Policyholder Question: Additional Living Expense (ALE) Conflicts and Cash Out Offers
One of the things I like about blogging, is that the tips and advice you provide policyholders about issues they are having with their insurance claims stays up indefinitely and can assist people having the same claim problems. I recently responded to reader question from a 2013 guest blog post on the Merlin Law Group Property Insurance Coverage Law Blog that I had the privilege of contributing to. The article titled: Insurance Companies Using Preferred Contractors to Settle Claims Not in Policyholders Best Interest discussed how insurance companies send out their preferred vendors who then try to control costs to the consternation of the policyholder.
It just amazes me how readers find this information and it’s fantastic to be able to help more folks. So I want to share this question with our readers. With more insurance companies touting preferred vendor programs and all the AOB issues we’ve written about, policyholders are going to experience more of these same issues. The bottom line is that policyholders need to be very diligent in understanding their rights under their insurance policy in order to make sure they are being treated fairly.
Q. We have a very similar situation with our frozen pipe/water damage claim. The insurer is allowing their preferred contractor to determine the scope of repair work and the costs. We are still negotiating the scope of work. They did not inform us regarding Loss of Use or Additional Living Expense coverage until 47 days after the claim was filed and then only because we asked after reading our policy carefully. They are asking us to consider a cash-out for ALE and Loss of Use for a 4 month period based on their contractor’s estimate of repair time when our local licensed, bonded contractor states the repairs will take a minimum of 7 months. They were unable to find comparable housing (we live in a 5 bedroom, 4 bath, 2 living room, kitchen, dining room, foyer, pantry, laundry room, mud room, 4000 sq. ft. + home with premium finishes (their term in the scope of work) through their third party temporary housing vendor. They refuse to add the now 2 months of Loss of Use and ALE to the 4 months for repair their preferred contractor estimated in their settlement offer for ALE. We do not have use of the kitchen, 3 bedrooms, 2 bathrooms, 2 living rooms, laundry room, mud room, dining room, and foyer of our home. We have no heat or air conditioning either. Should they pay us the monthly rate they and we agreed to for the ALE per month cash out option for the 2 months we have lived in our home without access to the use of these rooms and should they pay supplemental monthly amounts if our repairs take longer than 4 months?
A. Thank you for your question. It is very disheartening to hear about your unfortunate situation but not usual given the trend of most insurance companies to now use outside vendors to do the job that used to be the responsibility of in house staff adjusters and on occasion independent adjusters. Preferred contractors and other third party vendors have the best interest of the insurance company first and you second which appears obvious in your case. The insurance company and /or the third party housing vendor should have made every effort immediately after notice of your loss to find you like kind and quality housing in an area as close to your current home and worked with you to negotiate a lease with a landlord for the time it will take to restore your home. Given the conflicting construction period or time of restoration, I do not recommend you take a "cash out" settlement for ALE but instead require them to pay the full amount they agreed based on the monthly rate. Your ALE claim should stay open until your home is restored to its pre-loss condition. And remember, you likely have other expenses because of this loss which your insurance company should pay. Take some time and come up with any other additional expenses you have incurred because of this loss. Remember, the coverage is for "ADDITIONAL LIVING EXPENSES", that is to say expenses up and beyond those you would have had, verses those you now have because of this loss.