Advice for people who are facing property losses in the Los Angeles fires: Hire a public adjuster

I recently saw on a Facebook group I belong to advice for victims of the California fires and how they can maximize their insurance claims. The advice was dreadful. It included, "Make from memory the most detailed list you can of every item in your house that was destroyed, and its value."

This is terrible advice.

One of my specialties as an attorney is representing people with property damage claims against their insurers (Massachusetts only).  I also represent insurers in these losses, more on this at the end.  I have seen from both sides people who have suffered this type of terrible loss who received this advice and got completely caught up in futilely trying to make a complete inventory of their destroyed personal property and its value on their own. Of course, because these items represent their life and have huge value to them, and they get lost in that.

The good news is: there is an entire profession devoted to helping people with this type of insurance claim. Their job is to advocate with an insurance company for the insured for the value of the property damage loss, including personal property claims. They have specialists who will make lists of personal property inventory and value it.  Yes, you will need to work with them and provide them the information, which may include lists, but they will help you and they will provide the valuation.

They are called public adjusters. They get paid by contingency fee, typically ten percent (at least in Massachusetts; maximum percentage is set by state law), so cost nothing up front, and for any major loss are well worth the cost because you will recover more working with them even with their fee than you would trying to do it yourself, and they will act as a buffer between you and the insurer and reduce your stress in this aspect of your loss significantly.

In all honesty, some public adjusters are terrible and some are great (and most are in between). As with any professional doing something major for you, you will want referrals if possible. Meet with several. Ask for references. Google them. But a good public adjuster will save you time and aggravation and help you move forward. Even a not very good (but not terrible) public adjuster is better than you trying to do this yourself.

My advice for anyone who may need to evacuate but is currently safe (and everyone else, do this while you are thinking about it): Go around your house and take pictures of everything. The exterior walls. Everything you own inside. Appliances. Bookshelves. Open your closets, your cabinets, and your drawers and take pictures. (Not of each item, but of the inside of each drawer.  I am not trying to make you crazy here. Maybe individual photos of items you own of high monetary value.) Hopefully you will never need to look at them, but if you do need to show what you owned, this is a good way to do it. (I do this every couple of years. It takes 30 minutes or so.) You can hand the photos to the public adjuster, who can use them as a basis for their inventory (along with conversations with you).

Why is it terrible advice for you to try to inventory and value your own goods?  Because unfortunately sentimental value has nothing to do with insurance coverage.  The items you love the most – your photo albums, the souvenirs you picked up on your travels, your paperback copy of The Lord of the Rings trilogy that first belonged to your father that you have carried around since you were 12 (yes I’m projecting here) – you will obsess over their loss, they will make you sad,  you will mourn them, all of which is understandable, but they have little value in an insurance claim.  Your ergonomic chair in your home office that you never think about may be worth something.  You will obsess over that as well.  Even if you don’t, your lists will not be put together in a way that an insurer can easily work with.  (You will also need to understand the difference between actual cash value and replacement cost value.  Actual cash value broadly speaking is the value of the item you own today.  My beloved copy of Lord of the Rings is falling apart and has no value; even a thrift shop would just throw it out.  But its replacement cost value is $26.38, because that's what I would spend for it on Amazon.  I will get that amount from the insurer if I timely actually purchase a new copy.)  This will take your attention from where it needs to be, which is working with a contractor to rebuild your house within the amount the insurer will pay. 

I have seen advice that if a house suffers a total loss don’t waste your ten percent on a public adjuster because you will get your policy limits. This is an oversimplification.  There are various coverages that a policyholder may not know about on their own, that insurers may ignore. Everything from code upgrades, which is huge (you have to rebuild to current code, which is an extra expense and an extra coverage but the amount has to be proven based on local codes) to landscaping coverage. (These coverages are often but not always in addition to your building coverage limit.)   Again, the difference between actual cash value that you get paid up front and replacement cost value, that you get paid after the rebuild is complete if you have that coverage, can be significant, and you need ACV to pay your contractor to do the work. (Some contractors understand insurance claims; most don’t -- they just want to build houses.)  And don't forget loss of use coverage, which is rent while your house is being rebuilt.  (In my experience public adjusters generally don't charge their percentage for this but if needed they will help you advocate for a suitable place to live.)  With personal property (your stuff) you have to show the value of your destroyed property, which may or may not reach the coverage limit. Many public adjusters are not interested in coming into a loss late. So, if you are someone who can read and understand an insurance policy and advocate effectively for yourself with the overworked insurance adjusters who will be flooding into California from other states, and you have the time and emotional wherewithal to do this on your own, sure, go for it. As an attorney in the industry, I would 100 percent hire a public adjuster in this situation.

