Dear Mr. Miller:
I read your article about claiming reimbursement from your insurance company for your Wife’s and your medical emergency in Argentina. Do you know anything about water damage in a house and dealing with the insurance claim? Any tips on that?
Oh, do I. And your timing is excellent. First, I am not an insurance claims lawyer. Further, all insurance policies are different so I can only respond based on those that I have seen–yours may be better or worse. Lastly, I speak from a California perspective; the law and practices elsewhere may be different. That being said, one picks up things when one goes through one’s own insurance escapade.
Water Damage: We had a water damage experience several months ago. The central air conditioning unit located in the attic broke and dumped out water. The water ran down the inside of the exterior wall into the master bath directly below the attic and continued to the bedroom below that. My wife noticed water on the window in the bedroom and thought it was raining—until she realized the water was on the inside of the window. It was probably only 7 quarts or so of water, but water can be terribly destructive. My insurance agent tells me that on average, a homeowner has this type of loss occur every 20-25 years. We had one 20 years ago so we are right on target.
First, let’s know who the players are.
The insurance company: This is the company to whom you have been paying premiums for all these years. They owe you money equal to the amount it will cost to rebuild the structure to the specifications of what it was prior to the loss. Generally, there is no deduction for depreciation or age–it is just what it is going to cost (less your deductible). Now this gets down to very detailed specs. The insurance adjustor is going to come into the house and take measurements: how many square feet of painting (and how many coats of paint and primer), how many square feet of carpet and pad, shelving, and all of that. More or less like a contractor would prepare a bid based on what you wanted. Although that contractor might present you with just a dollar number bid, before he did that he would figure things out line item by line item. That’s what the adjustor does and, in my mind, exactly what he should do.
The water remediation company: Their job is to get rid of anything that has moisture in it before it causes further damage. That means they break into walls and slice up carpets, rapidly. More on that later.
The general contractor: This is the company that is going to repair and rebuild. It turns out that there are companies that specialize in these repair jobs and working with the insurance company to get paid if the adjustor missed some things or was too low. If you hire a contractor who does not specialize in these types of jobs then you are probably going to wind up doing that–and you’re at a disadvantage since building is probably not your specialty. You hire the contractor, in most cases the insurance company does not. The insurance company pays you and you pay the contractor. That means you have to make sure that the contract you sign with the contractor covers what it should and the price is in line with what the adjustor is authorizing for payment to you. And you have to be aware of mechanics lien potential and all of that.
The payees on the check: It would be so simple if the insurance company would write the checks directly to the insured. But they typically do not. They have to include the mortgage holder(s). That is why the mortgage holders are listed on the insurance policy declarations page: because the house is their collateral and they want to make sure it is rebult to the original specs with that insurance money. And keep in mind, if you have a home equity line of credit (HELOC) even if you don’t owe anything, that is a mortgage holder. So you receive the check but you can’t cash it until you get the mortgage holder and the HELOC to sign off. And since the days of having a mortgage that stays with the bank down the street are long gone, you are going to have to send the check all over the country to get those sign offs. And since you are probably going to receive more than one check, in our case it has been four, you will have to do this dance more than once.
In our next article, we will discuss all of the issues of which you need to be aware in a water damage claim.