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Catmandale
USA
67 Posts |
 Posted - 04/10/2003 : 01:02:02
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I have recently had long and heated arguments over measuring damages. Not the actual value or cost on the market of doing agreed repairs, but even getting to the point of agreement. In short, setting the scope of repairs.
It has been my understanding and practice to scope based on what it would take to put the insured in a position equal to where he was before the loss. Not better (unless and until replacement benefits are due), and certainly not worse.
To support my position, I started searching the internet for backup. Case law, definitions in policies, etc. Nada, zip, nope, nothing. Except with regard to autos, but I am talking homes.
The closest I have come is Like Kind and Quality definitions…no case law so far. I know in my gut and from agreement by peers that this is right, but the documentation, or lack of is nagging me. No one actually says “pre-loss condition”, in writing at least. It seems so obvious as to make any mention redundant.
I seem to recall one carriers ads that say something on the order of "we put you back where you belong", or something like that.
I would appreciate any discussion or opinions on the subject.
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"When we thought that we had all the answers,
suddenly all the questions changed."
Mario Benedetti (1920); Uruguayan writer.
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Edited by - Catmandale on 04/10/2003 01:03:53 |
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wberg
USA
6 Posts |
Posted - 08/14/2003 : 02:20:52
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I’ll take a crack at this…….
Firstly, “like kind and quality” are subjective in their respective meanings…
like (SIMILAR TO) preposition, conjunction
similar to; in the same way or manner as:
kind (TYPE) noun [C]
a group with similar characteristics, or a particular type:
quality (STANDARD) noun
1 [C][U] how good or bad something is:
quality (CHARACTERISTIC) noun [C]
a characteristic or feature of someone or something:
The definitions above were taken from the Cambridge Advanced Learner's Dictionary.
Actual Cash Value (ACV): 1) The cost of replacing or restoring property at prices prevailing at the time and place of the loss, less depreciation, however caused; 2) replacement cost minus.
Replacement Cost: The cost to repair or replace property at construction costs prevailing at time of loss; the cost to repair or rebuild property without considering depreciation. (See Actual Cash Value)
The definitions above were taken from the Risk Management and Insurance.
So, “like kind and quality” is what ever closes the file reasonably. For example;
You have an “overflow” from a bathtub upstairs, sugar booger was getting ready for that long awaited relaxing bath after a long day with the under school age children, while waiting for the tub to fill, the children begin to fight in the bedroom next door, she leaves the bathroom and discovers a smack down pillow fight going on, of course she begins screaming for them to stop. Once she has settled them down, she returns to the relaxing bath only to discover the water every where. Thinking quickly, she turns off the water, unplugs the drain, and throws some towels around to soak up the water. Satisfied, she continues with her bath. Feeling wonderful now, she desires a glass of wine to complete her evening. Once in the kitchen, she discovers that the water had leaked thru the ceiling and damaged that terrific faux paint on the wall, the grass mat wallpaper she had searched for weeks to find. At this point, being upset, she takes the bottle of Patron Tequila upstairs instead.
The next day she reports her claim and later that afternoon, the carrier, being very concerned about customer service, dispatches the local independent adjuster for an inspection. Being astute in his craft, he completes what appears to be an equitable scope and departs. Some days later the insured receives her copy of the estimate and her ACV check along with various letters explaining the RCV/ACV settlement and how to proceed.
Now, she calls for the painter that rendered that wonderful finish on her walls and discovers the painter is no longer in business. Slightly miffed, she calls her local Sherwin Williams Store and receives several names and numbers of quality painters. Several days later, they begin to arrive and all tell her that they cannot match or duplicate the particular style she has and all will have to be redone.
In the meantime, she had traveled to the local “Wallpaper To Go” outlet to purchase additional wallpaper for the painter to install. To her dismay, she learns that the pattern she bought is no longer available. The sales person shows her similar patterns that cost more.
At this time she has discovered that in order to return her kitchen to the “like kind and quality” prior to and at the time of loss, she needs additional funds. She calls the assigned carrier adjuster and the discussion proceeds. She faxes the estimates, the invoice from the Wallpaper To Go Outlet as requested. The next day, the carrier adjuster calls her and informs her to proceed with the repairs, she goes over the details of the adjusted figures, and informs her to forward the invoices once the repairs are completed to satisfy the “replacement cost requirements” of her policy for the additional funds to be sent to her.
