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Insurance Bill of Rights – A List of the Rights Most Ignored?

17 Jan

When you receive your homeowners policy, there may be a page called the Residential Property Insurance Bill of Rights.* With a title like “bill of rights” you would expect the document to clearly explain what you can do when you are not treated fairly by your insurance company. Well, not really.

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The “Rights” appear in the Bulleted List. The document title announces that these are your “Rights,” but then just before the bulleted list it says your insurer “can” provide  these items. If the list is meant to inform you of your Rights, doesn’t it seem odd that your insurer “can” provide, seemingly at their discretion, rather than “must” provide…? To see this document better, click this link.

Here are some of the major “Rights” listed under the California Homeowners (i.e. Residential Property) Bill of Rights, with some explanation – I’ll possibly create a Part II to this blog post, so I can cover more of the rights:

The Right to Your Policy

This one surprised me the most. An insurance policy is a contract between you and your insurance company. You definitely should have a copy. How do you know what your responsibilities are if you don’t have the policy? How do you know what your insurance company owes you if you don’t have the policy?

If your insurer provides you with anything – it should be the policy. Basic contract law (and HELLO, common sense) dictates that you need to know what you signed up for.

The real reason this right is listed:

If you request your policy from your insurer, they are typically VERY slow about getting a copy to you. In my experience, some insurers are quite prompt and you’ll have it in 1-2 weeks, but most will take 1-2 months. Then there are others that will take 2-10 months.

In case you haven’t ascertained yet by the many blog posts here on MisInsured, insurance companies are very customer-oriented on the sales end (when you purchase your policy), but after that, you are basically on your own. If you need something, your request is not priority because you are already paying premiums. Brokers and agents are no longer your friends, unless there is additional money in it for them. You need a copy of your policy? They will tell you it is no problem at all. But then you will wait, and wait, and wait some more…

An Explanation of How Your Policy Limits Were Established

Most people don’t particularly care how their policy limits were established, as long as their premiums are low. However, when you find yourself making a claim and suddenly you don’t think you have enough coverage, you will want to know why.

The real reason this right is listed:

I’ve never seen an insurance company formally explain how an insured’s policy limits were established without the insured needing to ask for an explanation more than once. Even when an “explanation” is finally provided, it does not exhaustively explain how the limits were calculated, but will list several assumptions which were made about the property and some calculations. The explanation will leave you with dozens more questions.

*These exist for several different types of insurance. For illustrative purposes, I’m referring to the Residential Property version for the State of California.

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Insurance Bad Faith

31 Oct

 

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Insurance Companies are Bad. And They Know It. (Photo credit:  Wikipedia)

When something goes wrong with an insurance claim, you will often hear the term “bad faith” thrown around. But what does bad faith really mean? California courts opine that “bad faith signifies a breach of the covenant of good faith and fair dealing that is implied by law in every contract…. [this] involves something beyond breach of the specific contractual duties or mistaken judgment.”* Clear now? If your reply is “Ummm… NO. Not at all,” you are not alone.

The courts are trying to say that your insurance company commits bad faith not just by violating the terms of the insurance agreement – there has to be an additional lack of good faith and fair dealing in the way your insurer handles the claim.

Example of Bad Faith

For example – your insurance company fails to pay you for fire damage to your back shed, even though it is clearly covered by the “other structures” clause in your homeowners policy. This is not bad faith. It IS a violation of the contract, but not bad faith on its own.

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Shed (credit:  Wikipedia)

But – if your insurer fails to pay for your covered shed AND it never even investigated the back shed, despite your informing them it is damaged and giving them the access and opportunity to investigate – this is probably bad faith. Now, before you get too excited about this – because I know that insurers fail to fulfill their duties under the policy all the time – you need to understand that to be successful in court for bad faith, the insurance company’s failure has to be pretty egregious.

But the Bad Action Must be REALLY Bad

In the example of the shed, your insurer would need to not only fail to investigate when you asked them to, but there would have to be an additional shockingly bad action – such as they repeatedly refused to consider the shed. For a court to recognize bad faith, the bad action needs to clearly show that they are just not interested in being fair.

