insurance payout when work is not done

[Holly Homeowner]

Hello.

Our vacant house had been on the market for 3 weeks when a second floor toilet supply line broke and let water pour through the house for at least 24 hours. The dryout took 2 weeks but the independent adjuster was there on day 2. He recommended a contractor but we felt that we needed more than one estimate. This absolutely befuddled the adjuster. In any case, we were waiting for the adjuster to tell us what would be covered so we would know what to ask contractors to bid on but he would not finalize his estimate until his "buddy", the contractor, produced his own. Then the 2 folks made their bottom line numbers agree. We examined the contractor's estimate and found several issues but the adjuster would not modify his estimate before submitting it to our insurance company. So, now we are in the process of requesting a supplement. This is much more difficult.

Note that, during this time, we had been told that we would get an initial payout of the depreciated cost of the repairs, less the deductible. If we actually had the repairs done then they would pay whatever it cost, allowing even another 20% on top of that for overhead and profit to a general contractor.

OK, so keep in mind that this house was on the market and the market here is really bad - there is about a 6-month supply of houses on the market TODAY. So, along comes a flipper with a lowball offer to buy the house as-is, for cash, with no home inspection. Our realtor told us to take the offer and be happy with it because we could end up fixing the house and then getting it back on the crowded market, losing another month or so, and then still have to wait for another buyer. So, we took the offer but are continuing to fight the insurance company for the items that they missed.

Well, this is the problem: The house is sold. I took tons of pictures of the items that we have issues with. Now the insurance company is giving us the "have the contractor contact us when he's ready to do the work and we will discuss any additional items then" runaround. And now, the adjuster is saying "well, now that you raise all of these issues I think that there were some items that I over- estimated on so I guess I'll just need to come out and re-inspect." Is that a threat or what?

They are making out like crazy because they don't have to pay for all of the work - just the depreciated value. So is it unreasonable to expect them to pay for the "hypothetical" need to remove the radiators before replacing the subfloors and hardwood floors instead of making a contractor tell them that they cannot do the work with the radiators in place?

I have spoken with the state Bureau of Insurance and they can't help us. This is a weird case of a homeowner fighting to be paid for work they are not going to have done. But, WE ARE ENTITLED TO THE MONEY ANYWAYS!!!

Gosh, can anybody help??? Nothing this vague in nature is in the policy or anywhere else.

Thanks for reading this far.

Lyne

[RickH]

Maybe I'm missing something (it wouldn't be the first time) but if you no longer own the home how can you be entitled to an insurance payment for repairs that are not going to be done? I can see if the insurance contract says "you can take the money or we'll pay your contractor directly" as fulfillment of your claim on a house you own. Then you can take the money and fix it yourself or have the contractor bill insurance. But if the house is sold the insurance company no longer has responsibility I would think. If you got a fair price in this market, where so few qualify qualify anymore and there is a glut of homes and the banks have no liquidity, you might be fortunate to just be able to walk away now with the angel buyer.

[Kurt Ullman]

Insurance, in theory, is to make you whole for the loss. How you are made whole is often up to you. For instance, you can use the insurance payment to make up the difference between what you might have gotten if you had sold after you repaired and what the flipper was willing to give "as is". If you sold before the problems, then yeah you would be right. They'd owe it to you. How much would be up to the contract and how much one wants to fight, etc.

[Toller]

I have had a couple claims and they were settled in a similar fashion; my contractor had to explain to the insurance company why the adjuster was wrong. Only difference is that I got 80% of the adjuster's amount if I didn't have it fixed; not too different than your depreciated amount. It seemed like a reasonable process to me.

Your problem is that you are continuing to fight for the higher amount eventhough you are not having it fixed. Never thought I would ever say this, but I am on the insurance company's side here; you can't simultaneously say the amount is inadequate, but you don't want to have anything fixed anyhow.

[Kurt Ullman]

Again that would depend on the contract. When I had my roof repaired last summer, they held out money until the job was done, but that was to give me an incentive to either get the work done or sign off on something that I was not going to get it done. This was to make sure the insurance company did not give me the money, me not do the work, and then try for another full claim the next time it hailed, or at least that was how it was explained. However, if I wanted to release them from liability, then I could get the whole thing right away. They owed it to me either way. At least IIRC how it was explained.

[Richard J Kinch]

The OP owned the home when the loss occurred, right? That's the grounds for a claim. The loss is paid to the insured whether repairs are performed or not.

But insurers are almost always deadbeats when it comes to claims. All their incentives work in that direction. They are experts at denying/delaying/minimizing claims, and at deluding themselves that somehow this is fair and ethical, while you are an amateur at collecting claims. You will get nowhere against them without force. That means hiring a lawyer, starting with a simple nastygram. If you don't want to hire a lawyer, then admit you're beaten and take the best offer you can get on your own.

Because on your own your are already beaten versus this adversary. Don't kid yourself that something you didn't do caused this, and get bitter. Accept the swindle for its educational value and get on with your life.

