Is This A Scam, Or Just Good Business?

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

“In the past year or so, we have started to experience siding installers seeking neighborhoods for hail damage and telling homeowners that their damage is covered under their HO policy, and that they will actually call the insurance company for them if necessary. These individuals are able to redo complete neighborhoods at the insurance company's expense. Often the hail damage is from months prior. Are other parts of the country experiencing this scenario, or is this an old (for lack of a better word) scam that has been around?”

It smelled a bit bad to me at first, also. I took it down the hall to the FC&S editor/analyst who handles most of our personal lines coverage interpretation, and her first response was, “Well, the Gypsies have moved” (a reference to what really is an old scam here in Cincinnati–migrant con artists who annually hit the city selling shoddy blacktop jobs to unsuspecting homeowners).

But then we got into it a bit more. Hail damage to home siding is generally covered under the homeowners policy, right? Does it matter how the homeowner is made aware of the damage, the extent of the damage, and the insurability of the damage? Is a siding contractor who informs a homeowner that there is hail damage to the dwelling and that hail damage is payable under his insurance a scam artist, or just a clever marketer?

The FC&S user writing in sees this as a play beneath the belt, somehow shady. But in his letter he affirms that there may be insured damage: “Often the hail damage is from months prior.” Does the fact that the damage was “from months prior” make it any less covered, assuming that we dont get into a “timely notice” situation (we think here that a few months delay in reporting damage that can be tied to a specific event–”that bad storm in March”–does not raise the specter of untimely notice by the insured).

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

In an example of one mans meat being another mans garbage, the close proximity of damaged homes aids the siding contractor drumming up business, whether or not the insurance company takes the brunt of the expense. However, it would be unlikely that one insurer would be on all the homes in the area–the risk would be more spread than that.

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

Interestingly though, in Florida (and other states with like statutes), the siding installer–depending upon his approach–might be cutting it too close. In Florida, the state statute under which adjusters 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, or files an insurance claim form for an insured or third-party claimant”

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

So if the siding installer actually does complete or file the claim for the insured, he or she might be guilty of the unlawful practice of adjusting. I mention this statute because of the statement in the readers letter saying that the installer will actually contact the homeowners insurer for the homeowner–that is a no-no.

But turn this on its head. Say a licensed public adjuster did the same thing–sought out hail-damaged neighborhoods after a big storm and evaluated the amount of damage for the homeowner, and then suggested the homeowner make a claim. That seems like something that would fall on the okay side of the line, so long as the adjuster didnt do anything that might be construed as unlawful solicitation of business under the state statute or department regulation.

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

Bruce Hillman, JD, is Editorial Director of Risk and Insurance Markets for the Professional Publishing Group of The National Underwriter Company, in Erlanger, Ky. Questions and comment are invited at fcs@nuco.com.

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

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Is This A Scam, Or Just Good Business?

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