Chapter One
Water, Water Everywhere

CHAPTER ONE

WATER, WATER EVERYWHERE

In this chapter, you’ll learn that your insurance adjuster doesn’t always know what he’s doing, and the only one who is responsible for getting all the money you’re owed is YOU.

In September 2005, the internal plastic water line that feeds our refrigerator’s icemaker burst, and started leaking water out on the floor of the kitchen. Naturally, this happened while no one was there to see it, and was leaking behind the refrigerator. Some of the water got over to a nearby wall and got under the vinyl floor. The 40-year-old plywood underlayment acted like a sponge, and soaked up the water, causing it to buckle and swell. So, when we discovered it, I quickly closed the valve under the sink that fed the icemaker line. But the floor was already damaged and would need repair.

We called an appliance repairman, who did find the cracked line and replaced it.

And all of a sudden, we had an insurance claim.

There is a major difference between a slow leak that occurs over time and a burst water line that happens suddenly. The normal Homeowners policy will not cover the slow leak. Please refer to Chapter Thirteen, Residential Water Claims.

Here’s what it says about the slow leak kind of loss in my Homeowners policy. It probably says the same thing in your policy.

Under “Dwelling and Other Structures” coverages, we do not cover loss resulting directly or indirectly from:

6. Continuous or repeated seepage or leakage of water or steam from within a plumbing, heating, automatic fire protection or sprinkler or air conditioning system or from within a household appliance which occurs over a period of weeks, months or years.” (Underlined emphasis mine)

That means that the sudden water damage losses are covered. Your policy will say something very close to this. Read it for yourself.

I called our insurance company and reported the claim. The next day, one of their claims examiners called me to verify the damage and start the claims process. I mentioned to the examiner that I was an insurance adjuster, and that I could save them a bunch of money hiring an independent adjuster if they’d like to work with me. I offered to get a restoration contractor’s estimate and send them photos of the damage. I had already written a damage estimate on the estimating software that I have in my computer. I offered to send them a copy of that estimate. Amazingly, they declined the offer, and said that they’d be giving this loss assignment to an independent adjusting company in my area.

The next day, I received a call from the local adjuster, and he made an appointment to inspect the damage the following Saturday.

When I went to the door that Saturday morning, I was greeted by a fresh-faced, clean-cut young man who announced that he was my adjuster. This young man couldn’t have been more than 25 or 26 years old. I’ve got clothes older than this kid. I asked him about his experience in claims, and found that he’d been in claims for about three years. This was his first job out of college. He did primarily homeowners losses.

I told him that I was a General Adjuster, and he didn’t even know what that meant. So, I had to explain to him that it meant I’d been a claims adjuster for a long time, had gone through a lot of schooling, and was now handling large commercial and industrial losses.

We went into the kitchen. I stood out of the way so I didn’t impede his work. He measured the room and photographed the damage. I didn’t point out anything out of the ordinary because I wanted to see what kind of estimate he would write without my input. After all, I was writing a book about claims, and what it takes to get paid all that a consumer is entitled to collect.

I gave him a copy of the appliance repairman’s paid invoice so he could document the cause of the damage.

He explained that he would be writing an estimate and sending it to the insurance company. I asked him to send me a copy of his estimate, and he agreed to do so.

He didn’t do it, though.

About a week later, I received a letter from the claims examiner at the insurance company. The letter included a copy of the adjuster’s estimate and a check for $309.64.

The estimate was accurate in its measurements, but that’s where the accuracy ended. The boy adjuster wrote an estimate that replaced the plywood underlayment for the part of the floor that he could see, and put down a new vinyl floor throughout the kitchen. The amount of the estimate was $1,701.94. He applied depreciation of $392.30, subtracted our $1,000 deductible and the Actual Cash Value (ACV) claim amount was $309.64.

Our Homeowner’s Policy had a Replacement Cost Value (RCV) clause. Here’s what the policy says about RCV at the time of a loss:

“Conditions, How losses are settled.

2. Under Dwelling and Other Structures Coverages:

We will pay only the actual cash value of the damaged property until actual repair or replacement is completed.”

So, the insurance company was correct to pay the ACV up front. I had 180 days to make repairs and show that I’d spent or incurred the RCV, and collect that depreciation amount of $392.30 that they had held back.

However, let’s get back to the estimate of the boy adjuster.

