If you own a home, you should have a policy of homeowner’s insurance in place to protect you against certain disasters that could damage that home. Your mortgage carrier requires you to carry a policy to protect its interest. Chances are good that sometime during your ownership, some event will happen resulting in you filing a claim with your insurance company. If you’ve not yet had to use your insurance, you may wonder how that works. Or, if you have filed a claim and the insurance company is denying the coverage you expected, you may be wondering what you should do next.

Your primary contact with your insurance company is through your agent. An insurance “agent” is a person who has a contractual relationship with one or more insurance companies to sell and issue policies on their behalf. The agent’s job is to take your application and issue the policy. The agent is therefore considered to be a legal representative of the insurance company, which is then legally bound by its agent’s actions in obtaining and placing insurance coverage. This relationship between the agent and the company exists as a matter of Ohio law, even if the written language of the application or policy suggest otherwise. However, if you have a loss and you find that the coverage the company is willing to provide on your claim is not what you expected, it is unlikely that you will be successful suing the agent. The extent of the agent’s legal duty is to assess what coverage you need and to provide the best available policy. If the agent has discussed whether you’d be best off purchasing a policy that specifically details the risks that are covered rather than a slightly more expensive policy that covers all risks not specifically excluded, he has in all probability fulfilled his duty to you.

The agent’s duties to you include being your contact with the company when you realize that you need to make a claim under your policy. You usually will contact the agent, who will then notify the company. The agent’s name and number should be on the first (declarations page) of your policy, as well as your policy number. Timely reporting of the claim is important, and may be set out in the provisions of the policy itself. It would be a good idea for you to have your copy of your policy on hand when you make that first call, and to have reviewed it to the extent that you can tell your agent where in the policy you find the language giving you coverage. This doesn’t have to be a detailed analysis, and generally you don’t have to have an attorney’s recommendation, but a general idea where the language is located that gives you coverage for, say, hail damage to a roof or damage from a fallen tree would be helpful in focusing the insurance company on the basis of your claim early on.

Keep in mind that a claim must be made on a policy before the insurance company’s obligation to perform under the policy is triggered. Mere knowledge by the insurer of the claim or of circumstances that might give rise to a claim are generally not enough to activate the insurer’s obligation. The insured must submit his claim to the insurance company, and thereby declare that he expects the company to compensate him for his loss under the policy.

Once the insurance company receives the claim, they will open a claim file and assign an adjuster (also called a “claim representative”). Adjusters settle insurance claims. It is the adjuster who manages the investigation of your claim and considers the extent of policy coverage for your damage. “Staff adjusters” are employed by the insurance company, while “independent adjusters” are non-employees retained by the insurance company to represent them in investigating and settling the claim. The adjuster assigned to your claim will contact you quickly after receiving the claim, usually no later than the next day. She will be your primary point of contact with the insurance company until the claim is resolved. The adjuster will also schedule a convenient time with you to view the loss. If it appears that specialized knowledge is necessary to determine the extent of the loss, she will retain the services of an engineer or some other professional, at the insurance company’s expense. She will investigate the claim, determine whether there is coverage for the claim under the policy, determine the amount due you under the policy, and then resolve the claim either by paying you or be disclaiming coverage.

Do keep in mind that if the adjuster hires an engineer to inspect the damage, the engineer’s loyalty is to the insurance company that pays him. He or his firm likely has provided services for the insurance company in the past and hopes to do so in the future. He is therefore looking to save the insurance company money if at all possible. Hopefully, he will be impartial in analyzing what he sees and fairly assess the extent of the damage. However, if there is any room for ambiguity, his opinion may be slanted so as to provide the insurance company with a report that will diminish the amount offered you to resolve the claim. (An example of this might be whether you had reason to know that the tree that smashed your roof was so rotten that it was only a matter of time until it fell on your house. Another example might be the source of water damage to the interior structure of the house.)

