How to Obtain Fair Claims Payments After a Hurricane
Consumers should begin preparing now to contact their insurance companies
As Hurricane Matthew draws near to North Carolina, consumers are encouraged to begin preparing claim information now regarding damage expected to occur due to the storm.
The Consumer Federation of America (CFA) estimates that the hurricane may result in up to 100,000 claims by homeowners for wind damage, but far fewer claims on federal flood insurance. The organization also expects that payments for damage caused by the storm will probably exceed $7.5 billion.
"Families will have to dig deeper into their pockets because insurers have been steadily increasing hurricane wind coverage deductibles and imposing other policy limitations," said J. Robert Hunter, director of insurance for CFA and former federal insurance administrator and Texas insurance commissioner. "This liability shift to consumers may take some by surprise, since disclosures are often buried in renewal paperwork that consumers may not understand or even read.
"Because so many consumers experienced claims problems in the wake of Hurricanes Katrina and Superstorm Sandy, we urge homeowners dealing with losses caused by Hurricane Matthew to be vigilant with their insurance companies to ensure that that they receive a full and fair settlement."
Consumers can follow the below tips as they make their preparations:
Before the Storm
- Find your homeowner's policy now and place it in a safe location so that you will be able to get to it after the hurricane passes.
- Look over the policy and figure out how and where to report a claim (e.g. by phone, on the Internet, talk to an agent)
- If possible, take photos or record videos of your possessions.
After the Storm
- Report your claim as soon as possible because insurance companies generally handle claims in the order in which they receive them.
- After reporting your claim, write down the claim number. This number is the easiest way claims departments can find your file.
- Keep receipts for any expenses related to immediate repairs you had to make to ensure your home was secure or, if you could not return home in the wake of the hurricane, to any living expenses you incurred, e.g. hotels, meals.
- The insurance company will send an adjuster to survey the damage. When it does so, ask if the adjuster is employed by the company or is an independent adjuster hired by the company. If he or she is independent, ask if he or she has the authorization to make decisions regarding claims and payments on the insurance company's behalf, and try to obtain the name of the in-house adjuster at the company to whom the independent adjuster will be sending your information.
- There are numerous insurance companies that offer repair programs in which they send one of their own approved contracts to estimate property damage. You are not under obligation to use them, though you may want to get an estimate from them. The insurer might encourage you to use them, since doing so would be to its benefit: contractors participating in such programs have probably agreed to unit repair costs determined either by the insurer or one of its vendors. Such costs are given to insurers by software vendors. They are averages calculated by geographic region and may or may not compensate you fully for your damages. You should remember that your claim is unique and individual and that your insurance company should always treat it as such.
Good Recordkeeping Practices
Whenever filing a claim, begin a notebook right away that documents every instance of contact you have with your insurance company. Record the date, time, and a short description of the exchange. Write down if the adjuster says that he or she will come but does not; write down if the adjuster is rude. This information will be crucial later in the event you need to complain.
Find your inventory of your possessions or, if you do not have one, try to compile one immediately. Keep your photos and/or videos of your belongings in a safe location. If you find that you do not have any pictures or videos, check with family and friends to see if they have any photos of rooms in your house that you could use in compiling a list of possessions.
Find a local contractor whom you can trust to guide you when speaking to the adjuster and get a repair estimate from him or her. Keep all receipts from emergency repairs and any costs you incur while living in temporary housing, as these may be reimbursable under the "Additional Living Expenses" section of your homeowners' policy.
If your house is uninhabitable, you may qualify for money upfront for living expenses such as hotel costs. Most insurance companies are very good about these payments while the media focuses on the aftermath of the storm; if problems ever arise, it is usually later when policyholders seek larger payments.
To File or Not to File?
If you have paid your insurance premium, you are entitled to coverage. Do not hesitate to file legitimate claims. Insurers have no actuarial reason to increase rates or reduce coverage due to Hurricane Matthew, which falls well within the projects that underlie the companies' current rate schedules. They have already raised prices and reduced coverage along the East Coast, and there is no reason for them to do so any further.
