Builders, Adjusters and Insurers Join Florida Insurance Consumer Advocate For Roundtable Forum on Claims Estimating

Jul 30, 2009

Florida Insurance Consumer Advocate Sean Shaw presided over a roundtable meeting on July 23, 2009 in which the insurance and home repair/remodeling industries jointly explored how property insurance claims and resulting repair estimates are developed, and what can be done to bring uniformity to these processes.   Participants included insurance company representatives, catastrophe adjusters, Florida Home Builders Association representatives and general contractors.

Convened by the Office of the Florida Insurance Consumer Advocate, the Claims Dispute Resolution Roundtable (“Roundtable”) was prompted by numerous consumer complaints from Floridians who have reported stressful experiences with the process of insurance-related mediation, appraisal and litigation related to damages that occurred during the 2004/2005 hurricane seasons. 

Mr. Shaw, who opened the meeting, explained that initial claim disputes apparently occur when there is a difference between a damage estimate made by the insurer and a repair estimate made by the contractor.  He said that it is his understanding that many insurers often use Xactimate, which is a detailed, computerized claim estimating system, whereas building contractors usually provide a more general-often handwritten–repair estimates based on their own experience.  Since no direct comparability exists between the two estimating processes, discrepancies cannot be easily identified and this disconnect is often where initial claim disputes occur.

Mr. Shaw said that he believes that all parties involved in the claims process would greatly benefit if a simplified or uniform method of estimating the cost of damages/repairs could be developed that would allow disputed issues to be identified and resolved in an expedient manner.  He then outlined the goals for the meeting:

  • To help Floridians get back into their homes after a loss and avoid the frustrating aspects of the claims dispute process.
  • To allow contractors to expedite the repair process in order to mitigate further damage. It was noted that this is particularly important in the aftermath of a hurricane, when so many Floridians are looking to hire capable contractors.
  • To help insurance companies control the costs of claims, which increase correlatively with the length of time they remain open.

These goals are expected to reduce the expense of mediation, appraisal, litigation and ultimately, insurance premiums.

The following insurance and building executives participated in the Roundtable:

  • Sean M. Shaw, Esq., Insurance Consumer Advocate
  • R. Terry Butler, Senior Attorney, Office of the Insurance Consumer Advocate
  • Zac Extejt, Charlotte County Seawalls, Inc., Florida Home Builders Association, Port Charlotte, FL
  • James P. Romerill, Chief Claims Officer, Tower Hill Insurance Company, Gainesville, FL
  • Darius H. Grimes, Disaster-Smart Consulting, Inc., Cantonment, FL
  • Yong Gilroy, Senior Vice President – Claims, Citizens Property Insurance Corporation, Jacksonville, FL
  • Mark Rodrigue, Lone Wolf, Inc., Tallahassee Builders Association, Tallahassee, FL
  • Paul G. Neilson, Account Manager-Property, Travelers of Florida, Tampa, FL
  • Carl Lott, President, U.S. Cat Adjusters, LLC, Palmetto, FL
  • Bert A. Kedroe, Director of Claims, Universal Adjusting Corporation and Universal Property and Casualty Insurance Company, Fort Lauderdale, FL
  • Bill Werther, Vice President Claims, American Traditions Insurance Company & Modern USA Insurance Company, Pinellas Park, FL
  • Stacey A. Giulianti, Chief Legal Officer, Florida Peninsula Insurance Company, Boca Raton, FL
  • Terry Maricque, Claims Section Manager, State Farm Florida Insurance Company, Jacksonville, FL
  • Tami Torres, Director of the Division of Consumer Services, Department of Financial Services, Tallahassee, FL
  • Ricardo Lewis, Academy of Leadership and Excellence Program (A.L.Ex.) – FAMU Intern, Office of the Insurance Consumer Advocate, Tallahassee, FL

Lively and varied discussion occurred during the first phase of the meeting.  The following points were raised, among others:

