cell 301 503-6078
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