Good point on agents having hard copy proof, signed by the insured, that the insured declined critical flood coverage.
My understanding is that after hurricane Andrew, if agents could not provide proof that claimants actually understood, and declined, in writting, that they wanted/purchased ACV (actual cash value) only coverage, instead of RCV (replacement cost value) coverage, that ALL such claimants never lost in (Dade County) courts, when seeking replacement cost coverage settlements.
As for covering flood losses, with wind coverage, if the causual-chain-of-events were such that wind did create the accidental opportunity for the levee breakage / NOL area flooding, then why would wind forces not be considered the accidental cause trigger for damage, by proxy?
No wind involvement, no levee breakage.
On the other hand, if coverage was clear that ONLY when wind created a opening / damage opportunity towards a wall, window, entry, garage door, or roofing system, then it seems the commonly understood concept-definition for flood water, (water that collectively gathers on the ground and rises accordingly, so as to create water floodage) is not, and was never intended to be, covered.
On properties that were not fully submerged, the wind / flood effects may be easy to determine. (Flood water marks verses ceiling and wall water stainage).
If flood water softened the ground under a concrete slab, and wind moved the structure, is that wind caused damage?
Can wind movement damage be contrasted against flood damage by carefully examining roof, wall and floor wood frame nails / fasteners for framework movement, even on structures that were submerged, and are now dry?
\”Newly\” exposed parts of fasteners, even rusting ones, have a pulled / oxidation rate history \”fingerprint\” to disclose, even after wood swells, dries out and shrinks, or doesn\’t swell, or shrink…
Seems like certain knowledgeable and experienced insurers, adjusters, engineers, contractors, homeowners, business owners, attorneys and public officials are going to be busy for a while, case-by-case…
With all due respect, in-the-trenches insurer \”adjusted\” construction estimation data, proves that Allstate, State Farm, Farmers, USAA, and the TWIA, in Texas, attempt to circumvent replacement cost loss values owed claimants.
Actuarially factored / Underwritten [structure replacement cost] contractor labor, reconstruction procedures and overhead / profit premium values can be regionally collected, and NOT properly returned to claimants.
Right under naive claimants collective noses…
Certain insurers past, and ongoing, attempts to redefine [actuarially / premium necessary] replacement cost indemnifcation calculations owed claimants, when loss claims occur(ed), led to the following pointed announcement by a regulatory agency;
COMMISSIONER´s BULLETIN NO. B-0045-98
——————————————
TO: ALL PROPERTY AND CASUALTY INSURANCE COMPANIES
RE: Calculation of Actual Cash Value Under the Texas Standard Homeowner´s Policy â€â€Ŕ Form B
The Department has learned that one or more insurers have interpreted language in the Texas Standard Homeowner´s Policy â€â€ŔForm B to permit the deduction of contractor´s overhead and profit, in addition to depreciation, from replacement cost in calculating actual cash value.
This interpretation has generated two class action lawsuits and inquiries to the Department regarding the Department´s position on this matter.
The insurers are interpreting the following Loss Settlement provision of the Texas Homeowners Policy â€â€Ŕ Form B:
We will pay only the actual cash value of the damaged building structure(s) until repair or replacement is completed.
The purpose of this bulletin is to state the Department´s position that actual cash value of a structure under a replacement cost policy, when the insurer does not repair or replace the structure, is the replacement cost with proper deduction for depreciation.
The deduction of prospective contractors’ overhead and profit and sales tax in determining the actual cash value under a replacement cost policy is improper, is not a reasonable interpretation of the policy language, and is UNFAIR to insureds.
The Department´s position is based on the following:
— Indemnity is the basis and foundation of insurance coverage.
The objective is that the insured should neither reap economic gain nor incur a loss if adequately insured.
This objective REQUIRES that the insured receive a payment EQUAL TO that of the covered loss so that the insured will be restored to the same position after the loss as before the loss.
The calculation of this payment results in UNDER-compensation if an insurer deducts prospective contractors’ overhead and profit and sales tax in determining the actual cash value under a replacement cost policy.
