PERSONAL
RESPONSIBILITY AND YOUR FUTURE FINANCIAL SECURITY
NOTWITHSTANDING INSURANCE
An original article by Public Adjuster Charles R. "Dick"
Tutwiler, C.P.C.L.A., P.C.L.A., presented at Windstorm 2006 Conference
Our
exposure to financial risks and ruin in today's society has changed, driven in
part by large natural disasters and in other ways by capitalism forces (some say
by the global economy) that require us to re-think and prepare for our future
economic security. Business and personal publications across America are heralding
a new era. Almost daily, the print and broadcast media bring yet another story
of the shifting of what used to be the delegated responsibility to others for
our security and safety from the many risks and perils both financial and physical
that we all face in today's world of uncertainty.
As
an example, the freezing of company pensions and gutting of traditional retirement
plans show the American culture is evolving in a way not seen since Roosevelt's
"New Deal" in the 1930's where our country's social security scheme
was connived. This change is no less true in the world of insurance, where a cultural
revolution of sorts is taking place following recent cataclysmic events both natural
and man made.
It
is not difficult to understand these changes considering 9/11, and four hurricane
landfalls in Florida in 2004, followed by what has been reported to be our country's
worst natural disaster that resulted when Hurricane Katrina made landfall in the
Gulf states in 2005. According to Insurance Service Office figures from January
2006, the U.S. Property & Casualty Insurance is expected to pay homeowners
and businesses a record $56.8 billion dollars for the 2005 insured property losses
for 24 catastrophic events, twice the record amount of 2004.
How,
you may ask, will these changes affect you, your family, and your business? Very
simply, you will be sharing in the risk in some subtle and some not so subtle
ways going forward. The world of insurance is rapidly changing so your share of
the risk is likely to be more than you expected, and you may not be aware of it.
Nowhere is this more evident than in hurricane battered Florida. Hurricane Wilma's
late arrival in 2005 shed new light on how difficult it is for Floridians to recover
insurance proceeds given the rapid changes underwriters have made in property
policies in this state. Million-dollar deductibles are now the norm for commercial
losses. High percentage deductibles are common in most homeowner policies for
windstorm coverage. Major loss events and the adjusting of losses have become
so common and unwieldy that the Florida legislature passed a "new" property
bill with effective changes for renewals taking place in 2005. It may turn out
that this piece of legislation is not so bad (relatively speaking) as it seems
neither side is particularly happy with the result.
Professional
loss adjusters, regardless of the legislative intervention or endorsement in the
contract, must press on and deal with issues and coverages that are given to us.
It is our job to triage and manage the loss and at the same time be mindful of
the insurance contract with its many limitations as well as setting reasonable
expectations for our clients of the likely outcome of the adjusting process.
Typically
the loss adjuster hears a chorus of discourse at a major loss from management,
stockholders, and others with a stake in the claim, with the comments typically
starting with, "They told us it was going to be fully covered, "We asked
for the best", "They said we would be taken care of should this happen",
and "What do you mean it's excluded!"
Some
insiders in the business pejoratively referred to the insurance contract as "the
big print giveth, the little print taketh away." In today's new era, the
little print is carving huge sections from insurance policy coverage in unprecedented
ways. In most cases the policyholder has no understanding of the effect these
exclusions and limitations will impact their attempts to be made whole following
a loss.
As
an example, there was such a hue and cry across Florida following the 2004 hurricanes
that a committee was mandated in the "new 2005" legislation requiring
it to conduct an investigation into the possibility of having the scribes craft
simplified policies so presumably the consumer would understand the meaning of
their insurance contracts.
Few
could fault the need for this committee if you consider for a moment a few traditional
common policy terms, clauses, and legal doctrines that may apply to today's insurance
contract in ways not understood by even the sophisticated policyholder. Terms
such as "co-insurance, percentage deductibles, anti-concurrent causation
language, law and ordinance exclusions, period of restoration for business interruption
limitations, application of valued policy laws, efficient proximate cause, broad
evidence rule, actual cash value, and, last but not least, ubiquitous exclusions
in the "losses not covered" section of an insurance contract. These
are all "adjuster speak" terms often spoken at a loss site to the shell-shocked
policyholder. Based on fact-specific losses, these terms and conditions can have
huge unanticipated consequences.