Is it Bad Faith?  Helpful Three Step Analysis

Another good example is when an insurance company causes unreasonable delay in the payment of benefits – which has now become a common routine in the industry. Let’s take our three part analysis and apply it to the situation where the insurer is failing to pay promptly:

  1. Did my insurer violate the terms of the contract?  Yes, the policy says they have to promptly investigate and issue benefits when they determine the claim is valid – and they didn’t. Move to question 2.
  2. When my insurer violated the contract, did it show a lack of good faith and fair dealing in the way it handled the claim?  Look carefully at how long it took for them to issue benefits. Were they actively investigating the entire time? Did you see evidence that they were actively investigating? Did you continuously remind them that you had not received a benefit payment, yet they still seemed to be doing nothing? Evaluate all of the actions that your insurance company took during the handling of the claim. If you believe the actions of your insurer clearly show that you were not treated fairly, move to question 3.
  3. Does the lack of good faith and fair dealing rise to the level of bad faith, according to the courts?  Now really look at all the actions of your insurer (or, their lack of action). Is it clear to you that your insurance company was just not interested in being fair? Would their actions shock the average person? Why?

As you can see, the definition of bad faith is not very precise. To compound the confusion, the definition varies depending on the state you reside in. To really grasp if your have been treated badly enough that you have a strong claim for bad faith, contact an experienced insurance attorney.

*Chateau Chamberay Homeowners Ass’n v. Associated Int’l Ins. Co., 90 CA4th 335 (2001).

What is an Insurance Adjuster?

15 Aug
House on Fire in North Escambia, Florida

House on Fire in North Escambia, Florida

Insurance industry insiders use a LOT of terminology that is completely foreign to the rest of the world. Even the simplest sounding words, such as “adjuster,” “reservation of rights,” and “risk” take on entirely new meanings when used in the insurance industry.

What is an Adjuster?

The short definition:  Someone who investigates and analyzes an insurance claim to determine how much it is worth. For example, let’s say you have Homeowner’s Insurance for your home, and the house catches fire. Once the fire is out and the flames have subsided, you call your insurance company to make a claim. The claims representative will tell you they are sending their adjuster to investigate the damage. The adjuster is supposed to look at the damage and determine how much money your insurance company owes you.

How are Adjusters Special?

Adjusters must have a relevant background in insurance and take a written examination before obtaining their insurance adjuster’s license. Basically, they need to have knowledge of insurance principles, the insurance claims process, and insurance laws.

What kind of Claims do they Adjust?

Adjusters work solely on property claims – such as claims for damages to homes, office buildings, personal property items, automobiles, and boats. For example, you won’t see an adjuster’s involvement in a medical or disability insurance claim.

What is a Public Adjuster?

Public Adjusters are adjusters who work only for the policyholder. For example, if your house is damaged by fire, you can contact a Public Adjuster to represent your interests when you make your insurance claim. Public Adjusters make a skilled analysis of the damage, prepare all the insurance claim forms on your behalf, and negotiate a settlement with your insurance company.

National Association of Public Insurance Adjusters

National Association of Public Insurance Adjusters

Since insurance companies routinely attempt to undersettle valid claims (this is called insurance bad faith and is ILLEGAL) by “neglecting” to properly assess the covered damages and offering ridiculously low sums as final payment, the services of Public Adjusters have become increasingly valuable. In 2010 the state government of Florida discovered that, on average, the involvement of a Public Adjuster increased claims payments by an incredible 88% (See Florida Legislature Office of Program Policy Analysis and Government Accountability report, page 7).

For more on Public Adjusters, visit the Defever Law blog.

What is an Independent Adjuster?

So-called Independent Adjusters are adjusters that insurance companies hire if they do not have on-staff adjusters of their own. Most insurance companies have their own force of adjusters, but as economic times change, insurers sometime opt to hire only independent adjusters and eliminate their in-house staff entirely.

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