Very important note: I don’t want to make it sound like I think insurers are evil. Quite the opposite.  I represent insurers as well as policyholders, and many insurance adjusters are wonderful people with integrity who do their absolute best to be fair.  But if you get off on the wrong foot with a claim it can be very difficult to course correct. Some insurance adjusters will advise you not to hire a public adjuster.  Some will be happy if you do because they know they will receive information in a form that is easiest for them to analyze.  Ultimately the choice is yours, but you know where I stand.  

 

United States District Court for District of Massachusetts holds that insurer breached ch. 93A by denying fire coverage for new homeowner because she had not yet moved into her house

Fire at house homeowner had just purchased and not yet moved into

Awilda Pimental closed on a new home on June 28, 2022.  She purchased a homeowner's policy from AmGuard Insurance Company that went into effect on the closing date, that included coverage for fire losses.

On July 22, 2022, before Pimental moved into her house, a fire significantly damaged it.  

Policy's definition of residence premises, and denial of coverage

The policy provided coverage for the "residence premises," which it defined as the "dwelling where you reside."  An endorsement to the policy amended the definition to "the dwelling where you reside . . . on the inception date of the policy period." The term "reside" was not defined by the policy.  (The decision did not address that the declarations page of the policy almost certainly would have listed the address as the residence premises or the insured location or similar language.)  

AmGuard denied Pimental's claim on the ground that she did not reside on the premises at the time of the fire, as she had not yet moved in.  

U.S. District Court holds that the insurer's interpretation of policy was not plausible, and was a 93A violation

In Awilda Pimental v. AmGuard Ins. Co., the United States District Court for the District of Massachusetts held that there were "multiple problems" with AmGuard's position.

First, according to the court, coverage applied to the dwelling where Pimental resided on the inception date of the policy, not the date she moved her belongings in and set up a household.  The inception date was June 28.  AmGuard ignored the "inception date" language entirely. 

Second, the policy had a vacancy exclusion that excluded coverage if the property was vacant for more than 60 consecutive days.   According to the court, that meant that a homeowner had 60 days from the closing date to move in before the vacancy exclusion applied.  AmGuard's position rendered the exclusion a nullity.  

The court pointed out that if AmGuard's position prevailed, there would never be insurance coverage between the day of a closing and the day the purchaser moves in sometime after that. "No reasonable purchaser of a new homeowner's policy would anticipate that gaping hole in her insurance coverage."  Moreover, under AmGuard's position coverage would never attach at all because the purchaser of a home does not reside in the home on the date of purchase, the inception date of the policy.  

The court held that the policy should be interpreted "sensibly" -- that it covered the dwelling beginning on the closing date, provided that the insured purchased the property intending it as her residence, and did not wait more than 60 days to move in. 

The court further held that AmGuard's interpretation of the policy was not plausible, and was therefore a violation of Mass. Gen. Laws ch. 93A.  However, the violation was not knowing or willful, so multiple damages were not awarded.  

My take 

In my view the decision was results-oriented.  The word "reside," for example, does not strike me as ambiguous.  Coverage was not illusory, because there would be circumstances where the coverage would come into play under the insurer's interpretation -- but not, as the court pointed out, for a new homeowner.  For that reason the court was correct that its interpretiation was "sensible" -- it would indeed by absurd for there to be no property coverage between the closing date and the date the homebuyer moves in.  

60 Minutes report on fraud by Florida homeowners insurers following Hurricane Ian two years ago

Here's the link:  

Supreme Judicial Court of Massachusetts holds that term "surface waters" in policy is ambiguous, so does not apply to water on surface of a roof

Sure, Steward Health Care has created a public health care emergency, but at least it has prevailed in an insurance coverage dispute. 

A storm in June 2020 caused an accumulation of rainwater on a rooftop courtyard and on roofs of Norwood Hospital. The rainwater seeped into the interior of the hospital buildings, causing significant damage.

