Hail Column Spurs Flood Of Responses

Well, when Mr. Hillman had leaks in his own attic and bedroom repaired in his "fairly old roof," the contractor claimed to have found hail damage, and said he would be pleased to verify that for insurance reimbursement.

Mr. Hillman wrote that he didn't feel right about putting in a claim, but his wife argued that they had paid for coverage, hail damage was indeed covered, so why not file a claim?

Mr. Hillman then described another part of his dilemma: He had just been notified by his agent that his 15-year association with his insurer was going to be non-renewed due to having two losses in three years. He went on to decry the lost social compact between insurance companies and policyholders, speculating that if trust and good faith are lost, and both sides merely look at the financial bottom line, both will suffer.

He said he wasn't sure what to do about filing the claim, and asked readers: "What would you do?" They answered in droves. Some of the responses follow:

From Cheryl Azar, a personal lines account manager for the Colonial Insurance Agency Inc. in Montgomery, Ala.

"You might start wishing you had filed the claim when you start getting prices for rewriting your coverage after you have been non-renewed and they won't write you because your roof has not been updatedand/or you quit gasping because of the jump in premium, loss of coverages, and the high deductible you have to swallow.

"I don't know how your insurance market is, but I would imagine you are going to pay big bucks for insurance for at least the next three years–three times the normal annual premium, with a $2,500 deductible. If your home is mortgaged, your monthly payment will go up proportionately. Try explaining paying for a roof and the mortgage payment increase to your wife.

"I don't know what I'd do in your situation, but I know what my husband would do. He'd file the claim.

"I am sorry you find yourself in this position. I find myself counseling clients or prospects every day on some variation of the same scenario–it is really getting old. I've been doing this for 20-plus years.

"Your comment about insureds and insurers being partners is correct, but we're not in Kansas anymore, Dorothy. Insurers do not look at you and have moral thoughts about it being wrong to cancel you. They look at you as a number and now a liability–simply a way to make money–and since you are no longer doing this, you are gone. They are making a business decision based on the information they have, and I think that you must make a business decision based on your own situation.

"I hope I made you laugh, if nothing else. Good luck. I did enjoy your column. I'd really be interested in hearing how this story ends."

Then there was Kathy Wistrom, an account manager at Business Insurance Specialists Inc. in Brookfield, Wis.

"Well, we live in Wisconsin and had ice damage to our roof. As a result, water damaged the roof and ceiling drywall in two bedrooms. We reported this to our insurance agent just in case there was more damage than we could see.

"My husband is a master carpenter and our roof was 20-years-old. When spring came, he went up on the roof and in the attic to do an inspection. There was minimal damage and we decided to replace the roof. Needless to say, we did not file a claim, as the roof needed to be replaced anyway. We and our neighbors did the work on the outside, and my husband did the repairs to the dry wall on the inside, all for the cost of materials, a little sweat equity, and a dumpster.

"Sure we might have been able to insist that the insurance company pay for the materials and reimburse us for the labor. But it wouldn't be right, and who needs the hassle? Let's face it–dealing with adjusters is right up there with a root canal.

"Like you, we believe that insurance is for the big stuff."

Let's move on to Bill Meier of Meier Insurance Agency Inc. in Bloomington, Ind.

"I have been in this business for 43 years–10 of those with large national companies working with agents in the field. I would very strongly advise against turning in the hail claim at this time as long as the roof is viable.

"You are currently being canceled by the carrier that has evidently had you insured for 15 years due to two claims in three years. If you go into the marketplace with three claims in three years, a cancellation, and a 110-year-old home, you will find that it is going to be very difficult to get decent coverage. The rates will be very high, the mandatory deductibles will not be to your liking, and the coverage will be undoubtedly very restrictive.

"This is to say nothing about the quality of the claims service from carriers that write 'distressed' business, which is the category you will be in with three claims in three years.

