Washington, D.C.-The Consumer Federation of America today estimated that Hurricane Isabel will result in a minimum of 20,000 wind claims (and many more federal flood insurance claims). Payments on the wind portion will likely be over one-half billion dollars. The expected payouts are sharply less than in previous similar storms, despite new construction. For example, a similar storm, Hurricane Floyd, paid $2.1 billion in current dollars in 1999. Payouts to families will be less because insurers have introduced, sometimes stealthily, percentage hurricane deductibles into many new homeowners policies.
“Families will have to dig deeper into their pockets because insurers have been steadily increasing hurricane coverage deductibles,” said J. Robert Hunter, Director of Insurance for CFA and former Federal Insurance Administrator and Texas Insurance Commissioner.
As consumers prepare to deal with their insurance companies in the wake of the storm, the Consumer Federation of America offered the following tips.
1. KEEP GOOD RECORDS
You should immediately start a notebook documenting contacts with your insurance company. List the date, time and a brief description of what was said. If you need to complain (see below) this information will be vital. If an adjuster says he or she will come and does not, write it down. If an adjuster is rude, write it down.
Get out your inventory of possessions or try, at once, to list your possessions. Don’t forget that your family likely has pictures of rooms in your house (for example, from Christmas or other celebrations) that can be helpful in recreating a list of your possessions.
Obtain a repair estimate from a trusted local contractor to use as a guide in talking with the adjuster. Keep receipts of emergency repairs and any costs you incur in temporary housing. This may be reimbursable under the “Additional Living Expense” portion of the Homeowners’ policy.
2. DECIDING ON WHETHER TO FILE A CLAIM AT A TIME WHEN INSURERS ARE BEING SO TOUGH ON CLAIMS
You have paid your premium and are entitled to coverage. Insurers are using tougher standards for renewing insurance for homeowners these days, but this sort of claim should be excused. A hurricane such as Isabel is not the fault of the homeowner. Neither is the wet ground
that may precede a hurricane and cause trees to topple when the hurricane hits, nor are any of the circumstances pertaining to claims from Isabel.
As consumers we must stand together and agree to not do business with any insurance company that would not renew policies with consumers who make a claim related to Hurricane Isabel. We should fight any attempt to use of hurricane claims as an excuse not to renew homeowners’ policies and complain to state regulators and, if required, the federal government, to assure that insurers do not take such actions.
3. WHAT IF THE CLAIM IS DENIED OR THE OFFER IS TOO LOW?
If the claim is denied or you feel the offer is too low, demand that the company tell you what language they are relying on in your homeowners’ policy to deny the claim or offer too little. This does several good things for you:
a. The company may be right and you may not know it. Once they point you to the appropriate language in the policy, you should be able to determine this. For example, suppose you have $400 in damage and the company points out you have agreed to a $500 deductible.
b. The company may have slipped new costs into the policy and not adequately informed you. Many companies have unilaterally imposed a separate “Hurricane Deductible” which is usually a percentage of the value of the home. CFA believes that many people are not aware of this deductible, which has been introduced since Hurricane Andrew in 1992. Moreover, the disclosure to consumers of this new deductible has often been inadequate. If you feel that you were misled in this regard it might be a good idea to talk to an attorney. The introduction of these percentage deductibles, up to 10 percent of the value of a home, will greatly shift the cost of Hurricane Isabel from insurance companies to insurance consumers, compared to earlier storms. The practice of shifting the cost of previously insured events back to consumers is acceptable, as long as consumers are clearly given the option to select the level of coverage they want with fully informed consent.
c. Once the insurance company tells you the reasons for its action it cannot come up with new reasons later. You have locked them in.
d. If you read the policy and find that it would be reasonable to read it in a way that would pay you for the full amount of your claim, 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 will prevail since the consumer played no part in writing the language.
4. HOW/WHERE DO I COMPLAIN?
If you feel that the offer is too low or the denial is wrong, the best process for getting your complaint resolved is as follows:
a. First, complain higher up in the insurance company. 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 they will be to make a more reasonable offer.
b. Second, complain to your state insurance department. All states will at least get responses from your company to the complaint. A few states will actually twist the arm of the insurance company 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.
c. Third, see a lawyer. Now the notes you took are vital. If your treatment was particularly bad, the courts in many states will allow damages not just sufficient to cover your claim but for “bad faith” (since insurance companies take your money in exchange for their promise to make you whole when disaster strikes, they are to act in utmost good faith in performing that obligation).
5. WHAT ISN’T COVERED IN THE HOMEOWNERS’ POLICY?
The homeowners’ policy does not cover flood, earthquake, tree removal (except when the tree damages the house) or food spoilage from power failures.
6. DO I USE THE SAME METHODS FOR A FLOOD INSURANCE CLAIM?
The federal government underwrites flood insurance, although the claim is often serviced by an insurance company. Follow the same procedures as above except when complaints, contact the Federal Insurance Administration at 888-flood29 or 800-427-5593. The flood insurance program tips on handling claims is at www.fema.gov/nfip/tips.
“Not all insurance companies handle claims badly, so go into the claim process with an open mind,” said Hunter. “But, be vigilant, or you run the real risk of being shortchanged,” he concluded.
CFA is a federation of some 300 pro-consumer groups that, since 1968, has sought to advance the consumer interest through research, education, and advocacy.