Does the Insured have to Concede to the Insurance Carrier Estimate?
It’s not unheard of for a homeowner to hear, “Sorry, that’s not covered under your policy”. But what happens when that homeowner believes the insurance carrier is wrong? Who should they turn to?
What happens when an insurance adjuster tells the homeowner that not all the damage to the home is covered under their policy? In reality, the adjuster examines the property and policy to determine the cause of loss is not just from a covered peril but also from a pre-existing situation or some type of exclusion. When the homeowner and adjuster cannot agree on damages, who determines what is paid, covered, excluded, etc.? Who gets the final decision? Surprisingly, the insurance carrier does not have the last say in what is covered. In some cases, a judge will decide, in others, an appraisal committee because insurance is regulated on a state by state basis. This decision changes with location.
The Property Insurance Coverage Blog has done a good job highlighting this issue and states that in some states, like Florida, a third party appraisal committee should be used to determine the validity of the claim. Florida recognizes the appraisers’ authority to determine causation, and courts have developed coverage versus causation analysis in property insurance cases.
“In State Farm & Casualty Company v. Licea, the Florida Supreme Court stated that when an insurance company admits there is a covered peril, but there is a disagreement on the amount of the loss, it is appropriate for the appraisal panel to determine the amount to be paid. In this circumstance, the appraisal panel is to inspect the property and determine how much the insurance company must pay based on the covered loss, while also excluding payment for excluded causes, such as wear and tear or dry rot. For example, if the insurance policy provides coverage for wind damage to the roof, but does not provide coverage for dry rot, the appraisal panel is to inspect the roof and determine a value for the wind damage, while excluding payment for repairs required by preexisting dry rot.”
Of course, while Florida’s legal precedent on determining causation is relatively structured, the same position cannot be said for other states. In states like New Jersey, there has been no legal precedent on whether an appraisal committee or court is the correct way of determining causation.
Should a situation arise where the homeowner feels that the only acceptable action is to challenge the insurance adjuster and neither contractor nor public adjuster can change the initial insurance adjuster position, my recommendation is to seek proper legal counsel to determine whether or not further legal action can be pursued.