Homeowners Insurance

There are many reasons why you should consult an attorney who is experienced in insurance litigation to help you determine whether or not you have a claim under your homeowner’s insurance policy. The language in your specific policy may exclude a claim in one section, but allow the same claim under a different portion of the policy. A mold claim may be excluded, but the cause of the mold (a broken pipe), may be included. The decision to accept a denial of your claim should always be reviewed by a professional with expertise in the interpretation of policy language. A second opinion by another attorney is just as important in an insurance coverage environment as in a medical environment. Just as the medical profession has specialists, so does the legal profession.

Knowing Your Coverage

When personal property is damaged, there are two types of coverage which can apply. “Actual cash value” means that the value of the property at the time of the loss is paid as compensation. Depreciation from the original cost of the product would be applied. The alternative coverage is “replacement value.” Replacement value could be greater than the original purchase price if the item costs more at the time of the loss than it did at the time of the original purchase.

All personal property that you are claiming was damaged or destroyed must be inventoried and the actual cash value or replacement value of the damaged property itemized. It is not unusual for an insurance company to say that it will pay only actual cash value even though the policy covers replacement value. Some companies have refused to pay the replacement value until the insured actually spends the money on replacement. This refusal may be inappropriate since it potentially requires the insured to spend money that he does not have in order to get the benefit of the bargain contained in the policy. Other policies specifically permit this type of conduct. If you do not have the money to replace the property, tell the insurance company immediately so that it has an opportunity to modify its position. This will prevent the company from claiming a lack of knowledge. Knowledge of your situation could lead to a claim that your company disregarded your economic condition in order to improve its own economic position. Read your policy carefully and consult an expert.

Assessing Your Damages

In any homeowner’s claim, it is extremely important that you hire a competent contractor to determine the cause of your problem. In the event that you have a disagreement with the insurance company concerning the cause of your problem, you may end up in litigation. If you are involved in litigation, the quality of your contractor and his credibility will play a significant role in whether your claim is accepted or rejected. The insurance company uses contractors regularly who are accustomed to providing testimony in court. You must be aware that your claim could become a matter of dueling experts. It is always appropriate to select a contractor or expert with excellent credentials. The judge or jury will decide whom to believe between your expert and the expert chosen by the insurance company. The expert witness or contractor you choose is of paramount importance.

Depreciation

The issue which arises most frequently in a loss to personal property or a structure is value. Some insurance companies depreciate the cost of work being performed to the structure of a home based on the age or condition of the property. If your insurance company is seeking to pay only a portion of the price that it acknowledges it will take to fix your property, you should seek an insurance attorney to review what is happening.

Public Adjusters

Public adjusters are knowledgeable about the costs of repairs and replacement of personal property and structure. They charge a percentage of the recovery they are able to obtain from the insurance company as their fee. Fees of a public adjuster are not regulated. The paramount issues in hiring a public adjuster are honesty, reliability and integrity.

Arbitration

Most insurance policies have a provision for the arbitration of disputes over cost or value of repairs to the premises and/or replacement of damaged or destroyed property. The arbitration clause found most often in a homeowner’s policy states that if the insurance company and the insured cannot agree on the value of the repairs or the value of damages or destroyed property, either party can demand arbitration. The insured can represent himself or hire an attorney or public adjuster to represent him. The decision of the arbitration panel is binding. There can be situations when an insurance company refuses to engage in arbitration or refuses to abide by the result of an arbitration (see “Bad Faith” below). If this happens to you, it is time to engage competent legal counsel.

Bad Faith

Virtually all of the decisions of an insurance company when dealing with its insured are required to be fair and honest. If your insurance company has dealt with you in an underhanded or dishonest way, you probably have rights that you can enforce in a bad faith or insurance malpractice setting. Bad faith does not require malicious action on the part of an insurance company, but malice does help when attempting to prove a case. A bad faith claim can arise from any type of homeowner’s claim when the insurance company does not live up to its contract of insurance with the insured.

Water and Flood Damage

Certain types of water damage are covered under a homeowner’s policy; for example, broken pipes or storm and wind damage. A roof leak may not be covered if it resulted from lack of maintenance.

“Flood” is generally water that travels vertically across the ground. Flooding is caused in most instances by a rising river or creek which overflows its banks. “Water damage” is generally horizontal and is caused by roof, gutter or pipe damage. The standard homeowner’s policy does not cover flood damage. Insurance against flooding is available in a separate policy through the federal government or through a deluxe homeowner’s policy. Unless your insurance policy says that flood is a covered peril, it is not.

