The Main Concern:I have a Replacement Cost Value (RCV) insurance policy, my adjuster came out and gave me an estimate, but the cost for doing the work is more than what the insurer said my loss was worth! Now what do I do?
There are a few primary reasons why this might happen:
1. There were hidden damages that simply weren’t able to be seen and accounted for during the insurer’s original visit on site (somewhat common with water losses in particular).
-In this scenario, you should be sure to snap a few photos of the new damages or scope items (typically wide shots to confirm location/your property and close-ups of the affected materials) so that the insurer can confirm what you are saying and add this to their file. Other than that, most insurers understand that hidden damages are found during work and that your contractor can’t just leave areas exposed to weather or remaining as hazards for employees or residents inside a facility. Most insurers will not fault you or your contractor for proceeding with work and not waiting the numerous days to weeks that it might take for an adjuster to come back onto site. In this case, most insurers will pay for the extra expenses that were hidden so long as they fall within a reasonable range of fair market valuations (typically Xactimate).
2. The insurer missed visible damages onsite (resulting in too small of a scope for the loss), did not properly account for all of the associated Xactimate line items associated with the scope they noted (resulting in a low valuation), and/or the insurer did not include additional costs such as Overhead and Profit (O&P), access costs, safety costs, supervision costs, and so on (resulting in a low valuation).
-In this scenario, the costs/scope differences are typically noted once the insured receives bids for the project (ie. before work has begun). In this case, it is proper for the insured to contact the insurer about the differences in cost/scope and the insurer will typically perform a follow up inspection or request photos from the insured or their contractor to confirm the additional damages. Upon observing additional covered damages, most insurers will apply the additional scope and upon being made aware of price differences most insurance adjusters will review their estimates to see if they missed line items somewhere and will add them thereafter.
3. The materials are customized (ie. very high end custom cabinets, counters, bathes, etc.) or the work is specialized in such a way that Xactimate is not able to accurately account for the costs associated with repairs (there are some line items that naturally vary in price so much that Xactimate is sometimes low on costs—Some window or door categories, for instance, have this issue).
-This is the rare circumstance where a bid is typically required, but the bid pricing is usually spot on because it is for a very specific material/object and the work is often performed only by that contractor. Alternately, for something like windows, a material cost might need to be obtained and a standardized labor cost could be applied to the material cost without necessarily requiring a contractor bid (ie. the windows cost $300 each and the contractor labor cost to install is $200 per window).
4. The insurer is not paying for certain costs or scope items based on the reasoning that the costs or line items aren’t covered.
-If this has occurred your options are typically to 1. Review the circumstances yourself and argue your case to the insurer if you understand there to be coverages that the insurer is not properly accounting for OR 2. You can consult with a public adjuster and have them review your claim to determine if the insurer’s coverage determinations are accurate. Most public adjusters will perform an initial review of your loss for free and they are not likely to tell you that you have coverages or damages that you don’t because public adjusters are paid a percentage of the new money they get you on your claim. In other words, telling you that you have damages that you don’t in order to get contracted with you doesn’t make any sense for a public adjuster because they won’t increase your claim and won’t get paid anything for their work!
5. The contractor is incorrect with their pricing and/or scope as it relates to your covered loss.
-This doesn’t mean that your contractor is trying to defraud you or something like that. We see circumstances of this all the time. An example might be that a contractor wants to add a presently nonexistent tapering system to your flat roof because he notes pooling on your roof. Codes typically say that as long as the pooling is gone within 72 hours nothing needs to be done and your roof only has pooling present for 48 hour spans. Your contractor is simply trying to give you a good roofing system, but most insurance policies typically only bind the insurer to pay for the minimal additional costs required by laws and ordinances (codes) when those items don’t presently exist on the roof. Therefore, your insurer isn’t obligated to pay for the additional costs related to the proposed tapering system because codes don’t minimally require it. If you simply aren’t sure who’s right, consider asking a Public Adjuster to give you their thoughts.
Takeaway: If there appears to be a need for more money than what the insurer originally provided, the cause may be that the insurer is off on their scope, their line item applications, or that the work is so custom that Xactimate (the common insurance estimating system) just can’t calculate the costs and a contractor bid for that item may be needed. Most insurers will swiftly review and correct these issues when they occur. The cost difference could also be that the insurer is interpreting items as not covered or part of a loss that has been called in. In these cases in particular as well as when the insurer has refused to adjust their scope, line item applications, or to utilize a bid on a custom item that Xactimate is clearly off on, it is strongly recommended that you have a public adjuster review your loss. The public adjuster will let you know if your claim is or is not being paid out accurately. The public adjuster will usually perform an initial (light) review for free; will be happy to contract with you to help resolve the issue if the loss difference is significant and their involvement would yield you a net positive for your when factoring in the time and cost involved; and, if the loss difference isn’t significant enough for the public adjuster to feel comfortable contracting with you, they will typically give you at least some guidance on the best steps you can take to resolve the claim yourself.
-Article written by David Phalen,Executive General Adjuster of Solutia Adjusters.