Duties After a Loss
By Christine G. Barlow, CPCU
From the January 2015 issue of Claims Magazine
Every insurance policy has things in common, covered perils, definitions, exclusions, and conditions. While the conditions at first glance are self-explanatory, there is still room for confusion. States have even added statements concerning proof of loss to their fair claim handling procedures in order to help avoid duplicated efforts.
The items that cause the most confusion are the proof of loss and inventory form. The ISO HO 00 03 requires an inventory of damaged personal property showing the quantity, description, actual cash value and amount of loss. Bills, receipts and related documents that justify the figures are required. However, not all insureds keep receipts, so an insured may not have the necessary documentation. While the policy asks for it, there is no statement that without the documentation that the claim will not be paid. Many carriers will accept affidavits from others vouching for the insured that they owned something highly valuable or significant; friends and neighbors will likely know about an expensive fifty inch television or a fancy leather sofa, even if it is a few years old.
We received a question recently from a subscriber where the carrier was requiring specific receipts and documentation before providing any coverage. The insurer's statement in part was as follows: “If proof of ownership is not shown for the items, they will not be covered.
We will be having Servpro and CRDN provide us a detailed list of all items they inspect. The items we are able to match exactly to the inventory form, we will not need proof of ownership for. However, if CRDN lists flip flops on their list and we are not able to verify these are the Nike flip flops listed on the personal property inventory, we will still need proof of ownership for this item. It is your responsibility to prove the items on your inventory form. As a courtesy, we will be going through trying to match as much as possible on our own.
Proof of ownership will also not be necessary for any items that we clean or restore.
Proof of ownership can be in the form of receipts, invoices, warranties, registrations, shipping receipts or bank statements matching the exact amounts. For example, line 135 lists a pair of flip flops purchased from Nike.com. A bank statement showing a purchase from Nike.com for this amount would be sufficient.” The carrier was taking the position that if the insured cannot provide receipts, bills, or invoices for the items claimed, the insurance company does not owe for these items. According to our subscriber, this is happening more and more often.
The policy does not require insureds to keep every receipt for every item ever purchased; the statement requiring the signed, sworn proof of loss clearly states that the statement must be to the best of the insured's knowledge and belief. While with the proof of loss the inventory is required, and the inventory statement states that “all bills, receipts and related documents that justify the figures in the inventory” are to be attached, there is nothing to say that if the insured does not have such documentation that the claim cannot be paid. In most losses there is salvage; most property is damaged, and not totally obliterated.
As far as retaining receipts, it is difficult for the carrier to demand such when due to the threat of stolen identity individuals are encouraged to shred documents such as bank statements and credit card receipts. Various consumer agencies recommend keeping ATM and credit card receipts only one month, just long enough to balance the checkbook and pay the bill. Keeping the bill or receipt is only recommended for products with warranties, and not every sweater, dish, towel the insured has ever purchased. These same groups encourage throwing out general receipts immediately. The IRS recommends keeping tax receipts for six years. And, what if the receipts burn with the property? Ideally they'd be kept in a fireproof safe, but ideals and reality are often worlds apart.
It is unfair to the insured to deny payment if the insured cannot produce receipts unless there is a question of fraud; while fraud is an issue, many people honestly do not have receipts for every item they own. If the insured is cooperative with the carrier and tries their best, the claim should be paid. Some insureds may have household inventories but no receipts; many carriers provide online inventories that insureds can fill out, and many agents and carriers recommend that their insureds not only make and inventory but also videotape their belongings. However this cannot be relied on; many insureds do not follow through on such recommendations, regardless of how often they are presented to the insured.
At the time of a loss, many insureds are upset and confused. Many will cooperate to the best of their ability, but the matching of a receipt, bill or bank statement to every piece of property damaged is difficult, if not impossible for many insureds. Incidents of fraud surely must be investigated, but unless fraud is an issue, working with the insured in reviewing the salvage and the list of items is the best course of action, even if the insured does not have proof for every possession. Without a household inventory it is impossible for most people to list every possession from memory; likewise, with the common recommendations to destroy receipts, using them as proof of loss in a claim may become more and more difficult.