[trader4]

Of course you can. Whether anyone has anything fixed or not is largely irrelevant as to whether the payment is reasonable. The purpose of insurance is to make someone whole. In this case, that would be to pay a reasonable amount to cover the cost of the repairs, whether she has it fixed or not. Suppose a car is totaled in an accident? Should the person have to repair it to get the actual value? Or suppose I have her damaged house and hire the most expensive guy around, who charges $100 an hour and takes twice as long to fix it? Should the insurance company pay for that, just cause that's what it cost?

What should have been done was to get several estimates from contractors to do the repair. Then look at the range of estimates compared to what the insurance company is offering, and the terms of what the policy says. If the offer is way off from an average price, or better yet below the lowest price, then she has a legitimate beef. She can show the quotes to the insurance company and if they still won't budge, then small claims may be an option. Doubt the insurance company is gonna get scared by a lawyer's letter, cause they know it would cost so much to sue them that it's only a bluff.

[Toller]

A totaled car is rather different than water damage. How much does it cost to make the person whole from water damage? It is very hard to say accurately, but a strong indicator is how much they spent to fix the damage. Choosing to forgo the repair is a clear sign that maybe it took very little.

[Chuck Measa]

The OP no longer owns the home. She states "They are making out like crazy because they don't have to pay for all of the work - just the depreciated value." She had _agreed_ to the depreciated value b/4 the house sold.

If you reread her letter, she attempts to lay blame for selling on the Realtor. Now the insurance company. In her greed, she grabbed every nickel she could from the house flipper & insurance company. She now thinks she deserves more, on a home she doesn't own. She's now has remorse for selling quick and cheap.

She's nothing more than a slumlord, looking for a quick buck. She's gotten what she was entitled to, otherwise, she wouldn't have settled for a check made out to her.

[trader4]

Hide quoted text -

Then I guess Larry Silverman should get a reduced payment for the World Trade Center loss too, cause it hasn't been replaced.

[Kurt Ullman]

The insurance guys have plenty of experience in what it takes to repair water damage. They do it all the time. This ain't rocket surgery.

[John Keiser]

You should start by reading your insurance policy. Many policies obligate the insurer to "repair, rebuild or replace" the damaged property but only to pay "actual cash value" if the property is not repaired. The "actual cash value" may be substantially less than the cost to repair. Since you no longer own the property, you may be limited to "actual cash value."

[dadiOH]

I'm having trouble grasping the concept of "depreciated value" of repair work. "Work" can't be depreciated, only property. Physical things.

Perhaps the insurance company was telling you they would pay for the depreciated value of *things* that were ruined OR that they would pay for the work necessary to restore/fix them (less deductible in both cases)? If yes, that is normal...they won't pay for you to go out and buy new things because you have received value from using the things. If you buy a new car and five years it is totaled, the insurance company isn't going to pay you what you paid for the car, it is going to pay the current value.

As far as your radiator question, a contractor bidding on removing/replacing a floor already knows he'd have to remove and replace them and the cost of doing so would be included in his overall price - no need to specifically mention and price that aspect though he could.

[dadiOH]

Not necessarily.

When there is a catastrophic happening - one that affects hundreds/thousands of policy holders - insurance companies don't have sufficient adjuster manpower to handle the flood of claims. To do so, they use "cat adjusters".

Cat adjusters are independant companies who hire independent adjusters on piece work. The companies are paid on a sliding scale according to the size of the claim...the bigger the claim, the more they earn. The independent adjusters are paid a percentage of that. Thus, there is an economic advantage to both to submit the largest possible claim and that is exactly what they do.

[MLD]

Get a public adjuster. He will represent you not the insurance company. Well worth his fee and (as was my case), the insurance company tends to be more flexible when working with them. Also, during the repair/rebuild most likely you will need a permit for some of the work. Since the work has to be inspected there may be code related issues. Your home owner's insurance policy should cover all costs required to bring anything up to code. Get a separate bill for any costs related to code upgrades. MLD

[Tony]

Apparently your adjuster is on kick back / take

[<josh]

That&#39;s generally true (unless there&#39;s a mortgage, then the loss is often paid to the mortgagee), but the method of payment often depends on whether the work is performed or not.

Many replacement-cost homeowners policies specify that they pay repair cost only if the repairs are actually performed within 12 months of the loss, otherwise the customer receives only the depreciated Actual Cash Value of the loss.

If the OP reads the replacement cost provision of the policy, it will probably have language like that.

Now, it is still possible that the original estimate was too low -- if some damage was missed entirely, then the Actual Cash Value of that damage would not have been paid up front. If the OP had kept the home and fixed it, the supplement would have been handled then. But since the OP opted not to complete the repairs and receive replacement cost, that part of the process never happened.

OP can certainly ask for more ACV, but the company may dispute the additional money and might be contractually entitled to reinspect before paying.

Disclaimer: unless you see my name on your declarations, I&#39;m not your insurance agent, I haven&#39;t read your policy, and I probably don&#39;t even live in the same state. I am not a lawyer or a claims adjuster.

[Mike Dobony]

The damage occurred while they still owned it and they are entitled to ALL the insurance money. The adjuster is in collusion with the contractor and this needs to be reported to the state insurance board and state attorney general. They did NOT get a fair price because of the damage done and the insurance company&#39;s crooked adjuster influenced them to take a loss on the house because of corruption.