Consumers should also take action to protect themselves. They are encouraged to unite and agree not to purchase any type of coverage from any insurance company that refuses to renew policies for consumers who file claims relating to Hurricane Matthew. They should fight any attempt by the insurer to use these claims as an excuse for not renewing homeowners' policies or for drastically increasing home insurance rates, and if an insurance company does engage in such actions, they should complain to state regulators.
Denied Claims and Too-Low Offers
Consumers who believe that the offer issued by their insurance company is too low, or whose claim is denied altogether, are encouraged to demand that the company identify the specific portion of their homeowners' policy on which the company based its decision. There are several benefits to this approach:
- It is possible that the company is correct and you might not know it. Pinpointing the specific language in the policy enables consumers to determine whether or not this is the case.
- The company could have inserted new limitations into the policy and not properly informed the consumer. It is wise to consult an attorney when consumers believe that they have been misled like this. When compared with previous storms, much of the cost of Hurricane Matthew will be shifted from insurers to consumers due to the introduction of percentage deductibles. This practice is acceptable only if the consumer is clearly provided with the option to select their desired level of coverage by giving fully-informed consent.
- Several policies are also facing another new restriction: limiting replacement cost payments. This can be important in cases in which homes are totally destroyed. A typical cap is 20 percent more than the policy's face value. This limit may apply in the event that costs go up due to the rise in demand for materials or labor due to a major storm like Hurricane Matthew (or in cases in which the state does not sufficiently monitor price gouging).
- Once the insurer provides the consumer with the reasons for its decision, it cannot produce new reasons to deny payment or make a low offer at a later date. The insurer is locked in.
- Upon reviewing the policy, if the consumer believes that—under a reasonable reading of the policy—he or she is entitled to the full amount of the claim while examining the language on which the insurer based its decision, it is likely that the consumer will win in the event of going to court. Courts have consistently ruled that, in the event of an ambiguous insurance policy, the insured party's reasonable expectation will prevail because he or she was not involved in drafting the language of the policy.
How and Where to Complain
The following is the best process to get complaints resolved:
- Take your complaint to senior staff at the company. Executives in consumer relations departments are paid to keep customers happy; executives in claims departments are paid to keep the costs of claims as low as possible. Remember the records you've been keeping from the beginning of the claims process? Use them now; the more seriously the insurer sees that you are taking the claims process and documenting how you have been treated, the more likely it is to make a more reasonable offer.
- Take your complaint to your state insurance department. Regardless of which state you live in, your state will at least try to obtain a response to your complaint from your insurer, and some states may actively intervene on your behalf in cases of obviously poor claims handling. In these situations, it is important to present your side of the case as dispassionately as possible using your notes.
- Go to a lawyer. Now your documentation is absolutely critical. In addition to an award that will cover the cost of your claim, if you were treated particularly badly, courts in many states will allow even more compensation when the insurance company acted in "bad faith." Because insurers take money from you in exchange for promising to cover damages when disaster occurs, they have to act in the utmost good faith in fulfilling that obligation.
What Do Homeowners' Policies Not Cover?
There are several things that are not covered by homeowners' policies, including flood, earthquake, tree removal (except in instances in which the tree damages the house), and food spoilage due to power failure. Some insurers put an "anti-concurrent-causation" clause in their policies that they claim removes coverage for wind damage if a flood occurs around the same time. Consumers are encouraged to read the provisions of their policies carefully to determine if they are ambiguous and, if they are, to see an attorney immediately.
What About Flood Insurance Claims?
Although insurance companies often service flood insurance claims, it is actually the federal government that underwrites such coverage. Consumers filing this type of claim should follow the same procedures detailed above, except that they should direct any complaints to the Federal Emergency Management Agency.
Because taxpayers pay for the National Flood Insurance Program, and it is often the same insurance company that will handle the claim for both wind damage and flood damage, consumers must take care to verify that insurance companies do not attribute an unreasonably large part of the consumers' losses to flood damage. Consumers who see such potential abuse by their insurance company should contact their U.S. Representative and Senators to ensure that taxpayers are protected.
"Not all insurance companies handle claims badly, so go into the claims process with an open mind," said Hunter. "Be vigilant though, or you run the real risk of being shortchanged."