Like kind and quality concerns have been debated long and hard. It really is a simple matter to resolve, just takes attention to detail and some negotiation skills to resolve. Where catastrophe matters are concerned, unless you’re able to stay informed as to the availability of all materials used on a typical building, you can only write what you see. Any discrepancies will fall to the call center handling the many adjustments that take place months down the road.
I hope this has helped.
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Type R 1090
Canada
14 Posts |
Posted - 09/07/2003 : 12:24:22
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While the insurance policy may never mention "pre-loss condition", I think this is something that's understood if you look at the purpose of an insurance policy.
The contract is one of indemnity, one where an insured is compensated and put in the same position as before, no better, no worse, as if a loss never occured. In the case of an ACV policy, they are paid the value of the property at the time of the loss so that financially they are no worse off than before. In the case of a Replacement Cost policy, like materials is used in repairs/replacement. While the insured may benefit from receiving new for old, I think the purpose still is to put them in a pre-loss state and not get a whole bunch of upgrades and betterments at the expense of the insurance company. LKQ is what is written into the policy to address this issue. |
Edited by - Type R 1090 on 09/07/2003 12:29:28 |
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TomWeems
USA
24 Posts |
Posted - 09/08/2003 : 09:27:57
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| I bet when the insured finds out that the price of the wallpaper is less, she doesn't call the carrier and tell them that...HUH? Funny thing, back in the Hurricane Andrew days, a man walked into the Storm Office in Morgan City with a check because the repairs were less than the estimate. That really threw everyone for a loop, because there is just as much paperwork to reopen the file to accept the money as there is to pay a supplement. As a matter of fact, I think it was MORE trouble...it's also the only time I have ever seen that happen... |
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CCarr
Canada
1200 Posts |
Posted - 10/08/2003 : 19:14:17
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I've come across some more information that is relevant to the opening post. A lot of my content is gleamed from an FC&S discussion titled, "Say what you mean and mean what you say"; which goes on at length about the meaning of replacement cost.
However, the concept of replacement cost was clarified in the court case 'Great Texas County Mutual v Lewis (TX App 1998)'. In that case the court said that the words "repair and replace" mean, "restoration to a condition substantially the same as that existing before the damage was sustained".
A "roof" was the subject matter of the discussion concerning the application of the meaning to "repair or replace" in relation to the court ruling. For example, take a roof that is partially damaged by an insured peril, that is, a portion of the shingles are damaged but not to a widespread extent that would normally "require" total replacement of all the shingles. If the new shingles do not match the undamaged shingles, has the "roof" been "restored to a condition substantially the same as that existing before the damages were sustained"; as per the ruling in the TX Cty Mutual case?
What is argued, in the above roof example, is that NO, the "roof" has not been restored. What the insured has now is an old roof with a new section of shingles, and that is not what the policy language promised. The policy language promises to "replace that part of the building damaged with materials of 'LKQ' and for like use". In this example, what part of the building has been damaged? Just the shingles that were missing or damaged? Or, is it the "roof" that was damaged?
Without providing a "roof" with shingles that match, the insurer has not put the insured back into the pre-loss condition. Prior to the loss, the insured had a "roof" with matching shingles. Current policy language promises that the insured will have a roof with matching shingles after an insured loss - "replace that part of the building ....". The concensus in the article was that if insurers want to only replace the damaged shingles, they should change the policy language, or give examples of their intent in the wording much like a commercial wording explains and gives examples of how deductibles or co-insurance are applied.
After that, Minnesota took American Family Insurance to court over the issue of replacement cost and matching. In that case, which was upheld on appeal, the court ordered AFI to "provide full replacement" for homeowners claims, including "reimbursement for any costs necessary to ensure that replacement materials reasonably match in terms of color, quality, texture or type of material; the existing material on the insured homes". Quite a unique way or certainly a clear way to get outside of the principal of indemnity.
The MN AG at the time of the court decision, Mike Hatch, said, ".... we have a court decision establishing the insurance company's obligation to provide full replacement coverage to its policyholders. Consumers do not pay their premiums to live in a two-toned house or have a checkerboard roof ....".
