Washington, D.C. — The Consumer Federation of America (CFA) today offered tips on how to get all you are entitled to from your insurance company if your home was damaged by Hurricane Irma or Hurricane Harvey and what to do if an insurer gives you trouble in getting that fair settlement.
Tips for Consumers Filing Claims
As you prepare to contact your insurance company in the wake of these hurricanes, use the following tips regarding the filing of a claim.
- You have paid your premium and are entitled to coverage. If you have damage, do not hesitate to file it. Report your claim as promptly as possible as insurance companies generally handle them first come, first serve. Because of the size of these hurricanes patience will be required but keep on top of your insurer to make sure you get service as soon as possible.
- Once your claim is reported, be sure to get your claim number and write it down. Insurance company claims departments can locate your file most promptly using your claim number.
- Maintain receipts for any expenditures related to immediate repairs you had to make to secure your home as well as any living expenses (hotel, evacuation costs, meals) if you could not return to your home in the wake of the storm. In you suffered wind damage you should get reimbursed for any additional living expenses. If your claim is limited to flood insurance, additional living expenses are usually not covered.
- When the insurance company sends out an adjuster to survey your damage, ask if he/she is an employee of the insurance company or an independent adjuster (I.A.) hired by them. If an independent adjuster, ask if they are authorized to make claim decisions and payments on behalf of your insurance company and ask for the name of the in-house company adjuster to whom the I.A. will be sending your information.
- Many insurance companies have repair programs in which they offer to send out one of their approved contractors to estimate your property damage. You may wish to obtain an estimate from that contractor, but you are not under any obligation to use them. The insurance company may encourage their use, as it is to their advantage. Contractors that participate in these programs have likely agreed to unit repair costs dictated by the insurance company or one of their vendors. The unit repair costs are often provided to insurance companies by software vendors and are averages by geographic region and may or may not fully compensate you for your damages. It is very important to remember that your claim is unique and individual and should always be treated as such by your insurance company. If your insurer suggests that you cannot get your own estimate or use your own contractor, contact your state insurance department to complain.
- Beware of fly-by-night contractors who might approach you to repair your home. Make sure the contractor has good references and is insured in case of errors in construction or a worker is injured on your property. Check with the Better Business Bureau near you or with your insurance company if you are not sure about the qualifications of a contractor.
“Not all insurance companies handle claims badly, so go into the claims process with an open mind,” said J. Robert Hunter, CFA’s Director of Insurance and former Administrator of the National Flood Insurance Program and Texas Insurance Commissioner. “Be vigilant, though, and be ready to stand up for yourself and your family, or you run the real risk of being shortchanged.”
Keeping Good Records is Critical to You Getting a Good Offer from your Insurer:
When you file a claim, you should immediately start a notebook documenting contacts with your insurance company. List the date, time, names of contacts and a brief description of every exchange. If you need to complain later, this information will be vital (see below). If an adjuster says he or she will come and does not, write it down. If an adjuster is rude, write it down. If the adjuster says your claim is good and later changes something, write it down. If the adjuster is pleasant and efficient, write that down, too.
Make as thorough a list of your possessions as you can. Use pictures of your possessions taken before the storm and keep them in a safe place. If you later realize you have no pictures when you file a claim, don’t forget that family or friends may have pictures of rooms in your house (for example, from Christmas or other celebrations) that can be helpful in recreating a list of your belongings.
You may wish to take your own photos of the damage as part of your documentation, if you can do so safely. Do not climb on the roof. Leave that to the professionals. The adjuster should also take their own damage photos.
You may be entitled to money up-front for living expenses, such as hotel costs and meals, if your home becomes uninhabitable as a result of wind damage. Now the receipts you kept for emergency repairs as well as any costs you incur in temporary housing are important for documenting your claim. Insurers are usually very good about these initial payments, while the media is focused on the hurricane aftermath. Most claims problems, if they arise, come later, when bigger payments are sought and the media has lost interest.
As you begin the claim process, if you are able, obtain a repair estimate from a trusted local contractor to use as a guide in talking with the adjuster.
What if Your Claim is Denied or the Offer is Too Low?
If your claim is denied or you feel the offer is too low, demand that the company identify the language in your homeowners’ policy that served as the basis for denying your claim or offering so little. This approach has several benefits:
- The company may be right and you may not know it. Once they pinpoint the appropriate language in the policy, you should be able to make this determination. For example, you may have $900 in damage, but the company could properly point out that you have agreed to a $1,000 deductible.
- The company may have slipped new limitations into the policy and not adequately informed you. If you feel that you have been misled in this regard, it might be a good idea to consult an attorney. Some of these new (and, often, confusing) policy provisions might include:
- The introduction of percentage deductibles (up to 10 percent of the value of a home) will shift much of the cost of Hurricane Irma from your insurance company to you, as compared to earlier storms. The practice of shifting the cost of previously insured events back to consumers may be acceptable, but only if you are clearly given the option to select the level of coverage you want with fully informed consent.