Mold Damage or Chemical / Toxic Spills

Within the last several years mold has become recognized as a significant environmental problem. Toxic mold has been identified as a cause of respiratory problems. There is evidence that mold can cause the onset of respiratory problems and/or aggravate an asthmatic condition. Toxic mold has also been known to make a home unfit for human habitation. There have been cases involving mold infestation where the insurance company did not recognize the full extent of the problem, resulting in major and permanent injury to the residents of the home. Some of these cases have brought jury verdicts and settlements in excess of $1,000,000.00.

Because of the significant exposure to an insurance company for mold, many homeowners policies now contain an exclusion for mold. Just because your insurance policy contains a mold exclusion, do not assume that the exclusion automatically applies to you. In the instance where mold is caused by a covered peril such as water damage from a broken pipe, the mold damage is probably covered. An insurance company’s refusal to remedy mold damage could result in a significant health problem for the homeowner. The damages in such a situation would be limited by the extent of injury to the insured. There would also be the possibility of punitive damages if the actions of the insurance company were sufficiently outrageous. We represented a woman who was hospitalized because of asthma caused by a mold infestation in her home. She contacted the insurance company and asked them to take care of the mold infestation. The insurance company came to the home and performed tests which determined that there was a significant quantity of mold growing in her basement as a result of water damage. Nonetheless, the insurance company refused to cover the mold or damage to clothing and personal property caused by the mold. In denying the claim, the insurance company relied on the exclusion for mold without advising their insured that the actual loss which caused the problem, water damage, was covered. In its refusal to remedy the problem, the insurance company created a situation where the insured was further exposed to the mold and her health deteriorated.

This insurance company exposed itself to two claims. The first claim was for failure to abide by its contract by failing to remove the mold and restore the home to its previous state. Four possible areas of damage could be involved: the cost of repairing or remediating the mold problem, attorney's fees, interest, and/or punitive damages. The second claim was for damages due to the deteriorating health of the insured. By causing the insured to remain in the polluted environment, the actions of the insurance company had a negative effect on her health. To the extent that those health problems would not have arisen but for the actions of the insurance company, it is responsible. This second measure of damages would be for the permanent health deterioration of the insured caused by the failure of the insurance company to abide by its obligation under the terms of the contract. These damages would be similar to the damages normally associated with a personal injury case. The damages would be limited only by the extent of injury to the insured. There would also be the possibility of punitive damages if the actions of the insurance company were sufficiently outrageous.

This type of claim would be available to the insured in any type of pollution problem (oil or chemical spill, for example) covered under the terms of the policy.

With a toxic or chemical spill, there are similar major health concerns to the homeowner. In an oil spill, if the insurance company fails to remedy the problem immediately, the homeowner may be exposed to toxic fumes, resulting in severe and permanent health problems. We represented a man who had bought a home that had been converted from oil to gas heat. Our client was unaware that the fuel filler pipe had not been sealed by the prior owner. An oil delivery made in error to the home of our client caused a toxic spill in the basement. The client’s insurance company took control of the problem and hired a contractor with whom they had prior relationship. The remediation was improperly performed and the oil came back into the basement from the soil under the concrete. Our client asked the both the insurance company and remediation company to fix the problem and to provide him with alternative living while the property was being repaired. The client told both companies that his health was being affected. Both companies chose to leave him in his residence where he was exposed to oil fumes which caused him to develop asthma. The steroids used to treat the asthma caused this 34-year-old man to develop Type II diabetes. The net result was a man whose health was compromised . The claims for his injuries resulted in confidential settlements both for the bad faith of the insurance company in the handling of the claim and also for the negligence of the oil company and the remediation contractor.

Fire Claims

Fire insurance is required by most mortgage companies to protect their interest in the real estate. There is a difference between a fire insurance policy and a homeowner’s policy. A fire policy covers structure only. A homeowner’s policy, in addition to covering the structure, generally covers contents, personal property and liability to non-family members injured on the premises. It is absolutely necessary to review the policy language carefully when a loss occurs. An attorney with expertise in insurance can be helpful in determining whether or not you are fully covered for a fire loss. Some homeowner’s policies require the homeowner to maintain insurance coverage at a percentage of the fair market value of the home. If the coverage is less than the mandated percentage, the homeowner would be forced to bear a percentage of the loss. It is important for homeowners to regularly review their insurance coverage to make certain that the appropriate value of their home is covered. If not, the homeowner will be forced to absorb a percentage of the repair or replacement costs along with the insurance company, based on the percentage that the home was underinsured.