Very confusing loss settlement

[Brea Levlin]

Hello, was hoping to get some input on a claim in progress. Due to heavy winds, I sustained damage to my shed which damaged my block wall. To my surprise I have RCounty on Dwelling and Personal Property but not on other structures. This was news to me. I can not believe in todays day and age that ACV would even be available. Come claim time it does nobody any good. Creates more problems. The she'd alone was depreciated 40% ouch. The wall about 28%.

The interesting part is I got a email stating if I found someone to do the wall and it was a little more but still reasonable then I could get more. That is not the way it works, grateful but confused. I do not want to name the company at this time. Once everything is complete and setitled I will share it at that time.

Thank you for any feedback you provide .

 

[adjusterjack]

That something about your policy is "news" to you is due to the fact that you've never read your policy.

I suggest you take out your policy and read it now because what you are saying about your settlement doesn't make sense.

I'm reading a copy of the standard HO-3 Homeowners Policy.

C. Loss Settlement
Covered property losses are settled as follows:
1. Property of the following types:
a. Personal property;
b. Awnings, carpeting, household appliances, outdoor antennas and outdoor equipment, whether or not attached to buildings;
c. Structures that are not buildings; and
d. Grave markers, including mausoleums;
at actual cash value at the time of loss but not more than the amount required to repair or replace.

If yours reads the same, here's my take on it.

1 - A shed is a "building" so it should be covered at Replacement Cost.

2 - The wall is a structure that is not a building so, yes, it's covered at ACV. But, depending on the extent of the damage, a repair is not a replacement and should not be depreciated.

Your company may be holding back part of the settlement based on

2. Buildings covered under Coverage A or B at replacement cost without deduction for depreciation, subject to the following:
d. We will pay no more than the actual cash value of the damage until actual repair or replacement is complete. Once actual repair or replacement is complete, we will settle the loss as noted in 2.a. and b. above.
However, if the cost to repair or replace the damage is both:
(1) Less than 5% of the amount of insurance in this policy on the building; and
(2) Less than $2,500;
we will settle the loss as noted in 2.a. and b. above whether or not actual repair or replacement is complete.

Discuss all of the above with your adjuster and see how it goes. You can upload photos of the damaged items if you like.

 

[Allen Trent]

In many cases, the condition of some peoples sheds or other detached structures are structurally sound, but cosmetically bad with bad paint, rust or a bad roof. This means they may be more likely to be damaged than a well maintained structure. Many carriers would want the item excluded from any coverage, but as an agent we want to avoid that when possible because an excluded other structure woudl also exclude liability for an injury and exclude all the contents personal property also.

So, getting an underwriter to allow ACV on an other structure is sometimes the best possible situation. Again, if an older other structure is not in like new well maintained condition, I am really not suffering greatly.

This can also happen when someone has larger other structures that have a much higher replacement cost value than the resident wants to put on the other structures, ie a pole barn. If new construction is $50,000, but I only want $10,000 the agent & client could request ACV on the structure. Especially for items they wouldnt plan to replace.

So, ACV can be a tool to get best possible coverage available in the circumstances

 

[adjusterjack]

It's not necessary to request ACV for an Other Structure that you want to under-insure. It's already built into the Homeowners Policy in Paragraph 2 of the Loss Settlement section.

See Page 13 of the sample policy:

https://www.iii.org/sites/default/files/docs/pdf/HO3_sample.pdf

a pole barn. If new construction is $50,000, but I only want $10,000

Which would be incredibly foolish. Coverage B - Other Structures is 10% of Coverage A. On my policy that gives me $20,000 on my backyard 5 car garage. I have an additional $17,500 on it with the Other Structures Increased Limits form HO 04 48. That additional coverage costs me $14 per year.

Without that coverage the building would automatically be covered at ACV.

By the way, any agent that allows his client to insure a $50,000 building for $10,000 better have his E&O paid up.

 

[Allen Trent]

Agree on the underinsuring other structures. Client would need to sign an acknowledgement when they choose to insure anything for less than believed cost to rebuild. That is more common on country estate properties or houses that used to be a former farm that might have a older farm building on it But no longer used for farming. Client may know they would put up a single story pole building, not a 50 foot tall structure with 12x12 beams, etc

ACV other structures on a HO policy is an endorsement changing the underlying RC to ACV, so this customer would want to look at the endorsements, not just the sample policy.

Many carriers are beginning to offer ACV roof endorsements for nice houses that may have structurally sound roofs, but cosmetically ugly roofs. This is a way to insure the property without the carrier risking paying of a 25k claim on a roof that has seen 90% of its useful life. Roof likely will be watched & need full replacement in 3-5 yrs & the ACV roof endorsement removed

When the housing crisis happened 10 yrs ago, many people failed to maintain their houses & carriers took huge losses giving brand new roofs to people that should have put a new roof on 5-15 yrs prior or a wood shed was all rotted out because that is what happens to wood sheds getting rotted sitting on the ground exposed to rain & snow.

Odd how we all accept ACV type losses in the car insurance world but expect 40 yr old shag carpet in a house with a small burn hole to get us brand new carpet on an entire level of a house

 

[adjusterjack]

Odd how we all accept ACV type losses in the car insurance world but expect 40 yr old shag carpet in a house with a small burn hole to get us brand new carpet on an entire level of a house

That's because the price of car insurance is based on ACV and the price of homeowners insurance is based on RC.

You can buy Agreed Value on a car policy and you can buy a basic dwelling fire policy at ACV.

Depends on what you want to pay for.

 

[InsCommentary]

There’s no way to know if this settlement is proper without more information. What do you consider a shed and what do you mean by “block wall”? Is the shed an enclosed building? Is the block wall a free standing wall, retaining wall, part of another structure, or is it part of the shed that maybe only has 1-3 walls?

 

[djs]

Pretty much what AdjusterJack said....

Replacement value claims are made in 2 payments, which tends to confuse a lot of people, especially in smaller claims.

First check is for actual cash value.

Once repairs are completed (and only if they are done in most cases), you then get a second check for the difference between actual cash value and replacement cost.

Keep in mind, many policies are different from the standard ISO policy and some limit separate structures to actual cash value and do not pay replacement cost. You'll have to get a definitive answer of this from the adjuster, who should provide the relevant policy language that explains it.

On the wall, my guess is the adjuster suspects there may be additional damage that (s)he cant see without some work being done. If the contractor runs into this, call the adjuster and they will come out and look at it again and potentially provide additional money to pay for the extra damage. This is a common practice. Claims are not 'closed' just because you take the first check.

 

[Brea Levlin]

Thank you for your feedback. Just concerned when you take out the best homeowners policy from a reputable company. For Dwelling expanded replacement cost and for Personal Property replacement cost. I did not think to ask if other structures where insured the same way. My policy reads exactly as above. You can see why this would be confusing.