FC&S Online constantly hears about how insurance companies are on a mission to underpay claims whenever and however possible. We hear this frequently from agents and adjusters with whom we interact with in our daily analysis of coverage language. But what about situations in which claims are overpaid?
I recently began questioning how much money insurers hand out needlessly because their adjusters don't have enough training or are so overloaded with work that they can't possibly handle all of the files they are assigned due in part to a claim a family member recently made.
A few months back, my sister's dishwasher piping burst, which flooded her finished basement and the kitchen sub floor. She filed a claim and received immediate action because the loss was deemed an "emergency" by her insurance company's claims triage unit. The field adjuster came out, estimated the damage, and made arrangement for repairs under the company's preferred contractor program.
The glitch arose when she decided to replace the floor in the basement bath/laundry room with ceramic tile instead of the linoleum that existed before. Being the most honest person on the face of the earth, she was willing to pay the difference on the upgrade.
That's where the insurance company lost out.
The repairs were made to everyone's satisfaction and the contractor was paid. My sister called the adjuster and the claims office a number of times to ask how much she had to repay. After a number of excuses — waiting for paper work, too many other emergencies, "we'll get back to you," the adjuster is over booked — she resigned herself to accepting more than she felt entitled to.
I'm sure the upgrade was only a few hundred dollars, but it raises the question: How often does this happen? Obviously the overpayments rarely hit the news or the courts — the situations we hear about are when the insurer is accused of trying to cheat the insured.
I wonder if this is just another example of false economies. Maybe in the macro sense the cutbacks in staff have saved money, but I doubt that anyone ever quantifies the other side of the coin because people rarely complain when an insurance company pays them too much.
What do you think?
This blog post is meant to provide insights into insurance coverage issues in general, and does not necessarily account for the differences in law and practice in different venues. As such, the opinions expressed within should not be construed as legal advice for the unique circumstances of any particular claim or suit.
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