Editor’s note: The 2023 regular session of the Florida State Legislature closed May 5, but folks in the property insurance industry continue to offer insights to the struggling state market. This one is from freelance officer Ben Mandel.
I am an independent insurance adjuster. This means that I work for many different insurance companies. I am usually hired by an IA that has a contract with an insurance company to adjust insurance claims. Many insurance companies have a limited number of employee adjusters and have more claims than their in-house adjusters can handle. That’s why I have a job.
I’m a field debugger, which means I travel to the actual location of the claim. My job is to interview the policyholder, gather the facts of the loss, and document the damages. I take plenty of pictures so the managers and office bearers can see the damages and make appropriate payment, to the policyholder, for the loss.
As a field officer who has dealt with thousands of claims, I’ve seen some of the same things come up over and over again. There is no doubt that Florida’s strengthened building codes have helped reduce damages from catastrophic events. This is a step in the right direction, but it has created other problems. Claims have become more complex and claims that were once easy to amend are now more difficult as damages are no longer so easily visible. For example, with new building codes, shingles do not separate from roofs as easily and frequently as in the past.
We may come to a house and notice that most of the panels are still attached to the house. Some people think that if the shingles are still on the roof, there is no harm in doing so. After all, you see no harm. But upon closer inspection, we’ll often find wind damage to many shingles.
During a tornado or hurricane, winds pick up pieces of wood, trees, or other debris and smash them against the roof at speeds of 150 miles per hour or more. On an asphalt shingle roof, the shingles are still there, but dented; The granules loosened and the inner fiberglass mats were broken. If there is no leak today, it will leak in 3 to 6 months as the sun heats the roof in the day and cools it at night. This will cause the shingles to crack or open, causing the roof to leak, even though the shingles are still on the roof.
The most common property insurance claims are from roofs and from water. These two categories account for 70% of our claims volume. The water we are referring to is water from broken pipes inside the dwelling, broken or defective appliances (such as dishwashers, refrigerators) inside the dwelling, or water that enters the dwelling through a broken window, roof leak, or from above.
Most insurance companies do not include or have coverage for water that came in contact with the ground prior to entering the dwelling. We classify this as flood water and this risk is excluded from residential or commercial insurance policies. This is an important exclusion. Flood insurance is a separate insurance product that must be purchased separately and is most often a government-backed insurance product issued through the National Flood Insurance Program.
One of the first things we learn in claims adjusting training school is that housing policies used in the insurance industry are fire policies. Insurance was originally designed to only cover losses caused by fire. A fire policy is modified through the use of endorsements that can add or remove additional coverages.
There are many types of endorsements available. Some of the newer common approvals are for mold and water. Most housing policies now limit mold damage to $5,000 per policy. The water endorsement limit may be as high as $10,000 per policy. Endorsement may exclude wastewater backup unless you pay an additional premium.
These approvals are important for insurance companies to limit their maximum exposure and maintain premiums at a reasonable level.
Prior to introducing a $5,000 template credit, most insurance companies were responsible for coverage up to the policy limits. This caused lawsuits demanding that an entire house be demolished and rebuilt because someone found mold inside the dwelling. These claims may, or may not, have merit. The simple fact remains that they were costly claims to investigate and/or defend.
We no longer see these types of major claims. The reason is that the maximum payout is $5,000. The target has been taken out of the insurance policy and the bad guys can’t get in and scare a homeowner half to death claiming hundreds of thousands of dollars when the maximum payout is limited to $5,000. The winnings are not worth it for the bad guys.
There is a stark endorsement missing. This is the roof support. As a field proofreader, I have recommended this endorsement for the past several years. It really is just common sense. So far, I haven’t had any traction with it and every excuse why insurance companies don’t. I hope that changes soon.
It is my belief that the insurance crises we are currently facing in Florida could have been eliminated, or greatly reduced, by the adoption of a cap attached to the insurance policies. They have the endorsement in Canada, so it’s totally unheard of. Why don’t Florida insurance companies endorse the cap?
I think the Florida policy should have a roof support that provides maximum coverage. For example, roof coverage could be $20,000. This will be the maximum that the policyholder can get if their roof is damaged. If the policyholder wants more coverage, he can purchase more roof coverage for an additional premium. If the policyholder needs $30,000 worth of protection, they can purchase an additional $10,000 of roof coverage.
The insurance company may, during an underwriting examination, determine that the roof is old, but not leaking, and still serviceable. Instead of denying the policy or requesting a new cap before the policy is issued, the insurance company may choose to set the initial amount of coverage under the cap approval. For example, they may limit roof coverage to $5,000.
The endorsement will limit the maximum amount the insurance company has to pay on a ceiling claim. Currently there is no rooftop limit in Florida and the policy limits are an attractive target for bad guys. Without a roof endorsement, if the house has a $400,000 insurance policy, the bad guys look at that number and can claim the $20,000 roof and turn it into $120,000 from the insurance company. If the cap is upheld, the $20,000 cap will be replaced and the bad guys will have to figure out another way to take advantage of the system.
Let’s hope we find some insurance executives in Florida who understand what a roof subsidy can do for the industry. Surely this one-page addition could be written and executed faster than the Florida legislature passed the 120-page insurance bill last December.
Ben Mandell is an independent insurance adjuster, licensed in Florida and other states.
Threads
Florida claims