Following a major loss event, like a hurricane, insurance companies usually receive a higher volume of reported claims. When an insurance company is overwhelmed with the number of claims, the loss event is remotely located, or specialized knowledge is required, it generally hires independent adjusting firms to prepare an estimate of the damage. In adjusting insurance policy claims, independent adjusters represent the interest of the insurance company and prepare estimates at their direction.

Major catastrophes often shed light on the unfair practices employed by insurance companies.

It is essential for a prudent association to carefully review the insurance adjuster’s estimate prior to agreeing to the scope of damage and cost of repair. Examine whether they deliberately made a low estimate by missing items or providing incomplete measurements, and do not hesitate to challenge the estimate. Below are a few of the loss components that will assist you in determining whether the insurance adjuster’s estimate is fair and complete.

Establish Pre-Loss Condition

After a loss, the insurance company may want to replace or repair only the damaged section of the property, whereas the policyholder wants to be returned to what he or she had before. Consequently, disputes may arise regarding matching issues, age and deterioration of the insured item, maintenance and repairs or lack thereof. To get an accurate estimate of the cost to replace or repair the property, consider resources that will help you establish pre-loss condition, including but not limited to Board meeting minutes, maintenance and repair records, appraisal reports, contractor invoices and estimates. Be sure to keep these documents in a safe location.

Determine the Scope and Value of Loss

The insurance company’s estimate may consider a simplistic approach to repair. For instance, it may account for structural damage but primarily focus on cosmetic damage and fail to take into account the structural components. Alternatively, it may provide an accurate scope but it may low-ball the contractor’s cost. Document the damage and the amount spent to replace or repair the insured property. It is important to retain a reputable professional to inspect the property to determine the scope of repairs necessary to restore the property to its pre-loss condition, and to prepare an estimate for the cost of same.

Compliance with OSHA Standards

Many insurance estimates do not reflect the cost residential contractors must carry to comply with OSHA’s Fall Protection requirement. Determine whether this component of damages is missing from the estimate.

Entitlement to Overhead and Profit

The general rule for when contractor overhead and profit is to be paid is when the policyholder is reasonably likely to need a general contractor to complete the repairs at the insured property. Confirm whether the insurance estimate excludes overhead and profit in calculating the actual cash value.

Sales Tax

Review the estimate to determine whether it includes a separate line-item for sales tax and whether the line-items themselves include sales tax. Make certain that the estimate does not fail to include sales tax on the summary page.

As always, if affected by unfair practices employed by insurance companies in adjusting your claim, policyholders can and should contact an experienced insurance professional for guidance.