Top Seven Ways Insurance Companies Try to Avert Paying All or Part of Consumer Claims

By: Alan Garfinkel, Attorney

It has been three months since Hurricane Wilma paralyzed South Florida and left many residents frustrated.  But, now, the electricity is restored, the tree limbs are removed and there is a sense of normalcy, until you have to deal with folks that are insuring your home or business.

All you want is for your insurance company to assess the hurricane damage and reimburse you for the full amount of the claim. All insurance companies want to do is avert paying the full amount you are entitled to outlined in your insurance contract. 

Ask yourself how is it that US property and casualty insurers earnings rose 4.4 percent during the first 9 months of 2005, according to the Insurance Services Offices (ISO)?  Why are the largest property-casualty insurance companies facing huge penalties for fraud, and thousands of lawsuits for underpayment of claims?

Insurance companies are for-profit corporations. It benefits their profitability to pay the least amount of money.  After spending many years working with victims of natural disasters, our firm knows the games insurance companies played to reduce consumer claims and the amounts they pay.

Here are the top seven ways they do it.

1. Multiple Deductibles for a Single Claim: Our firm has seen cases in which insurance companies applied multiple deductibles for a single claim.  This practice is unlawful. Some insurance companies assert, “The damage does not exceed the deductible,” when, in fact, this position is almost always proved wrong once our law firm conducts an investigation.

2. Blanket Depreciation of Replacement Costs: Some insurance companies may “blanket depreciate” the replacement costs, based on the age of the house, roof or property ruined. The insurance company may, for example, depreciate not only the cost of paint but also the cost of labor. Depreciating material cost is acceptable.  Depreciating labor cost is not. The consumer ends up paying the difference out of his or her own pocket.   

3. Use the Threat of Policy Cancellation:  The insurance policy – which is a contract – cannot be cancelled because a policy holder presents a claim or retains a lawyer.  Hurricanes, just like earthquakes, are natural disasters and are not based on the behavior or maintenance of the property.

4. Underestimate with Estimating Software:  Insurance companies use estimating software programs.  Many fail to address the sudden increases of material and labor costs due to a regional or national catastrophe.  Material and labor costs are a large portions of repairs. Some materials, like roofing supplies, have increased dramatically. 

5. Require Receipts to Discourage Self-Repair: Some insurance companies state they will not reimburse the consumer if they do not have receipts or if they do the repair work themselves.  This is an insurance trick. Consumers should be reimbursed for repair work regardless of who performs the work.  

6. Fail to Advise Policyholders About Carpeting Coverage: Coverage for carpeting can be complicated for policyholders.  Garfinkel Trial Group sees examples of insurance companies that fail to fully reimburse carpet damage.     

? Some insurance companies try to convince the insured that the carpet needs only cleaning instead of replacing. Once there is water penetration or glass breakage, however, the insurance company is legally obligated to compensate for the replacement of the carpet.

? Some insurance companies may avoid paying for carpet padding.  It is necessary to change the pad or eventually the carpet will stick to the pad causing humidity damage and mold contamination.

7. Deny Testing for Mold:   The Garfinkel Trial group has seen many cases where insurance companies deny mold testing and payment.  Garfinkel Trial Group recommends mold testing.  If there is mold present, a claim for remediation should be presented to have the insurance company pay for the affected areas. 
Written for Lexis/Nexis.

About the Garfinkel Trial Group:  The Garfinkel Trial Group is headquartered in Orlando and has offices throughout the state and country, including Louisiana and California. Alan Garfinkel is admitted to the U.S. Supreme Court and has devoted his career to natural disaster law and civil litigation. The Garfinkel Trial Group was named “One of The Most Prestigious Law Firms in America” by Martindale Hubbell. Mr. Garfinkel is listed on the Bar Register of Pre-eminent lawyers and is AV rated.