Is This A Scam, Or Just Good Business?

The way the letter came in, you just know where the insurancecompany staffer is coming from and how he feels about thesituation:

“In the past year or so, we have started to experience sidinginstallers seeking neighborhoods for hail damage and tellinghomeowners that their damage is covered under their HO policy, andthat they will actually call the insurance company for them ifnecessary. These individuals are able to redo completeneighborhoods at the insurance company's expense. Often the haildamage is from months prior. Are other parts of the countryexperiencing this scenario, or is this an old (for lack of a betterword) scam that has been around?”

It smelled a bit bad to me at first, also. I took it down thehall to the FC&S editor/analyst who handles most ofour personal lines coverage interpretation, and her first responsewas, “Well, the Gypsies have moved” (a reference to what really isan old scam here in Cincinnati–migrant con artists who annually hitthe city selling shoddy blacktop jobs to unsuspectinghomeowners).

But then we got into it a bit more. Hail damage to home sidingis generally covered under the homeowners policy, right? Does itmatter how the homeowner is made aware of the damage, the extent ofthe damage, and the insurability of the damage? Is a sidingcontractor who informs a homeowner that there is hail damage to thedwelling and that hail damage is payable under his insurance a scamartist, or just a clever marketer?

The FC&S user writing in sees this as a playbeneath the belt, somehow shady. But in his letter he affirms thatthere may be insured damage: “Often the hail damage is from monthsprior.” Does the fact that the damage was “from months prior” makeit any less covered, assuming that we dont get into a “timelynotice” situation (we think here that a few months delay inreporting damage that can be tied to a specific event–”that badstorm in March”–does not raise the specter of untimely notice bythe insured).

The writer also has objections to the mass-marketing technique.“These individuals are able to redo complete neighborhoods at theinsurance company's expense.” So? Isnt an entire neighborhoodredone in the event of a tornado? Is the writers objection to theinsured making a claim, or the siding contractor instigatingit?

In an example of one mans meat being another mans garbage, theclose proximity of damaged homes aids the siding contractordrumming up business, whether or not the insurance company takesthe brunt of the expense. However, it would be unlikely that oneinsurer would be on all the homes in the area–the risk would bemore spread than that.

So unless the siding contractor is doing the hail damage with aping hammer prior to contacting the insured, there may not be anyscam here–just a sharp practice by a heads-up siding installer.

Interestingly though, in Florida (and other states with likestatutes), the siding installer–depending upon his approach–mightbe cutting it too close. In Florida, the state statute under whichadjusters are licensed says that a public insurance adjuster is“any person, except a duly licensed attorney at lawwho, for money,commission, or any other thing of value, prepares, completes, orfiles an insurance claim form for an insured or third-partyclaimant”

The statute also says: “Any person who acts as a resident ornonresident public adjuster, or holds himself or herself out to bea public adjuster to adjust claims in this state, without beinglicensed by the department as a public adjuster and appointed as apublic adjuster, commits a felony of the third degree.”

So if the siding installer actually does complete or file theclaim for the insured, he or she might be guilty of the unlawfulpractice of adjusting. I mention this statute because of thestatement in the readers letter saying that the installer willactually contact the homeowners insurer for the homeowner–that is ano-no.

But turn this on its head. Say a licensed public adjuster didthe same thing–sought out hail-damaged neighborhoods after a bigstorm and evaluated the amount of damage for the homeowner, andthen suggested the homeowner make a claim. That seems likesomething that would fall on the okay side of the line, so long asthe adjuster didnt do anything that might be construed as unlawfulsolicitation of business under the state statute or departmentregulation.

So you be the judge. Scam, or just business?

Bruce Hillman, JD, is Editorial Director of Risk andInsurance Markets for the Professional Publishing Group of TheNational Underwriter Company, in Erlanger, Ky. Questions andcomment are invited at [email protected].

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, May 27 2002.Copyright 2002 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.