For
example, if you live in Florida and your building exterior is damaged, you will
find most policies have an exterior paint exclusion. For some property owners
this can be another type of hidden deductible as their cost can be well into six
figures depending on the building size and coating that is damaged. For the typical
homeowner the wind blown flying debris causing damage to exterior coatings puts
you in the same soup as the commercial property owners, no coverage for the exterior
paint on your home. The lay person may feel some consolation in that surely this
cost can be applied to the big percentage deductible. Unfortunately this little
detail has been taken care of in that the courts have stated that the deductible
will be applied to the "covered loss" and not "the loss".
If you have interior water damage with resulting mold, you guessed it, the lobbyists
in Tallahassee have had their way, and you have little to no coverage for mold
remediation. If you have a business policy with Citizens Insurance Company for
wind coverage in Florida, you will not have business interruption coverage if
that peril put you out of business. When windows and doors are blown out in the
high-rise condominiums along the Florida ocean front, the insurance companies
point fingers at each other (condo unit owner carriers versus the master association
insurance company), each saying they are not responsible for repair and replacement
of the window cladding on these buildings.
Have
sections of your roof blown off, you may be given a definition of "replacement
cost," the meaning of which is that the insurance company will not replace
your roof but may only repair or replace a slope or section of your roof tiles
or shingles. Given their interpretation of the term "replacement cost"
the result likely will be a mismatched roof in appearance. Today this unilateral
interpretation of "replacement cost" often favors the insurance industry
and may well leave you with a checkerboard roof on one side or a slope of your
roof different from the other side.
As
if in tune to the beat of a far off drummer, the underwriters are in a dance today
to reduce loss payments, claim severity, and maintain low loss ratios in order
to shore up the bottom line. Florida, as always, is in yet another insurance crisis,
or perhaps it is merely a continuation of crises that seemingly never ends in
this state. Historically, the insurance industry has always wanted to pay on the
lowest estimate, however, with new restrictions being placed in policies you may
not even get to the point of negotiating upwards from the lowest estimate. Make
no mistake, the business of claims is a business dynamic in which the old adage
of buy low, sell high applies. In many loss situations the outcome might well
be a declination of coverage due to some obscure and ambiguous language buried
in the bowels of an insurance contract, or the high threshold deductible for which
you will have to go out of pocket.
Times
are changing and to their credit some insurance companies are openly admitting
that change is required. Allstate Insurance Company's chief executive, Mr. Edward
Liddy, quoted in a January 11, 2006 Wall Street Journal article stated, "The
spate of hurricanes could lead to changes in deductibles, coverage and underwriting
of the common policy." As evidenced by large ads in the national print media,
Allstate has embarked on a campaign urging a national catastrophe plan to be put
in place to help offset future catastrophic losses. Presumably this national catastrophe
plan is now required to ensure the solvency of the insurance industry because
the green-shaded actuaries did not have the foresight to see the recent large
loss events. But on the other hand, who among us can step up and say we knew how
the events of the last few years would have unfolded.
This
upheaval portends multiple changes in the protection business with one certainty:
You are going to be on your own for a greater piece of your protection umbrella.
There
will always be insurance and in most cases there will be some contribution from
an insurance carrier. After all, they took a premium and there is the lead-in
language in the policy that typically states, "in exchange for the premium
we will. . . ." But the clear and unambiguous message from this writer's
perspective is to plan now, understand the limitations and exclusions, and make
it a point to study the recent large catastrophic events, particularly as they
have had an effect on others, your industry, your clients, and your competitors.
Learn from their mistakes and misfortunes.
The
old saying that the "big print giveth and the little print taketh away"
is not something new, but has been in this industry's culture from the creation
of the insurance products in the old London coffee houses of the last century.
Your challenge today is to understand just how much the little print is now taking
away.
If
there is one lesson that the big "CAT" events have taught us, it is
that personal responsibility for your financial security is clearly in your court.
As we have discovered, government is not going to save you, and as others are
finding out, an insurance policy is not a disaster recovery plan.
Your
future financial security is in your hands! Plan now by understanding the exposure
and risk that you face on a daily basis. The new era for personal responsibility
is here. You must maintain a vigil for your own future financial well being.
Our clients are the insured policyholders - property owners and business owners telling the story of increased insurance settlements, full policy limits paid and successful recovery from hurricanes, fires, sinkholes, hidden decay, water and smoke damage and other property loss insurance claims and catastrophic (CAT) disasters. Examine our SUCCESS STORIES LIBRARY, PAGE
1, PAGE
2, PAGE
3, PAGE
4 and PAGE
5. You will discover you are not the only person who has had to deal
with the frustrations, the worries, and the inconvenience that follows a loss.
Call our National Toll Free Number: 1.800.321.4488
or email us
at tutwiler@publicadjuster.com. We will discuss your loss and help
ease you through your crisis.
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