It is probably just a matter of time, before more of this MN attitude finds its way into more court cases on this issue.
It does all seem to boil down to say what you mean and mean what you say. |
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KileAnderson
USA
875 Posts |
Posted - 10/08/2003 : 20:55:05
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| Clayton, I guess it all depends on perspective. One could also say that before the loss the insured had a roof made entirley of old shingles but now he has a roof made up of some old and some new shingles, therefore, the average age of the roof is actually less than it was before and the insured is now in a better position than before the loss. |
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khromas
USA
103 Posts |
Posted - 10/08/2003 : 22:19:40
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Clayon has provided a succinct summary of the current case law in regards to LKQ. ( I received my JD back in 1992 and regretably have not kept up with the cases he referenced however he provided a clear explanation without all the legalese.) In other forums on this site, people have tried to maintain that as adjusters, our ONLY responsibility is to stick to the plain wording of the policy contract. I would put forth that the policy contract is quite often defined as what 9 out of 12 reasonable people say it is, regardless of what the insurance companies will argue. Now while I do not think we should handle our business as adjusters solely premised on keeping our butts out of legal problems, sometimes that is a good perspective to use when considering a denial. If it came down to crunch time, could you sell your decision to those 9 out of 12?
I have been surprised by the approaches here in Virginia to the roof repair vs replacement issue. The insureds are much more willing to accept the partial repair of slopes and that is the expected way to settle per the carriers. Try this in Texas and get your head handed to you! |
Kevin Hromas |
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Wes
USA
62 Posts |
Posted - 10/08/2003 : 22:47:21
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| Clayton, is the above information in its entirety available on the internet? If so could you please provide a link. I am a firm believer that a spot repaired roof significantly diminishes the value of the said roof. How many of us have driven thru a hail storm town after the fact and seen all the unsightly roofs that no longer have matching shingles because of spot repair. I know that if i was looking to purchase a home I definately would not even consider one with checkerboard shingles unless it was significantly reduced in price (financial loss). The policy states that the insured is owed for financial loss incurred. I believe there would be a significant financial loss if a roof is repaired and does not match in its entirety. Now with that said lets discuss kitchen cabinets!!! |
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CCarr
Canada
1200 Posts |
Posted - 10/08/2003 : 22:59:23
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| Wes, the FC&S discussion article mentioned, came to me as a regular e-news service I subscribe to, therefore I don't have a link to provide you with. |
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Catmandale
USA
67 Posts |
Posted - 10/09/2003 : 21:46:55
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Thanks to all of you for the great repartee on this thorny subject. I am heartened by the spirit of information given, we were able to discuss it without namecalling. That is the way this medium functions best.
Just to add a wrinkle, the LKQ issue can be complicated by the evaluation challenges. Who decides whether the wallpaper is indeed the same quality...especially wallpaper which is difficult for even decorators and people in the trades to value. Think of how many wallpaper books there are. When you get into specialty materials like Van Luits and the like the cost can be astronomical (although most people with these items know what they have to some degree).
People have said to me, I bought the best they had at the time, I want the best now, even though what they had is still available and the best is now a whole different type of item. Years ago the best was a Cadillac and now its a Mercedes or a Lexus.
These kind of issues are part of what makes our profession a challenge and worth doing. And what separates the joe schmo adjuster from the pro.
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"When we thought that we had all the answers,
suddenly all the questions changed."
Mario Benedetti (1920); Uruguayan writer.
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Type R 1090
Canada
14 Posts |
Posted - 10/10/2003 : 19:43:35
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quote:
Originally posted by Wes
I am a firm believer that a spot repaired roof significantly diminishes the value of the said roof. How many of us have driven thru a hail storm town after the fact and seen all the unsightly roofs that no longer have matching shingles because of spot repair. I know that if i was looking to purchase a home I definately would not even consider one with checkerboard shingles unless it was significantly reduced in price (financial loss). The policy states that the insured is owed for financial loss incurred. I believe there would be a significant financial loss if a roof is repaired and does not match in its entirety.
Now for arguments sake let's assume the insured had a 3 tab shingle roof that's about 30 years old, well past it's lifespan and has curled and buckling shingles all over. Along comes a windstorm and takes 1/3 of the shingles off on one side. Will a spot repair really diminish it's value when it's pre-loss condition was probably little in the first place due to it's advanced age?