The plywood underlayment had swollen under about half of the kitchen floor. More importantly, it has swollen under the sink base cabinet right next to the refrigerator. The cabinets in our kitchen were custom built in place, not the kind that come in a box from your local home improvement store. All the young adjuster would have had to do to discover this was to look inside the cabinet, but he didn’t. The sink base was going to have to be removed before the flooring could be repaired. But that meant the custom sink base cabinet would have to be dismantled to be removed.

The boy adjuster missed this.

Dismantling the sink base means first removing the faucet, then removing the sink, then removing the countertop. That also meant that the dishwasher on the other side of the sink base would have to be disconnected and reconnected after repairs.

The boy adjuster missed this.

The countertop was also a custom laminate. Trying to remove it would destroy it. The countertop was also glued down to the top of the base cabinets. So, new countertop of like kind and quality would be required…not just over this cabinet, but for all the countertop on the rest of the cabinets.

The boy adjuster missed this.

The cabinets were custom built when the house was built in 1970. So, the sink base cabinet would have to be custom rebuilt. We were pretty confident that a finish carpenter (no, not a carpenter from Finland) could build the cabinet to match the other cabinets perfectly. But, it would be expensive. Then, all of the cabinets would have to be repainted to match. More expense.

The boy adjuster missed this.

After I reviewed the boy adjuster’s estimate, I called the claims examiner at the insurance company. I reminded him that I had offered to save him the cost of the independent adjuster. Then, I told him about all of the things that his boy adjuster had missed.

The examiner was not happy.

So, I offered again to have a local restoration contractor write an estimate for repairs, and that I’d submit that estimate to the examiner. He finally agreed. I even offered to have my contractor meet at my home with the boy adjuster and agree on an estimate. The examiner told me that wasn’t going to be necessary.

The restoration contractor’s accurate estimate was $5,785.45. I sent it to the examiner, and he sent me a supplemental check for another $3,897.26. The repairs got done, and I got my total holdback amount of $970.85.

Friends, this was a small loss. It does not compare to a fire, or tornado, or hurricane. But, in this one small loss, where a young adjuster didn’t notice obvious things about the damages, there was a difference in settlement of $4,475.81.

Now let’s say for a moment that I was an average person who had never read his homeowner’s policy. Let’s also say that I was not familiar with home repairs and remodeling. (Do you think that there might be TENS OF MILLIONS of people just like that?) With just those two assumptions, I would be at a big disadvantage. A person like that could receive the estimate and check from the insurance examiner, and be led to believe that those repairs were all he was entitled to collect.

The insurance company didn’t offer to have my contractor meet with the adjuster and reach an agreed estimate. As a matter of fact, they declined the offer the first time. I had to get my own contractor to write an estimate.

If I had been that average guy, my lack of knowledge about the claims process….in this one small loss….could have cost me almost $4,500.00 !

Or, stated another way…by simply using the strategies in this book, I collected almost $4,500 more than the insurance company was first willing to pay. In defense of the insurance company…once I presented the correct amount of the loss, they willingly and quickly paid. But they never offered any assistance to help me make sure my claim was correct.

I didn’t expect them to, and neither should you.

In defense of the boy adjuster, he seemed to be sincere, and I believe he was doing his best with the knowledge he had. I never thought for a minute that he was trying to cheat me or shortchange me.

But, now that I’ve defended the insurance company and the adjuster just a little…let me ask you to think about YOUR situation.

What if the adjuster that the insurance company sends to your house is as inexperienced as the one I had?

What if you’re not very familiar with home repair, and you are forced to rely upon the mercy and goodness of the adjuster? How does it make you feel when you know you’re vulnerable because of what you DON’T know?

What if your adjuster is a staff adjuster, employed by the insurance company, and purposefully writes an estimate meant to save the company money? The adjuster can do that in a number of ways:

1. He can use unit pricing in his estimate that is below what it actually costs.

2. He can leave out repairs and hope you don’t catch it.

3. He can leave out repairs because he doesn’t know what he’s doing.

4. He can tell you that you have to use the insurance company’s “approved contractor or vendor.”

5. He can apply high depreciation.

What if your loss is after a tornado or hurricane, and your adjuster is a temporary adjuster, also known as a “Storm Trooper?” These types of adjusters have very little training and often write inaccurate estimates.

QUESTION: How are you going to protect your assets and be sure that you’re collecting all the insurance proceeds you’re entitled to collect?

ANSWER: By doing exactly what I tell you in this book!!!

You…and ONLY YOU…are responsible to collect all the insurance proceeds you are entitled to collect.

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