Conversely, the inclusion of contractor´s overhead and profit and sales tax on building materials does not over-compensate an insured for the amount of the loss because these items represent part of the insured´s loss.
Generally, the objectives of indemnity will be met if actual cash value is calculated as replacement cost with proper deduction for depreciation.
In the rare situation that defies calculation of actual value on this basis, such as cases in which the structure has historical significance or the materials cannot reasonably be replaced, other factors may be considered.
However, there is NO SITUATION in which the deduction from replacement cost of depreciation and contractor´s overhead and profit and/or sales tax on materials will be the correct measure of the insured´s loss.
–Premiums charged MUST NOT BE EXCESSIVE for the risks to which they apply.
Under a replacement cost policy, the liability limits of the policy and the premium paid by the insured are DETERMINED ON on the BASIS of the replacement cost of the structure.
The value of contractor´s overhead and profit, as well as sales tax on building materials, has been INCLUDED IN the limit of liability for which the insured has paid premium.
If the insurer in determining actual cash value EXCLUDES COSTS that are included in the determination of liability limits, on which the insured´s premium is based, the insurer reaps an ILLEGAL windfall BECAUSE the insurer receives premium on insurable values for which loss may never be paid.
–To deduct costs other than depreciation from the estimated replacement cost of the damaged structure is contrary to historical industry norms and practices.
Historically, insurers have determined actual cash value on the basis of repair or replacement cost less depreciation.
Only recently have some insurers deducted contractor´s overhead and profit and sales taxes on building materials.
There has been no recent change in the language in the promulgated residential property policies TO SUPPORT such a change in determining actual cash value.
–The insurers’ argument that the cost of contractor´s overhead and profit and sales tax on building materials should be excluded from an actual cash value loss settlement because the insured has not incurred these expenses is not persuasive.
Using this logic, an insured who opts not to repair or replace damaged property would not incur any of the expenses necessary to repair or replace the damaged property, including the costs of building materials, and would collect nothing under an actual cash value loss settlement.
This result would be CONTRARY to the PURPOSES of the subject insurance policy.
The scope of this bulletin is limited to the CALCULATION OF actual cash value for dwelling coverage in replacement value policies by use of the practice described herein.
This bulletin is not intended to, and does not, express any opinion of the Department as to the calculation of actual cash value in other contexts, such as personal property, or measures of the actual value of such property to the owners of such property.
The Department has CONCLUDED that an insurer providing property coverage under replacement cost residential policies that allow for the adjustment of covered losses to structures on an actual cash value basis MAY NOT calculate actual cash value on the basis of replacement cost with proper deduction for depreciation, less contractor´s overhead and profit, nor may the insurer deduct sales tax on building materials.
ANY INSURER that determines actual cash value on this basis may be subject to disciplinary action for violations of the Texas Insurance Code, including unfair claims practices pursuant to Article 21.21 § 4(10)(a) and Article 21.21-2.
\”If the insurer in determining actual cash value EXCLUDES COSTS that are INCLUDED IN the DETERMINATION OF LIABILITY LIMITS, on which the insured´s PREMIUM is BASED, the insurer reaps an ILLEGAL windfall because the insurer receives premium on insurable values for which loss may never be paid.\”
Major insurers have, and are still, collecting premium on \’insurable
values\’, and are not voluntarily disclosing those loss values to their claim clients.
Many contractors and consumers in Texas,and other parts of the country, realize this. The Texas Department of Insurance, to date, knows about that kind of (on-going) \’Illegal\’ conduct.
Even catastrophe adjusters know how management instructions to \’underpay every claim\’ works for the interest of the insurer, and against the interests of their customers.
Consider the following (fairly recent) testimony from a ex-Allstate claim management employee, to a new adjuster;
I just recieved my adjusters liscence, from The Great State of Texas. I have 22 years in construction (framing, roofing, sales & concrete). I am an excellent estimator, and can build anything from a dawg house to a church.