Norwood Hospital's owner, Medical Properties Trust, Inc., which is insured by Zurich, and Steward, the hospital's operator, insured by AGLIC, sought coverage from their respective insurers.  

Both policies had sublimits (meaning, limited coverage) for damage caused by "Flood," which the policies defined as "a general and temporary condition of partial or complete inundation of normally dry land areas or structures caused by the unusual and rapid accumulation or runoff of surface waters." 

The insurers and insureds disagreed about whether water that accumulated on roofs and infiltrated the buildings was "surface water" and therefore subject to the flood sublimits rather than the higher policy limits.  

The insureds argued that the plain meaning of "surface waters" is waters at ground level or on a ground-level surface -- waters on the surface of the earth.  The insurers argued that the phrase means waters accumulating naturally on any surface whether or not at ground level.

In Zurich Am. Ins. Co. v. Medical Properties Trust, Inc., __ N.E.3d __, 2024 WL 3504060 (Mass. 2024), the Supreme Judicial Court of Massachusetts held that the meaning of "surface waters," and therefore of "Flood," under the policies is ambiguous with respect to accumulation of rainwater on roofs.  As ambiguous terms are interpreted in favor of policyholders, the court held that there was coverage for the loss.  

Even Whitey Bulger's crimes end in insurance coverage disputes: Town of Braintree sues multiple insurance carriers for coverage for wrongful conviction claim by man framed by Bulger

 

On May 24, 2024, the Town of Braintree filed a lawsuit in Suffolk County Superior Court against fifteen insurers, as well as insurance companies Does 1 though 50, for refusing to defend and indemnify it in a massive wrongful conviction lawsuit.

The Town alleges that the insurers have each either refused to acknowledge or outright denied their contractual obligations under liability policies issued to the Town over the course of nearly four decades for claims that the Town is liable for the wrongful conviction and 36 year imprisonment of Frederick Weichel.  Weichel has sued the Town in federal court and has demanded tens of millions of dollars in damages. 

The complaint summarizes Weichel's allegations:  In 1980, Robert LaMonica was murdered in the Town.  The Town police investigated.  A composite sketch from details provided by a witness bore a likeness to a convicted murderer named Rocco Balliro, who had failed to return from a prison furlough.  A police report, the "Leahy report," containing this information was stored by the town in a "Basement Archive" and was not turned over to the prosecutors, Mr. Weichel, or Mr. Weichel's defense counsel.  

Mr. Weichel was convicted of the murder in 1981.  He alleges that if the Leahy report had been produced he would not have been convicted.  He was sentenced to life without the possibility of parole, and spent over 36 years in prison.  In 2017, after he obtained the Leahy Report and moved for a new trial, he was released and all charges against him were dropped.  In a 2018 lawsuit against the Commonwealth, a jury found that Mr. Weichel had been innocent of the murder.  

Mr. Weichel sued the Town, alleging that it had a continuing obligation to disclose disculpatory evidence throughout the entire period between 1980 and 2017, and that it was deliberately indifferent to, and breached, that duty throughout his incarceration.  He alleges that he suffered bodily injury and personal injury during each year of his incarceration.  

During these years the defendant insurers had issued law enforcement, general liability, and umbrella policies to the Town.  Most of the insurers have refused to defend and indemnify the Town.  According to the complaint, some of the insurers have asserted that the events that led to Mr. Weichel's injury took place in 1980, and therefore the only applicable insurance coverage would be a 1980 policy.

The Town asserts that the Weichel lawsuit is a "paradigmatic example of the claims that the Town's liability policies were supposed to protect it against: a suit seeking tens of millions of dollars in damages, brought against the Town by an individual who accuses the Town, its police officers, and its other managers and officials, of being responsible for his bodily injury and personal injury foreseeably resulting from him having spent thirty-six years in prison for a crime he did not commit."  

It's interesting that the complaint (as well as Weichel's complaint in federal court) does not mention his claim that he was framed by Whitey Bulger.   

Insurance Claims for Damage to Buildings in Massachusetts (my new brochure)

THE LIFECYCLE OF A MASSACHUSETTS PROPERTY DAMAGE CLAIM

• The property damage occurs.
  
  
• The insured submits the claim to the insurer.
  
  
• The insured chooses and retains a public adjuster.

The role of the public adjuster: to determine all applicable coverages under the insurance policy, prepare estimates, and advocate with the insurer over the amount of loss.

