Nationwide Underpaid Home Insurance

When a homeowner experiences property damage, they can file a claim with their insurance company. Before filing a home insurance claim, the property owner should review their insurance policy to determine what’s covered or excluded from coverage.

The most important part of making an insurance claim is documentation, including records of who you’ve talked to, the details of your conversation, as well as the date and time of the conversation. It is also important to determine whether there is a time limit that restricts the timeframe in which you are allowed to submit a claim.

It is always a good idea to document the extent of the property damage in case your insurance company pays you less than expected.

Depending on the nature of your home insurance claim, you may need to follow certain steps. If necessary, such as in cases of theft or vandalism, you may need to report the situation to the authorities.

You’ll need to contact your insurance company to file a claim. An insurance adjuster will be assigned to the case and will be responsible for assessing the extent of the damage and estimating the costs.

Depreciation is typically deducted from the ACV of the property when a property owner elects to have their property damage claim paid on an ACV basis.

Most people expect that depreciation includes the cost of materials, but courts are reportedly divided on the issue of whether the cost of labor can also be depreciated.

In February 2020, the North Carolina Supreme Court determined that depreciation included the cost of labor, according to the National Law Review. In that case, the insurance company calculated the ACV cost by depreciating the cost of labor and materials, and the court found that the company’s endorsement for roof damage which defined ACV reasonably applied throughout the policy.

The 6th U.S. Circuit Court of Appeals reached the opposite conclusion, however, finding that an insurer who deducted both material and labor as part of the depreciation cost when calculating the property damage claim was not necessarily entitled to do so under Ohio law.

The insurance claim process starts when you report the damage to your insurance company. After you have completed and submitted the claim forms, an insurance adjuster will inspect the damage. An adjuster is a company representative who inspects property damage to determine how much the insurance company should pay for the loss. The adjuster will inspect the property and interview about the events surrounding the damage. He or she will then produce an estimate of the costs, and the insurance company will then offer you a payment on this basis.

Many people wonder what is supposed to happen to whatever money is left over after repairs have been done at a lower cost than what was initially estimated. Once the insurance company pays your claim and the work has been done, they have fulfilled their obligations to you, and you are free to use the remaining funds as you see fit. You may choose to do the repairs yourself, reduce your costs and use the remainder of the money for something else. It would be your prerogative to do so, as long as the claims process was honest and legitimate. The important thing is to ensure that you receive a fair payment based on an accurate assessment of the damage.

Insurance companies have several reasons for not paying claims. To be fair, some of these may be honest errors, but they are often deliberate tactics to justify underpayment.  Some of the most common reasons are:

• The assessors don’t look closely enough at the damage. In this case, the company may honestly want to pay you the right amount, but the adjuster doesn’t get an accurate assessment of the damage, so you get less than you really need.
• They misinterpret your policy. Some of your damage might be covered explicitly in your contract, while some of it is not. Ensure that you understand the terms of the policy completely – this is the best way to ensure that you don’t get underpaid.
• They would rather underpay than deny a claim. If they refuse your claim outright, you are more likely to take action against them. On the other hand, people are more likely to accept money that is offered to them, even if it is less than what they claim. Unfortunately, this gives insurance companies a good reason to underpay. If they can pay less than they need to and get away with it, why shouldn’t they?
• They pay only the actual cash value (ACV) of the claim, rather than the full replacement/ repair cost.
• A subtle, but quite common tactic is to depreciate the cost of labor in the calculations. Insurance adjusters will often correctly estimate the costs of parts and materials but then deliberately underestimate the labor costs involved with your home repairs, in order to lower the total amount they need to pay out.

The tactic of depreciating labor costs has become common enough for many homeowners around the country to file lawsuits against their insurance providers. An insurance adjuster will typically calculate the ACV of the repair work and then deduct depreciation from that figure, amounting to a reduced claim value. Legal action in Tennessee led the state’s supreme court to rule that insurance companies may not depreciate the costs of labor when working out the cash value of a claim. This ruling has led many homeowners to file class-action suits against their insurers in reaction to this practice.

If you have filed a claim and you believe that you have been underpaid, you still have options open to you. Before taking the matter up with your insurer or seeking legal advice, the important thing is to gather as much evidence as possible to back up your belief that you have received less than your claim is worth. It is best to escalate the dispute gradually by going through the following steps:

• First, approach your insurance company. Before you do, go back and look at your policy document, as well as the original claim you filed. See if there is any way you can present better evidence of damage or loss in order to increase the value of the claim. If you can improve the quality of evidence, call your insurance agent or someone in the claims department and raise your queries and objections about the estimate you have received from the adjuster. Ask them to present another estimate or for the adjuster to reexamine the damage. They may agree to review it, but that doesn’t mean they will change their estimate. If they don’t, then you might want to consider bringing in a third party for an appraisal.
• If you are unhappy with the results of the first step, you can hire an independent appraiser to take a look at the damage and estimate the repair costs. A new, independent estimate will either confirm the accuracy of your insurance company’s appraisal, or it will provide evidence for your argument that the original assessment was too low. If you get a favorable result, approach the claims manager at your insurance company and present your case.
• Get the help of a home insurance claims attorney. If the insurer still will not revise their evaluation, the next thing to do is to take legal action against the insurance company.

The home insurance claim attorneys at Shamis & Gentile are investigating cases involving homeowners who have filed first-party insurance claims and have been underpaid due to depreciated labor costs. If all of these criteria apply to you, you may be eligible to join a nationwide class-action lawsuit. Book a free consultation, and let us see if the particulars of your home insurance claim case qualify you to sue for compensation.