I am having a hard time finding a job in the adjusting field. I know what my angle is now. Imagine having an adjusters liscence, and being a contractor. I am calling Allstate tommorow. You have to change with the times.
I would not advise calling Allstate if you wish to keep your integrity intact.
After almost 7 years with them and having held a variety of positions, including the sole Quality Evaluator for the entire southern half of Texas, I finally became fed up with their approach to REQUIRING every adjuster to KNOWINGLY UNDERPAY every claim and left them this past July.
The head of Allstate in Texas – Gary Briggs – had the nerve to stand up in front of an agent\’s meeting last spring and say (QUOTE) \”I love the new HOA+ policy! It doesn\’t cover anything and WE STILL GET TO KEEP THEIR MONEY!\”
I used to tell people whose claim I was handling that \”the good hands of Allstate were right here\” as I held my hands out for them. I could no longer do that in good faith and look myself in the mirror so I left.
One of these days the Texas DOI is going to catch up with their property handling practices and then it will all hit the fan!
Good luck with anyone else!
Kevin Hromas Country: USA | Posts: 75
Underwriter, there are many, many ways to \’knowingly\’ underpay claims.
Collective evidence, especially in the past 4+ years, shows beyond a reasonable doubt, certain insurers, in certain parts of the country, are practicing predatory and deceptive premium-to-claim value [settlement calculation] business strategies against their trusting clients.
It\’s just a matter of time before \’it
(the non-existing conspiracy) all hits the (federal investigation of market conduct) fan\’.
P.S. By your mature business insight, it\’s sound like you try to do the right thing.
However, we, actually in the reconstruction trenches, know when we are dealing with honorable insurers / adjusters, or not.
One big red flag is when insurers / adjusters claim, as a consistent mantra \”We don\’t pay contractor overhead and profit in [Texas, Florida, Minnesota, etc. regions].\”
I, and others, are willing to testify as to what we can prove (personally and claim data wise) is being done, unfairly, to our neighbors, relatives and clients.
Should we advise clients to have an attorney read their homeowners policy before they buy it? No insured, that I know of, has ever read the policy upon my suggestion. I tell every new homeowner, please read your policy at least once, it covers a lot of things. But I am sure no one ever has… .until the claim occurs.
So, by your \”chain of event\” standard of coverage, it\’s fair that the flood the resulted from the breaking of the levees should be covered, because the wind broke the levees, AND the movement of the stucture should have also been covered even though that was caused by, initially, the flood? You just want your cake and eat it, too. But, if you pull out your policy, it excludes tidal water WHETHER OR NOT IT WAS CAUSED BY WIND. The levee water is tidal water. And it was the weight of this water going over the top of the levees that caused them to break, NOT just wind. If this were the case, the levees would have broke everytime a severe thunderstorm went through New Orleans. Wind doesn\’t just blow over an earthan embankment, and even if it did, like I said, rising water is exluded whether or not pushed into waves or surges by wind. Sorry, should have paid for a flood policy. People need to stop blaming insurance agents for not buying their products.
If anyone here has shown totalitarian tendancies it is Mr. Hood himself. His open hostility to free market capitalism and the sanctity of contracts, held so dear by the founding fathers, shows that he is a populist demagogue or worse. Mr. Hood essentially opposes the right to freely contract for goods and services.
I think this sorry mess says a lot more about \”justice\” in Mississippi than about Democrats or, for that matter, Republicans like Trent Lott also suing their insurance companies.
It\’s not just Democrats, it appears to be any politician running for re-election that\’s trying to get votes from anyone who doesn\’t understand how insurance works.
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4-18-2006
Confounded,
Good point on agents having hard copy proof, signed by the insured, that the insured declined critical flood coverage.
My understanding is that after hurricane Andrew, if agents could not provide proof that claimants actually understood, and declined, in writting, that they wanted/purchased ACV (actual cash value) only coverage, instead of RCV (replacement cost value) coverage, that ALL such claimants never lost in (Dade County) courts, when seeking replacement cost coverage settlements.
