Home Insurance consumer advocates United Policyholders (UP) gives other common examples of the ways in which an adjuster might fail to properly scope the loss. Windows need to be replaced, but the adjuster fails to separately specify the need to replace wood trim on the inside of the windows. The measurements of the room are taken inaccurately or rounded down; since the drywall, paint, baseboard, and floor coverings, and the electrical, heating, and air-conditioning costs will be based on room dimensions, underestimating here will result in an unreasonably low estimate.

Measuring the damage

Measurements may be taken accurately but may not account for waste, particularly where more material is needed to match complex color combinations or borders in carpeting, vinyl flooring, or wood flooring.9 Adjusters may calculate the dimensions of a wall and then deduct the area of cutouts for doors and windows even though those cutouts may increase, not decrease, the cost of repair; the drywall removed for a window opening cannot be used elsewhere, and it takes more time to paint around an opening than to paint a solid wall.

What are the home insurance trends?

Problems in scoping the extent of a loss sometimes result from industry trends. Trade publications, training courses, and word of mouth spread “common wisdom” among adjusters from different companies, and policyholder advocates report seeing many companies adopt the same unfair scoping tactics at the same time. The concept of an “abandoned floor” is one recent example. A homeowner suffers a plumbing leak that is included in the policy. Water from the leak inundates a room in which wall-to-wall carpeting covers a hardwood floor. Many insurance companies have taken the position that the hardwood floor is abandoned because its sole value is to provide a base for the carpeting; therefore, paying for the water damage requires only replacing the carpeting and providing a cheap underlayment of particleboard rather than also replacing the hardwood floor. Of course, if the homeowner someday would prefer to have hardwood floors rather than wall-to-wall carpeting, he will have to pay for the installation of a new floor; at that point, the homeowner realizes that the insurance company has not honored its promise to fairly adjust the claim and indemnify the homeowner for his loss. The difference can be substantial.

Home insurance claim example

One Pennsylvania homeowner was offered four thousand dollars by his insurance company to adjust a water loss in precisely these circumstances; after pursuing the claim with the aid of a public adjuster he ultimately received $15,000 as the frill measure of his loss. .(A public adjuster is an independent adjuster not employed by an insurance company who is hired by a policyholder to help with a claim.)

The abandoned floor problem illustrates several problems with the process of scoping property losses. The homeowner files a claim for the damaged floor, and the adjuster responds that the value of the hardwood floor is not covered under the obscure, legal-sounding concept of an “abandoned floor”. The homeowner may question the decision, and the adjuster responds that this is an accepted interpretation and “all the companies do it” (which may well be true, at least when they can get away with it). At this point the homeowner suffers from two disadvantages. The adjuster is, or at least appears to be, the expert, and without expertise it is difficult to contest his argument. Nor is it necessarily easy to get a real expert to contest the decision.

Insurance lesson learned

The difference in the Pennsylvania claim was $11,000, enough to justify hiring a lawyer or public adjuster. But on many claims the difference will be smaller. If the difference is a few hundred or even a few thousand dollars, it will not be worth it to hire professional help, so the adjuster’s improper determination of the loss will go unchallenged. The homeowner has not received what the insurance company promised, but it’s only a few hundred or a few thousand dollars. The insurance company has benefited by those relatively few dollars, but a few dollars on a lot of claims add up to a lot of dollars.

Part of the problem with scoping a loss is the degree and range of expertise involved. Houses are complex things, and tracking down the cause and nature of damage can be even more complex.

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