If there is any chance that your claim will involve a significant amount of money to remediate the damages, I would suggest that you retain your own engineer to do an independent investigation of the damaged areas. His services will be at your own expense, but if there’s a possibility that the insurance company will not pay you a reasonable amount based upon their interpretation of your policy, his investigation, made at a time when the damages were fresh and open for view, could be essential in establishing the fair value of your claim. Do not rely on the agent’s representations that she thinks the company will pay for the full remediation of your damages, and therefore decide not to incur the additional expense. When, many months later, your agent informs you that her “supervisors” at the insurance company finally decided to offer you much less than your true costs of remediation, you are at a disadvantage if you only then retain your own engineer.

As you can see, the adjuster has a great deal of control over how your claim is processed and resolved. Insurance companies are in business to make money, the same as other types of businesses. They make money when they take in more premiums than they pay out in claims. Therefore, it is safe to assume that their adjusters have been trained to minimize claims whenever they can. Sometimes the adjusters are even awarded for doing so. With this in mind, regulators of the insurance industry have come up with a list of practices which insurance adjusters (and their companies) must follow. These include the following:

  • The adjuster must not knowingly misrepresent to you relevant facts or policy provisions relating to your claim;
  • The adjuster must acknowledge with reasonable promptness all pertinent communications regarding claims made under your policy;
  • The adjuster cannot refuse to pay your claim without conducting a reasonable investigation;
  • The adjuster must accept or deny coverage of your claim within a reasonable time after she completes her investigation;
  • If the adjuster denies your claim or offers you less than what you expected, she must promptly provide you with a reasonable and accurate explanation of the basis for her decision;
  • The adjuster must provide you with the forms required to submit your claim within 15 calendar days of your making the claim, and provide reasonable explanations regarding their use;
  • The adjuster must not force you to have to file suit to recover the amount due under your policy by offering substantially less than the amounts ultimately recovered in such a lawsuit;
  • The adjuster must have established reasonable standards to ensure that any repairs made by a repairer that she requires you to use are performed in a workmanlike manner.

The adjuster’s failure to perform one or more of these duties indicates that she may have processed your claim in bad faith. This is a serious charge against both the adjuster and her company. You should not raise it lightly, but should have a factual basis to support such a complaint. If you do believe your adjuster has acted in bad faith, you would be wise to seek the services of a competent attorney to present and pursue the complaint for you.

Keep in mind as well that you are contractually obligated to cooperate with your adjuster in resolving your claim. Your failure to do so could jeopardize the success of your claim. Adjusters sometimes contend that the insured failed to cooperate as a defense to their own lack of performing their duties in the claim process. You will greatly benefit from making detailed notes for yourself of every communication you have with the adjuster and any professional she hires. Be sure to note the date and time, and briefly record what was said and/or done. Keep in mind that the adjuster has to keep her own case log of everything she does on your claim. If a lawsuit ultimately has to be filed for you to get fairly compensated on your claim, your attorney can get a copy of her claim log, and you can compare it to your own notes.

Clearly, you are under a strain while your claim is being processed. This stress is caused by the uncertainty about how much you will be offered for your loss, at the same time you are dealing with the disruption and hardship that major losses or occurrences cause in your life. Both you and the adjuster are best-served if you can maintain a cooperative approach in resolving the claim. That may not always be possible, especially when the facts of the loss may be complicated or where there are difficult coverage issues. Keep in mind that the resolution of any claim starts with the language of the policy that potentially applies to the loss. If you and the adjuster appear to be at odds as to whether your loss is covered under the terms of your policy, you would be wise to consult with a qualified lawyer. In addition to advising you as to whether you have a strong basis to contest the adjuster’s interpretation of coverage for your claim, that lawyer may very well find other provisions that you didn’t realize provide you with additional coverage for your particular loss.

[1] In a previous blog, I described in more detail the difference between these types of homeowner’s policies.

About Barbara Horwitz

Barbara Horwitz is an experienced bankruptcy attorney helping people get past financial difficulties. She believes in creating a relationship with clients and is dedicated to making the bankruptcy process as easy and stress-free for clients.

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