As for covering flood losses, with wind coverage, if the causual-chain-of-events were such that wind did create the accidental opportunity for the levee breakage / NOL area flooding, then why would wind forces not be considered the accidental cause trigger for damage, by proxy?
No wind involvement, no levee breakage.
On the other hand, if coverage was clear that ONLY when wind created a opening / damage opportunity towards a wall, window, entry, garage door, or roofing system, then it seems the commonly understood concept-definition for flood water, (water that collectively gathers on the ground and rises accordingly, so as to create water floodage) is not, and was never intended to be, covered.
On properties that were not fully submerged, the wind / flood effects may be easy to determine. (Flood water marks verses ceiling and wall water stainage).
If flood water softened the ground under a concrete slab, and wind moved the structure, is that wind caused damage?
Can wind movement damage be contrasted against flood damage by carefully examining roof, wall and floor wood frame nails / fasteners for framework movement, even on structures that were submerged, and are now dry?
\”Newly\” exposed parts of fasteners, even rusting ones, have a pulled / oxidation rate history \”fingerprint\” to disclose, even after wood swells, dries out and shrinks, or doesn\’t swell, or shrink…
Seems like certain knowledgeable and experienced insurers, adjusters, engineers, contractors, homeowners, business owners, attorneys and public officials are going to be busy for a while, case-by-case…
rogerpoegc@yahoo.com
4-18-2006
Underwriter,
With all due respect, in-the-trenches insurer \”adjusted\” construction estimation data, proves that Allstate, State Farm, Farmers, USAA, and the TWIA, in Texas, attempt to circumvent replacement cost loss values owed claimants.
Actuarially factored / Underwritten [structure replacement cost] contractor labor, reconstruction procedures and overhead / profit premium values can be regionally collected, and NOT properly returned to claimants.
Right under naive claimants collective noses…
Certain insurers past, and ongoing, attempts to redefine [actuarially / premium necessary] replacement cost indemnifcation calculations owed claimants, when loss claims occur(ed), led to the following pointed announcement by a regulatory agency;
COMMISSIONER´s BULLETIN NO. B-0045-98
——————————————
TO: ALL PROPERTY AND CASUALTY INSURANCE COMPANIES
RE: Calculation of Actual Cash Value Under the Texas Standard Homeowner´s Policy â€â€Ŕ Form B
The Department has learned that one or more insurers have interpreted language in the Texas Standard Homeowner´s Policy â€â€ŔForm B to permit the deduction of contractor´s overhead and profit, in addition to depreciation, from replacement cost in calculating actual cash value.
This interpretation has generated two class action lawsuits and inquiries to the Department regarding the Department´s position on this matter.
The insurers are interpreting the following Loss Settlement provision of the Texas Homeowners Policy â€â€Ŕ Form B:
We will pay only the actual cash value of the damaged building structure(s) until repair or replacement is completed.
The purpose of this bulletin is to state the Department´s position that actual cash value of a structure under a replacement cost policy, when the insurer does not repair or replace the structure, is the replacement cost with proper deduction for depreciation.
The deduction of prospective contractors’ overhead and profit and sales tax in determining the actual cash value under a replacement cost policy is improper, is not a reasonable interpretation of the policy language, and is UNFAIR to insureds.
The Department´s position is based on the following:
— Indemnity is the basis and foundation of insurance coverage.
The objective is that the insured should neither reap economic gain nor incur a loss if adequately insured.
This objective REQUIRES that the insured receive a payment EQUAL TO that of the covered loss so that the insured will be restored to the same position after the loss as before the loss.
The calculation of this payment results in UNDER-compensation if an insurer deducts prospective contractors’ overhead and profit and sales tax in determining the actual cash value under a replacement cost policy.
Conversely, the inclusion of contractor´s overhead and profit and sales tax on building materials does not over-compensate an insured for the amount of the loss because these items represent part of the insured´s loss.
Generally, the objectives of indemnity will be met if actual cash value is calculated as replacement cost with proper deduction for depreciation.
In the rare situation that defies calculation of actual value on this basis, such as cases in which the structure has historical significance or the materials cannot reasonably be replaced, other factors may be considered.
