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.  

 

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

Insurance coverage for loss of income from business interruptions due to coronavirus

Last time I posted about coronavirus liability insurance issues, a little more than a month and a lifetime ago, I had no idea that I would be writing this post from my home office, taking my temperature every few hours because I need to go three days with  no fever before I can stop self-quarantining away from my kids.  I am grateful for how lucky I have been: that my kids are old enough that they've been able to handle little supervision beyond my pestering them by text; that I did not get sicker; that friends and acquaintances and even strangers have helped my family out in all kinds of ways, from deliveries of toilet paper to making masks for us; and that I have a law practice will survive my not working for a couple of weeks.

Many businesses are worried that they will not survive.  One of the questions for them is whether they can recoup their coronavirus losses from their general liability insurance.  These are the major issues that arise from that question: 

·       Does the business interruption insurance provide coverage for loss of income from coronavirus?  

As with every insurance question, the first place to look is the language of the policy. 

Most policies provide business interruption coverage in the case of "direct physical loss or damage" to the insured property (such as a fire loss).  

There will no doubt be litigation over whether the coronavirus itself is damage to the property, at least where there were known cases of coronavirus at the business which caused it to shut or lose revenue.  

Many policies have an exclusion for losses due to viruses or bacteria.  The courts will have to address whether a “pandemic” comes within that exclusion  

Many policies also provide business interruption coverage if the losses are caused by “civil authority,” where access to the business is prohibited by an act of government.  (For example, after the Boston Marathon bombings, the government shut down businesses near the bomb site.)  Such losses do not require direct physical loss or damage to the business property, but are generally limited in scope to a few weeks.  

·       Is there any chance that insurance will provide coverage even if coverage seems to be excluded by the language of the policy?

The Massachusetts legislature is considering a bill under which insurers would pay business interruption losses from coronavirus up to the policy limit for small businesses.  The insurers would then by reimbursed by the state.  There’s a good summary of the bill here.  

·       What do I do if my insurer denies my business interruption claim?

Don’t give up without consulting with an attorney.  Insurers may reflexively deny claims.  You may have a policy that provides coverage, or a court decision may come down in the future interpreting your policy as providing coverage.  You want to make sure you don’t lose any rights. 

·       What do I do in my insurer says that there is coverage for my business interruption claim?

You should consider hiring a public adjuster to help you make sure you are submitting the full value of your claim.  Public adjusters are non-attorneys who advocate for policyholders on the amount of loss, almost always on a contingency fee.  

·       Upcoming Boston Bar Association webinar

The Insurance and Reinsurance Committee of the Boston Bar Association will be holding a webinar on these issues on Friday April 17, 2020 from noon to 1 PM.  (I am one of the chairs of this committee but the credit for putting the program together goes to my co-chair Sara Perkins Jones as well as to Nathan Cole.)  You do not need to be a member of the BBA to participate in this webinar.  

A primer on public adjusters

An insured who has a property damage claim--such as basement flooding--may hire a public adjuster to advocate on his or her behalf with the insurer.

As defined by Massachusetts statute public adjusters may represent an insured in connection with the assessment of damages, negotiation, settlement, appraisal or reference proceedings for property damage insurance of any sort.

Public adjusters are generally not attorneys and, like other non-attorneys, may not advise or represent clients on questions of law.

Public adjusters must be licensed by the state. The contents of a contract between a public adjuster and an insured are regulated by statute.