"What your company has done is certainly not without precedent, as you pointed out in your column. My suggestion is to have your current agent go back to the company and see if there isn't something that can be done to keep the coverage for you. It might be acceptable to them if you opted for a higher deductible. Sometimes a company will make an exception for a good agent. If they will not, perhaps your agent will have another company that will, but my feeling is that will be impossible if you turn in the third claim. Good luck."

From Berry B. Adcock of Cole & Durham Insurance Inc. in Madisonville, Ky.

"There are all sorts of quotes to give you: 'Right is right, wrong is wrong,' etc., etc., not to mention the 'Golden Rule.'

"I think that knowing I have done the fair and proper action is worth a lot more than a new roof. This is what I have taught my 21-year-old business student daughter. You will get a bloody nose every now and then, and some will laugh at you, but in the end it is your decision. This certainly is not a great answer, but it is the one that works for me, and in the end that is the best."

From Frank G. Gallina, a commercial underwriter in Hamilton, Ohio, who emphasizes that he is speaking for himself alone, and not his company (which shall remain anonymous.)

"You asked, 'What would you do?' You have two elements to consider–a moral issue and a practical issue.

"If you believe the roof needs to be replaced because of hail, then you could turn it in. If hail damage occurred but was really immaterial to replacing the roof, then I don't think you should turn it in.

"Your current carrier is non-renewing you due to two losses in three years. Another carrier may have a threshold of three claims in three years. If you turn in this roof claim, whether it is paid or not, you might be cutting off a portion of your potential market for coverage.

"Many underwriters (and expert systems) count it against you whether the loss is paid or not because it costs money to set up a claim file, investigate the claim, etc. In addition, I recently read that losses on your house might make your house less attractive to a buyer because some carriers look at the house, not the insured, when determining whether to offer coverage.

"In a nutshell, Bruce, I doubt that I would turn this claim in."

From Richard D. Gund, director of legal affairs of Barney & Barney, LLC in San Diego.

"What would I do? I think I'd invite the insurer's claims representative out to have a look at my roof. I'd do that by tendering a claim to them as is my obligation to protect my rights under the policy. The insurer doesn't have to agree with the roofer's assessment, and they may well not. In that case you'll have a more difficult decision to make.

"I'm of the opinion that insureds should not be timid about putting their carrier on notice of a potentially covered loss. Insurers have an obligation to conduct an investigation. In many states, if not all, that obligation is statutory.

"I'd always advise a policyholder to fulfill his or her end of the bargain by paying the premium on time and reporting claimsin a timely manner. Thereafter the insurer has its own set of rights and duties that govern or should govern its conduct.

"Note that this is distinctly different from creating a loss or claim, or exaggerating the amount of a claim. Your wife has a point. You and I went to law school and presumably not to contractor's school or contractor's licensing school.

Thanks for sharing your story and inviting comments."

These are six reader responses printed more or less in their entirety. Approximately 20 other readers provided their opinions. Several advised to make the claim. "The carrier has received a full premium to pay full losses," and, "You're a homeowner first and an insured second," and, "An insurer sold an insured a promise to indemnify the insured from loss according to the terms and conditions of the contractAs long as you are truthful, it is your right to make them uphold their end of the contract."

Almost an equal amount advised not to, either due to practical considerations in getting new coverage or because of ethical considerations.

Some readers bemoaned the loss of the insured/insurer partnership, along with Mr. Hillman. "Wonderful editorial. Can you e-mail it to every CEO of every insurance company. Those well-meaning but insulated decision-makers are out of touch with reality. To cure the patient, let's cut of its leg!" and "The unspoken social contract between insureds and their insurers is, like so many other intangibles of past years, going the way of the buggy whip. We need to focus on how to reinstill that feeling of partnership without negating carriers' rights to build profitable business."

Well, Bruce? What DID you do and why? Tell us in your next installment of "The FC&S Answer," scheduled for publication in our Oct. 28 edition.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, September 30, 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.