  • Sixty percent of all insurance-related disputes involve claims handling. This number is substantially more likely to involve claims made as a result of a catastrophe.
  • Often, a contractor first will evaluate a job weeks after an adjuster, only to find that a “simple” repair job became far more costly and complex because of the lapsed time and/or a homeowner’s failure to mitigate existing damage. In fact, contractors have often heard that some property owners believe that existing damage should not be mitigated because of the misconception that their insurers would not make accurate adjustments, thereby yielding less of a claims payment.
  • Homeowners should be informed of their obligation to mitigate damage. Insurer representatives agreed and added that, after a storm, insurance companies typically allow latitude for a homeowner to be compensated.
  • Homeowners are often unaware of their contractual responsibility to notify their insurer of any contractor price dispute, however, the timing and communication of these types of notifications by the three parties involved is often difficult, misguided or non-existent.
  • Contractors and insurance companies view a repair job differently. A contractor takes more of a global approach to assessing the damage and what needs to be repaired, whereas insurers use an itemization method.
  • The need for repair versus replacement is a frequent point of contention in the estimating process.
  • Meeting building codes and/or pleasing the homeowner through issues such as color matching become difficult if the full extent of a job is not initially known or determinable. Guidelines on how to address these various types of situations already exist in state and local building codes, which vary because they are revised every few years by state and/or county governments. This makes interpreting the application of, and compliance with, multiple codes difficult and leads to more unlicensed contractor activity.
  • During the 2004/2005 Florida hurricanes, inconsistent methods of interpreting the building codes were used in the estimate process. Because city and county building departments were administering codes differently, especially in application to “trigger points” such as roofs, it was different for adjusters to be consistent in their work.
  • If initial construction was not code compliant, should the insurance company be required to repair it to its former non-compliant state, or to construct it to code?
    • For example, 2004 building codes required that a roof replacement have the oversight of an engineer.  As a result of many homeowners not wanting to bear that expense, more unlicensed work ensued.
    • In post-Hurricane Charley, Charlotte County adjusters assigned percentages, rather than dollar values to damage estimates.  Thus, if a code specified that total roof replacement was necessary for roofs that were damaged by more than 50 percent, the percentage estimate would clearly specify that a roof replacement was necessary according to applicable code.
  • It is imperative to address the fact that during the past two years, 80 percent of the building departments throughout the State of Florida have laid off staff, or have been eliminated altogether. The resultant lack of inspection personnel required to approve projects is expected to delay the claims process even more.
  • Insurance values also can be affected if unlicensed contractors are hired (because of price or availability) and the underlying work is not completed in compliance with applicable code. The contractor hired to repair the damage may have to remove an entire roof, for example, if the damaged roof had not been installed to code. Thus, unlicensed activity is as much of a problem for insurers as it is for contractors.
  • Implications of wind versus water damage litigation should be considered in creating estimates.

    It was agreed that all parties involved-property owners, insurers and contractors-need education and improved communication.   Mr. Shaw asked the Roundtable participants to present their ideas on how to accomplish this.

    During the second half of the Roundtable, Edmund Webecke, Vice President of Xactware, gave a presentation of his company’s claims evaluation and estimating software.  Xactware can also track adjusters’ performance and response times.

    Mr. Webecke explained that Xactware is used by insurance professionals to evaluate an average of 10,000 claims each day and, during its history, has been used to process approximately 18 million claims worth $122 million.  He said the company is an independent third party between carriers and contractors and facilitates faster estimates and more efficient repairs.

    Mike Fulton, General Manager of Xactware pricing data services, explained that there are 430 insurance markets in the United States and 20 in Florida.  Each prices supplies and labor differently.  He said estimates can vary widely, but the software gives a basis for establishing a more accurate estimate. The adjuster actually creates a picture of the house on the computer with exact measurements.

    The Xactware software has ZIP code-based price lists for all building materials and labor costs, which are updated monthly.  It also computes the costs of complying with local building codes and makes comparisons of adjuster and contractor estimates to help quickly resolve disputes.

    Mr. Shaw categorized the recommendations made by the participants at the end of the meeting and stated that he intends to have a follow-up meeting to further explore implementation of these recommendations.  The recommendations include making improvements in the following:

    Communications:  Roundtable participants stated that disputes often arose because of poor communication between insurers and contractors regarding insurance coverage and the basis for specific repairs.  Several participants recommended that contractors, home builders and inspectors be required to educate themselves for a certain number of hours in homeowners’ insurance policies as part of their basic Continuing Education requirements. Participants also indicated that part of the continuing education should be focused on the scope of work authorizations provided from an insurer to an insured after an event. Insurance company representative stated that, if contractors and builders used a uniform form to submit estimates to insurers, a great deal of confusion could be avoided.

    Building Code Issues:  Roundtable participants indicated that statewide uniformity in building codes and building code enforcement would be preferable to the current system of local government ordinances.  Insurer representatives emphasized that it is important to know which repairs are recommended as a law or ordinance upgrade, and which are repairs for damage from a covered peril.  Additionally, a recommendation was made that out of state contractors be required to take a 8 – 16 hour course regarding the Florida Building Code prior to working in the State.

    Demand Surge: Mr. Shaw stated that he plans to form a separate focus group to study demand surge.

    Hurricane Deductibles: The group recommended ongoing education for consumers on their deductible and how it may affect them in the event of a claim.

    Public Adjusters:  In response to insurance company representatives’ statements that often disputes arise with public adjusters, rather than builders or contractors, Mr. Shaw recommended that another focus group be formed to study the role of public adjusters in claims disputes.


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