The investigation revealed approximately 40 victims with an estimated loss of more than $20,000.
$20,000 taken in from 40 victims, what was this person thinking?
Have a guy in my PA hometown who took in over $500,000 from one insured over a couple years, never bound coverage with the company, issued phoney binders, issued over 400 bogus certificates.
\”Enron is a good case study for risk managers and the insurance community, Brewer indicated. \”Misconduct can interfere with business continuity … These things hit like a tsunami, and then it\’s very difficult to regain shareholder value and trust.\”
__________
Collecting dollars from consumers for needed premium values, that are not actually reflected in loss claim settlement values, is a serious accounting, fiduciary, and indemnification matter.
Insurers advertise replacement cost coverage, to replace a structure, as an insurance contract policy valued benefit.
From an insurance agent\’s desk, replacement cost of a house is calculated
for a homeowner.
Prospective primary-general contractor, plus specialty subcontractor, labor, materials, sales tax, business overhead and profit costs are included in the premium payment / limit-of-liability / advertised policy promises.
Allstate, State Farm, Farmers, Safeco, USAA and the TWIA accept dollars daily (from consumers) that calculate / pre-pay for primary – general contractor PLUS specialty trade subcontractor materials, labor, sales tax, business overhead and profit values calculated to replace a house.
However, they are not openly disclosing those aggregated construction replacement loss values appropriately, by their adjusters, when losses occur.
How so?
They\’ve claimed that they don\’t pay (primary-general) contractor overhead and profit on single trade roofing, carpeting and fencing losses.
Or, they don\’t pay (primary-general)
contractor overhead and profit unless \’two or more trades are needed for repairs\’.
Or, \’the repairs are not \”complex enough\” for (primary-general contractor involvement\’.
Or, \’we don\’t pay overhead and profit on roofing in Texas\’ / Florida.
For quite a few years now, they have defied complying with the Texas Department of Insurance notice B0045-98.
The notice is clear regarding contractor construction costs / home replacement costs equal claim loss settlement values that are NOT to be kept by insurers.
__________
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 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.
__________
Whatever the policy form title, replacement cost calculations for a given structure do not reflect single specialty subtrade involvement only.
Generally (historically), builder-primary-general contractor construction knowledge and expertise management skill is needed for assembling a house / reassembling a house.
Limit-of-liability calculations / premium dollars collected contain (builder-primary-general contractor) replacement costs needed historically for placing / replacing a home.
Is excluding insurable replacement cost values of claim loss settlement values, (that are included in the limit-of-liability insures have promised to pay out), grand theft of premiums, false advertising, deceptive trade practice, that leads to illegal windfall and illicit profits?
Ironically, it appears that the general public is naively contributing to others virtually invisible illegal windfall profit schemes, and yet will inevitably understand what all they are being charged for, and are intrinsically entitled to.
Maybe even sooner than some reinsurers, insurers, stockholders, agents, adjusters, states DOI representatives, the FTC, the SEC, and the DOJ may have anticipated.
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The investigation revealed approximately 40 victims with an estimated loss of more than $20,000.
$20,000 taken in from 40 victims, what was this person thinking?
Have a guy in my PA hometown who took in over $500,000 from one insured over a couple years, never bound coverage with the company, issued phoney binders, issued over 400 bogus certificates.
What runs through these people\’s minds?
5-6-2006
\”Enron is a good case study for risk managers and the insurance community, Brewer indicated. \”Misconduct can interfere with business continuity … These things hit like a tsunami, and then it\’s very difficult to regain shareholder value and trust.\”
__________
Collecting dollars from consumers for needed premium values, that are not actually reflected in loss claim settlement values, is a serious accounting, fiduciary, and indemnification matter.
Insurers advertise replacement cost coverage, to replace a structure, as an insurance contract policy valued benefit.
From an insurance agent\’s desk, replacement cost of a house is calculated
for a homeowner.
Prospective primary-general contractor, plus specialty subcontractor, labor, materials, sales tax, business overhead and profit costs are included in the premium payment / limit-of-liability / advertised policy promises.
Allstate, State Farm, Farmers, Safeco, USAA and the TWIA accept dollars daily (from consumers) that calculate / pre-pay for primary – general contractor PLUS specialty trade subcontractor materials, labor, sales tax, business overhead and profit values calculated to replace a house.
However, they are not openly disclosing those aggregated construction replacement loss values appropriately, by their adjusters, when losses occur.
How so?
They\’ve claimed that they don\’t pay (primary-general) contractor overhead and profit on single trade roofing, carpeting and fencing losses.
Or, they don\’t pay (primary-general)
contractor overhead and profit unless \’two or more trades are needed for repairs\’.
Or, \’the repairs are not \”complex enough\” for (primary-general contractor involvement\’.
Or, \’we don\’t pay overhead and profit on roofing in Texas\’ / Florida.
For quite a few years now, they have defied complying with the Texas Department of Insurance notice B0045-98.
The notice is clear regarding contractor construction costs / home replacement costs equal claim loss settlement values that are NOT to be kept by insurers.
__________
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 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.
__________
Whatever the policy form title, replacement cost calculations for a given structure do not reflect single specialty subtrade involvement only.
Generally (historically), builder-primary-general contractor construction knowledge and expertise management skill is needed for assembling a house / reassembling a house.
Limit-of-liability calculations / premium dollars collected contain (builder-primary-general contractor) replacement costs needed historically for placing / replacing a home.
Is excluding insurable replacement cost values of claim loss settlement values, (that are included in the limit-of-liability insures have promised to pay out), grand theft of premiums, false advertising, deceptive trade practice, that leads to illegal windfall and illicit profits?
Ironically, it appears that the general public is naively contributing to others virtually invisible illegal windfall profit schemes, and yet will inevitably understand what all they are being charged for, and are intrinsically entitled to.
Maybe even sooner than some reinsurers, insurers, stockholders, agents, adjusters, states DOI representatives, the FTC, the SEC, and the DOJ may have anticipated.
rogerpoegc@yahoo.com