- You may find that you are being low-balled because of another restriction new to many policies is a limit on replacement cost payments, which might come into play in the event that a home is totally destroyed. A typical cap is 20 percent above the face value of the policy (some companies cap at no increase over the face value of the policy). If costs surge because of the spike in demand for materials or labor from a major storm like Hurricane Irma or Harvey (particularly if the state does not monitor price gouging sufficiently) this limit might apply. For example, if a home would cost $200,000 to replace before the storm and that amount was the limit on the policy, the insurance company would pay no more than 20 percent more, or $240,000. If the surge in construction costs due to extreme demand causes the price of replacing your home to jump to $300,000, you will be short $60,000.
- Another new limit on policy coverage that will surprise you is that many insurers no longer cover additional costs to bring a damaged home up to current building codes (wiring, elevation for flood risk, etc.)
- If you have both wind and water damage to your home, be particularly wary. Some insurance companies have slipped a provision into their policies that they claim says that, if you have both an insured event (wind) and an uninsured event (flood) that happen at about the same time, they will cover neither. Regulators should protect consumers from such egregious abuse where a stated coverage like wind falls out of your policy due to tricky language creating a trap door hidden in the recesses of policy language for the coverage to drop through.
Once the insurance company tells you the reasons for its action, it cannot produce new reasons for denying payment or making a low offer at a later time. You have locked them in—an important protection for the consumer.
If you review the policy and find that, under a reasonable reading, you think you are entitled to the full amount of your claim as you read the language they relied upon, you will likely win if you go to court. Courts consistently rule that, if an insurance policy is ambiguous, the reasonable expectation of the insured party will prevail since the consumer played no part in writing the language of the insurance policy. Don’t be afraid to seek legal help if this happens.
How/Where do I Complain if I Have Trouble on a Wind Claim?
If you feel that the offer is too low or the claim denial is wrong, the best process for getting your complaint resolved is as follows:
- Complain to more senior staff in your insurance company. It is often best to complain to an executive in customer relations (who is paid to keep consumers happy) rather than an executive in the claims department (who is paid to keep claims costs low). Use the records you have kept since the claim process began. The more serious the insurance company sees that you are in documenting how you were treated, the more likely that they will make a more reasonable offer.
- Complain to your state insurance department. All states will at least seek a response to your complaint from your company, which will give you more information as you consider next steps if you are not satisfied with the response. A few states may actually intervene on your behalf with the insurance company, particularly in clear cases of bad claims handling. It is important to dispassionately present your side of the story, using the notes you have been taking. As tough as it may be to contain your anger about an insurer that mishandles your claim, the more level-headed you are with your complaint, the more likely it is that insurance regulators will see your substantive problem and work to help you.
- See a lawyer. Now the notes you took are even more vital. In addition to an award covering your claim, if your treatment was particularly bad, the courts in many states will allow additional compensation when the insurance company acted in “bad faith.” Since insurance companies take your money in exchange for their promise to make you whole when disaster strikes, they must act in utmost good faith in performing that obligation. If they do not, large verdicts sometimes are won by consumers like you.
Do I Use the Same Methods for a Flood Insurance Claim?
The federal government underwrites flood insurance coverage, although insurance companies (known as “Write Your Own” companies) are contracted with the government to service claims. Follow the same procedures as above, except direct your complaints to the Federal Emergency Management Agency, the government agency responsible for running the federal flood insurance program (1-800-427-4219, TDD# 1-800-427-5593). The FEMA flood insurance program tips on handling claims are located here. This page shows you how to appeal your claim, seek an appraisal or file a lawsuit or hire someone to represent you in the claim process, approaches created after the awful claims practices discovered in the wake of Superstorm Sandy and the resulting public and Congressional outrage with FEMA.
CFA research has found that some of the private insurance companies that settle flood claims have corporate cultures that are biased toward settling claims low, even when the payments will be paid by NFIP/taxpayers and not the insurance company. In Superstorm Sandy, this tendency led to woefully inadequate settlement offers and outrage among NFIP policyholders.
“Flood insurance claims after both Katrina and Sandy were handled very badly and many Sandy claims are still being settled,” said Hunter. “This sad history should not deter you from seeking fair compensation for your flood losses caused by Hurricanes Irma and Harvey.” Indeed, Hunter said, “insurers should face greater scrutiny by state regulators and FEMA because of the serious claims problems that occurred after Hurricane Katrina and Superstorm Sandy. FEMA has been under pressure from Congress to get better at watching the performance of their insurance company contractors to do a better and firer job in settling flood insurance claims. If you have a real problem, alert your Congressional delegation”.
Some flood insurance policies are written by private insurers that are usually regulated by the state. If you experience trouble with private flood insurance claims, follow the steps above for wind claims to help resolve your problems. In rare instances, you may be insured for flood by insurers called “surplus lines insurers” who may not be regulated for claims by the state or the federal government – your only recourse then is to seek legal help.
Contact: J. Robert Hunter, 207-864-3953; Mark Romano, 708-525-3975
The Consumer Federation of America is a national organization of more than 250 nonprofit consumer groups that was founded in 1968 to advance the consumer interest through research, advocacy, and education.