However, there is NO SITUATION in which the deduction from replacement cost of depreciation and contractor´s overhead and profit and/or sales tax on materials will be the correct measure of the insured´s loss.
–Premiums charged MUST NOT BE EXCESSIVE for the risks to which they apply.
Under a replacement cost policy, the liability limits of the policy and the premium paid by the insured are DETERMINED ON on the BASIS of the replacement cost of the structure.
The value of contractor´s overhead and profit, as well as sales tax on building materials, has been INCLUDED IN the limit of liability for which the insured has paid premium.
If the insurer in determining actual cash value EXCLUDES COSTS that are included in the determination of liability limits, on which the insured´s premium is based, the insurer reaps an ILLEGAL windfall BECAUSE the insurer receives premium on insurable values for which loss may never be paid.
–To deduct costs other than depreciation from the estimated replacement cost of the damaged structure is contrary to historical industry norms and practices.
Historically, insurers have determined actual cash value on the basis of repair or replacement cost less depreciation.
Only recently have some insurers deducted contractor´s overhead and profit and sales taxes on building materials.
There has been no recent change in the language in the promulgated residential property policies TO SUPPORT such a change in determining actual cash value.
–The insurers’ argument that the cost of contractor´s overhead and profit and sales tax on building materials should be excluded from an actual cash value loss settlement because the insured has not incurred these expenses is not persuasive.
Using this logic, an insured who opts not to repair or replace damaged property would not incur any of the expenses necessary to repair or replace the damaged property, including the costs of building materials, and would collect nothing under an actual cash value loss settlement.
This result would be CONTRARY to the PURPOSES of the subject insurance policy.
The scope of this bulletin is limited to the CALCULATION OF actual cash value for dwelling coverage in replacement value policies by use of the practice described herein.
This bulletin is not intended to, and does not, express any opinion of the Department as to the calculation of actual cash value in other contexts, such as personal property, or measures of the actual value of such property to the owners of such property.
The Department has CONCLUDED that an insurer providing property coverage under replacement cost residential policies that allow for the adjustment of covered losses to structures on an actual cash value basis MAY NOT calculate actual cash value on the basis of replacement cost with proper deduction for depreciation, less contractor´s overhead and profit, nor may the insurer deduct sales tax on building materials.
ANY INSURER that determines actual cash value on this basis may be subject to disciplinary action for violations of the Texas Insurance Code, including unfair claims practices pursuant to Article 21.21 § 4(10)(a) and Article 21.21-2.
http://www.tdi.state.tx.us/bulletins/b-0045-8.html
__________
Just consider the paragraph that states;
\”If the insurer in determining actual cash value EXCLUDES COSTS that are INCLUDED IN the DETERMINATION OF LIABILITY LIMITS, on which the insured´s PREMIUM is BASED, the insurer reaps an ILLEGAL windfall because the insurer receives premium on insurable values for which loss may never be paid.\”
Major insurers have, and are still, collecting premium on \’insurable
values\’, and are not voluntarily disclosing those loss values to their claim clients.
Many contractors and consumers in Texas,and other parts of the country, realize this. The Texas Department of Insurance, to date, knows about that kind of (on-going) \’Illegal\’ conduct.
Even catastrophe adjusters know how management instructions to \’underpay every claim\’ works for the interest of the insurer, and against the interests of their customers.
Consider the following (fairly recent) testimony from a ex-Allstate claim management employee, to a new adjuster;
Brooks Todd Posted – 12/18/2003 : 19:10:52
——————————————
I just recieved my adjusters liscence, from The Great State of Texas. I have 22 years in construction (framing, roofing, sales & concrete). I am an excellent estimator, and can build anything from a dawg house to a church.
I am having a hard time finding a job in the adjusting field. I know what my angle is now. Imagine having an adjusters liscence, and being a contractor. I am calling Allstate tommorow. You have to change with the times.
Brooks
khromas Posted – 12/18/2003 : 23:06:22
——————————————
Brooks,
I would not advise calling Allstate if you wish to keep your integrity intact.