This actually happened to me a while back. In my conversation with the insured I pointed out to her that the roof was quite old. She admitted that and told me they were planning on replacing it in a few months. I basically jumped on that, and offered to pay for half of a new roof. Though she hummed and hawed for a few days, she eventually accepted it. |
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CCarr
Canada
1200 Posts |
Posted - 10/10/2003 : 21:02:08
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TR, our cousins to the south are surely not going to understand the very Canadianish content to your story, eh.
They will recognize it as a Canuck tale, because it wouldn't likely happen in Pawsdukeville USA.
Would I be guessing correctly - and it is certainly not meant as a negative in any way - that your services on that claim were being paid through other than a fee schedule based on gross loss? |
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KileAnderson
USA
875 Posts |
Posted - 10/11/2003 : 00:05:14
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| I would think a 30 yr old roof, unless it's slate, would be non repairable and one shingle lost on a slope would warrant the entire slope being replaced at the very least. |
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Type R 1090
Canada
14 Posts |
Posted - 10/11/2003 : 02:01:07
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quote:
Originally posted by CCarr
TR, our cousins to the south are surely not going to understand the very Canadianish content to your story, eh.
They will recognize it as a Canuck tale, because it wouldn't likely happen in Pawsdukeville USA.
Would I be guessing correctly - and it is certainly not meant as a negative in any way - that your services on that claim were being paid through other than a fee schedule based on gross loss?
Sometimes I forget how differently Canadians and Americans handle claims [:)].
Actually, I don't have to worry about fees and such - I'm a staff adjuster with one of Canada's mutual insurance companies. |
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bobdog127
3 Posts |
Posted - 10/11/2003 : 08:24:59
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Dear Forum,
I would appreciate any opinions on the following matter:
I am a homeowner who recently suffered a catastrophic loss by fire. My insurance company has determined it to be a total loss. The insurance company hired a contractor to determine the replacement value. This value was $300,000. He used the "like, kind and quality" principle to guide his estimate.
The house was designed by Acorn, a renowned company that designs custom, quality homes and provides pre-fab building packages for them. I solicited replacement estimates from Acorn and several of its recommended builders based on the original plans. The lowest of the five estimates I received was $400,000. In addition we had added about $20,000 in improvements to the home over the past few years.
While $300,000 might rebuild a home that "looks and smells" like an Acorn home using materials of like, kind and quality it would not, in fact, be an Acorn home. In order to rebuild the Acorn I would have to buy the building package from them, which cost considerably more than the materials in the $300,000 estimate.
I believe there was a pre-existing value associated with this brand of home. For example, I could not sell the $300,000 rebuilt home as an Acorn, whereas I could have sold the pre-fire home as such.
In your opinion in this case is "like, kind and quality" satisfied by the $300,000 replacement value, or am I entitled the materials from Acorn to rebuild an Acorn home?
Thanks for your help.
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CCarr
Canada
1200 Posts |
Posted - 10/11/2003 : 09:08:38
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Bobdog, before I venture forward with any thoughts, would you please advise what province and city the loss occured in, and what month of this year?
In addition, what exact type of Homeowners policy do you have? Is the amount of insurance sufficient or at issue, or do you have guaranteed replacement cost on the home?
A quick review of the Acorn Homes web site, narrows both the geography and other issues.
In that regard, I look to your further qualifying or clarifying statement concerning your earlier statement, ".... the house was designed by Acorn, a renowned company that designs custom, quality homes and provides pre-fab building packages for them ....". I'm particularily looking for any substantiation you may have regarding the last part of that quote.
I'll add by edit, while I wait for your reply, also asking you to confirm which "Acorn Homes" company built the dwelling which was destroyed by fire.
Was it Acorn Developments Corporation, of Ontario, or Acorn Communities Ltd, of British Columbia.? Both these entities use the style name "Acorn Homes". Both these entities are new home builders, i.e. builders of subdivisions, neighbourhoods, developments. Neither of these entities will do as you say, ".... provides pre-fab building packages ....". |
Edited by - CCarr on 10/11/2003 11:34:58 |
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Like Kind & Quality or Pre-Loss Condition?
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