The public adjuster is paid by contingency fee, typically ten percent of the amount recovered.

• The insurer may raise defenses to coverage.  If so, the insured should hire an attorney immediately.  The public adjuster is not an attorney and cannot argue with the insurer about coverage issues. 
  
  
• If there is no dispute over coverage, there will usually be back and forth between the public adjuster and the insurer about the amount of loss. 
  
  
• If the public adjuster/insured and the insurer cannot agree over the amount of loss, the case goes to a reference proceeding. 
  
  
• A reference proceeding is similar to an arbitration, with three referees who decide the amount of loss based on evidence submitted by both sides.
  
  

THE INSURED SHOULD CONSULT WITH AN ATTORNEY:

• At any time, to answer questions about the process and whether the claim seems to be proceeding on track. 
  
  
• If the public adjuster advises the insured to consult with an attorney.
  
  
• If the insurer raises defenses to coverage.
  
  
• If the public adjuster and the insurer are unable to agree on the amount of loss.
  
  
• If the insurer has demanded a reference proceeding or the public adjuster advises the insured that a reference proceeding is necessary.
  
  
• If the loss occurred 18 months ago and the claim remains open.
  
  

Important:  The statute of limitations on property damage claims in Massachusetts is generally two years, but if you wait until close to two years to hire an attorney you can lose crucial rights.

HOW A PUBLIC ADJUSTER AND ATTORNEY WORK TOGETHER:

• If the insurer raises defenses to coverage, the attorney will take the lead.
  
  
• If the public adjuster and insurer are in the negotiating phase, the public adjuster will take the lead.  The attorney will be available to answer questions from both the insured and the public adjuster, and to provide advice, usually behind the scenes. 
  
  
• If the public adjuster and insurer are unable to agree on the amount of loss, the public adjuster and attorney will work closely together.  The attorney will draft formal “demand letters” to the insurer, prepare the case for a reference proceeding, and represent the insured at the reference proceeding.  The public adjuster will support claims about the amount of loss, will prepare or help prepare exhibits, and will be an expert witness at the reference proceeding.
  
  

TYPES OF COVERAGE IN MOST POLICIES

• Building damage
  
  
• Other structures 
  
  
• Personal property
  
  
• Loss of use / additional living expenses (residential) / business interruption (lost profits) (commercial)
  
  
• Code upgrades
  
  
• Mold
  
  
• Additional coverages such as landscaping, etc.
  
  

Special issues in condominium buildings:

• The master policy is issued to the condominium trust and provides coverage for common elements of the building (for example, the roof and common areas).
  
  
• The unit-owners policy (often called the HO-6 policy) provides coverage for the interior of a unit.
  
  
• Different master policies and unit-owners’ policies have different definitions of common elements.
  
  
• In condominiums, a unit-owners’ personal property and loss of use is typically covered by their unit-owner’s policy, not by the master policy. 
  
  
• Insurance proceeds from the master policy are disbursed to the condominium trust. 

VOCABULARY

• Actual cash value (ACV): 
  The value of an item on the date of loss.  This is paid immediately.
  
  
• Replacement cost value (RCV): 
  The cost to replace an item.  
  
  
• Depreciation:
  The difference between ACV and RCV,  This is paid upon completion of the work or when the item is replaced.
  
  
• Code upgrades: 
  The cost to bring a building in line with current state and local building code requirements.  This is paid upon completion.
  
  

Material presented in this brochure is for informational purposes only. It is not intended as professional advice and should not be construed as such. Unless and until you enter into a formal agreement with Attorney Kallen, she is not your attorney and you do not have an attorney-client relationship with her.

Let me Introduce Myself!

I have been an attorney in Massachusetts since 1994. I practice in general litigation and focus on insurance coverage and bad faith issues. I am available to assist claimants and insureds who have a dispute over property, homeowners, general liability, motor vehicle, and other insurance policies.

You can learn more about me on my website: www.kallenlawyer.com

 

40 FLORIAN STREET
ROSLINDALE, MA 02131
Phone: (617) 363-0547
nkallen@kallenlawyer.com
www.kallenlawyer.com

 Blog: 
Insurance Coverage Law in Massachusetts
http://insurancecoveragemassachusetts.blogspot.com

A video primer on the duties of an insurer to defend and indemnify

Welcome to my video.