After almost 7 years with them and having held a variety of positions, including the sole Quality Evaluator for the entire southern half of Texas, I finally became fed up with their approach to REQUIRING every adjuster to KNOWINGLY UNDERPAY every claim and left them this past July.
The head of Allstate in Texas – Gary Briggs – had the nerve to stand up in front of an agent\’s meeting last spring and say (QUOTE) \”I love the new HOA+ policy! It doesn\’t cover anything and WE STILL GET TO KEEP THEIR MONEY!\”
I used to tell people whose claim I was handling that \”the good hands of Allstate were right here\” as I held my hands out for them. I could no longer do that in good faith and look myself in the mirror so I left.
One of these days the Texas DOI is going to catch up with their property handling practices and then it will all hit the fan!
Good luck with anyone else!
Kevin Hromas Country: USA | Posts: 75
http://72.14.203.104/search?q=cache:LH8RbB9s00UJ:www.catadjuster.org/forum/m_899/mpage_10/key_/tm.htm++gary+briggs+allstate+intentionally+underpay+claim&hl=en&gl=us&ct=clnk&cd=3
__________
Underwriter, there are many, many ways to \’knowingly\’ underpay claims.
Collective evidence, especially in the past 4+ years, shows beyond a reasonable doubt, certain insurers, in certain parts of the country, are practicing predatory and deceptive premium-to-claim value [settlement calculation] business strategies against their trusting clients.
It\’s just a matter of time before \’it
(the non-existing conspiracy) all hits the (federal investigation of market conduct) fan\’.
rogerpoegc@yahoo.com
P.S. By your mature business insight, it\’s sound like you try to do the right thing.
However, we, actually in the reconstruction trenches, know when we are dealing with honorable insurers / adjusters, or not.
One big red flag is when insurers / adjusters claim, as a consistent mantra \”We don\’t pay contractor overhead and profit in [Texas, Florida, Minnesota, etc. regions].\”
I, and others, are willing to testify as to what we can prove (personally and claim data wise) is being done, unfairly, to our neighbors, relatives and clients.
Should we advise clients to have an attorney read their homeowners policy before they buy it? No insured, that I know of, has ever read the policy upon my suggestion. I tell every new homeowner, please read your policy at least once, it covers a lot of things. But I am sure no one ever has… .until the claim occurs.
So, by your \”chain of event\” standard of coverage, it\’s fair that the flood the resulted from the breaking of the levees should be covered, because the wind broke the levees, AND the movement of the stucture should have also been covered even though that was caused by, initially, the flood? You just want your cake and eat it, too. But, if you pull out your policy, it excludes tidal water WHETHER OR NOT IT WAS CAUSED BY WIND. The levee water is tidal water. And it was the weight of this water going over the top of the levees that caused them to break, NOT just wind. If this were the case, the levees would have broke everytime a severe thunderstorm went through New Orleans. Wind doesn\’t just blow over an earthan embankment, and even if it did, like I said, rising water is exluded whether or not pushed into waves or surges by wind. Sorry, should have paid for a flood policy. People need to stop blaming insurance agents for not buying their products.
Absolutely true. And when the renewal comes around no insured gets past the premium notice. Hood is an ***.
If anyone here has shown totalitarian tendancies it is Mr. Hood himself. His open hostility to free market capitalism and the sanctity of contracts, held so dear by the founding fathers, shows that he is a populist demagogue or worse. Mr. Hood essentially opposes the right to freely contract for goods and services.
We have rule of law here, not rule of lawyers.
This guy graduated from high school. Must have been a government school.
It amazes me that Democrat\’s increasingly use the word Nazi in issues involving the Govt and Business when they argue for their agendas.
I think this sorry mess says a lot more about \”justice\” in Mississippi than about Democrats or, for that matter, Republicans like Trent Lott also suing their insurance companies.
Heath,
It\’s not just Democrats, it appears to be any politician running for re-election that\’s trying to get votes from anyone who doesn\’t understand how insurance works.