Storm Damage 101

Now that Tropical Storm Irma has paid us a visit there are thousands of property owners with damage to their property. As a nearly 27 year veteran of the fire, water, and storm damage industry, I have seen dozens of storms and inspected thousands of storm damaged buildings. Here are a few things property owners should be aware of.

The safety, security, and comfort of your family comes first

  • A severely damaged home can be a traumatizing thing. Your first priority should be to secure adequate accommodations for your family. This can occur in up to three phases depending on the severity of the damage:
    • Immediately stay with friends/family for 2-3 days until you can fully understand your situation.
    • From there, move to an extended stay hotel, close to where you live if possible. Extended stay hotels usually have a nearly full kitchen and a separate area for sitting. This will be much more comfortable if you find yourself there for more than a couple days.
      • Virtually all homeowners and renters insurance policies have “Additional Living Expense” (ALE) coverage built in. Be sure you save every single receipt for every meal, bag of ice, bottle of water, extra gas, etc.!
      • This coverage only pays after you have incurred the ALE expense, so you may have to put the room(s) on a credit card or pay upfront and be reimbursed by your insurer.
      • Because of this, your insurer may “advance” you money for ALE’s. This is a welcome service they are providing, but beware. This “advance” is often booked in their accounting as an advance on your contents coverage. This means that they will reduce the amount of a contents coverage payout by the amount of the ALE advance. If you keep all your ALE receipts, however, they will then reimburse you that money back later under ALE coverage.
    • If your home can be repaired within thirty days or so, consider staying in the hotel for the duration. Your policy says that you are entitled to ALE coverage for “The reasonable increase in your living expense to maintain your normal standard of living while you live elsewhere.” (emphasis added) You should insist that your insurer pay for accommodations that resemble your normal standard of living. In other words, don’t allow them to cram your six member family into one hotel room.
    • If your home is damaged to the point where it will take more than 45 days to repair, consider renting a furnished house or apartment. This is a win/win for you and your insurer; the house or apartment is much more comfortable for you, and usually less expensive for them. Many insurers have departments that do nothing but find and pay for ALE accommodations, so be sure to insist on their help. Again, insist that they pay for a house or apartment similar to the home that was damaged.

Once you and your family are situated, it’s time to deal with the property damage.

  • Beware. It is at this early point that you are most likely to be taken advantage of, either by a shady contractor, an unscrupulous insurer, or both!
  • Dozens of tree companies, roofers, and contractors will flood into our area from all over the country. Some of them will be great people, but others will not. Be very careful dealing with an out-of-town contractor.
  • Hundreds of “storm trooper” insurance adjusters will flood into our area. It is likely that your claim will be assessed by one of them. It is also likely that they will not make a very accurate assessment of your damages and the costs to repair them.
  • It is likely that your insurer will offer to supply you with a contractor that they “recommend,” someone on their “direct repair program,” someone that they will deal with and pay directly. Be very careful here. While this may seem like an easy way to go, many of these contractors and “programs” are not run by your insurer. They are managed by third party administrator (TPA) companies whose sole reason to exist is to help the insurer pay less money on your claim. I don’t think insurers should pay more than necessary, but under these programs the cost savings are too often at the expense of the repairs, leaving you with shoddy and insufficient work that leaves your property less valuable than it was.
    • These contractors rarely have your best interests in mind. They did not get the opportunity to be at your home from you, nor will they get tomorrow’s opportunity from you. They get their opportunities from the insurer and/or TPA, and that is where their interests usually lean.
       Often, these contractors have pre-existing written contracts with your insurer that affect the way your repairs are handled. They are not likely to reveal the existence of this contract or what it says, though.
    • This creates a direct conflict of interest, and in my opinion is a serious ethical breach.
  • If your roof was compromised in the damage, it is likely that you have wet materials in your home that should be professionally dried. You should immediately seek out a competent mitigation company to do this work before further damage occurs.
  • A competent mitigation company will document your damage. They should provide you with documentation of:
    • The extent of the water damage and wet materials, otherwise known as a “moisture map.”
    • A drying record that details the wet materials being dried and provides a daily record of the moisture content of those materials. That moisture content should be declining daily, and should end with a moisture content that can be considered “dry.” In our area that is roughly 15%.
    • A daily record of the inside and outside temperature and relative humidity.
    • A daily record of the temperature and relative humidity of the air leaving the dehumidifiers. This allows the calculation of “grain depression,” and gives insight into the efficiency of the drying setup.
      • Here’s a hint: If they set up equipment, leave and don’t come back every day to check your home, they will not be able to provide you with an accurate drying record. And if they do provide one without daily readings it is likely a fake. I have seen this many times.
    • Proper structural drying can be expensive, and many insurers don’t like to pay for it. I don’t blame them, but that was the deal they made when they wrote your policy. Because of the expense, however, some insurers will pressure mitigation contractors to end the mitigation prematurely, call your home dry, and leave.
      • When I get a call from a client telling me that they have had water damage and someone has dried it for them, it is almost 50/50 that I will find that the home is still wet to some degree when I get there.
    • Along with proper structural drying, your roof must be made water tight again, at least temporarily.
      • That means getting any trees/limbs off your roof and putting on a heavy duty tarp.
    • It is very likely that any mitigation contractor will ask you to sign some forms.
      • These forms are actually agreements. Read these forms very carefully, and insist on a copy.
      • If the contractor cannot provide a copy that moment, simply take a picture of the signed form with your phone.
      • There are typically two types of forms you will be asked to sign at the mitigation phase of your claim, and sometimes both are on the same piece of paper:
        • A work authorization. This is simply a statement that you are hiring this contractor to perform some work. It probably won’t have a price on it, because usually the price is not known at that point
        • A direct pay authorization. This authorizes your insurer to pay this contractor directly from your insurance policy
      • Don’t sign any form that has blanks. If there are sections that for some reason don’t apply, fill them in with an “N/A.”
      • Should you sign these forms? I say yes, as long as they are filled out properly, and you have read and understand them.
        • A competent mitigation contractor needs the assurance of the forms. They need to know they will be paid, and it is likely that if you refuse to sign them they will leave, go to another job, and your home will still be wet.
      • There is one form that you must be aware (and beware) of. This is known as an “Assignment of Benefits” (AOB). This form basically gives the contractor your claim and all the benefits of it. It literally allows them to “stand in your shoes” as the insured. You sign one virtually every time you go to the doctor. I don’t recommend that you sign an AOB in a homeowners claim situation.
    • For the permanent repairs, select a competent, experienced, and likeable contractor that has your best interests at heart.
      • Investigate potential contractors:
        • Get references
        • Check their website and social media pages.
        • Ask for (and get) a copy of their liability and workers compensation policies.
      • Interview several contractors, but if you are making a homeowners claim, only get one estimate from the contractor that you prefer.
        • If your adjuster says to get more than one estimate, ask where the policy requires you to do that.
          • If you turn in more than one estimate to your insurer, you better like the low guy, because that’s who they are paying.
        • A competent contractor will try to reach an agreement with your insurer regarding the amount of damage and the cost to repair.
          • Georgia law, however, prevents them from “negotiating” your claim with your insurer.
        • A competent contractor will ask you to sign a contract for the repairs. I recommend not signing a contract until your insurer has agreed to pay the amount they are requiring.
      • Once the amount is determined and agreed on, your insurer should quickly produce a check. That initial check will likely only represent the actual cash value (ACV) portion of your claim and will be for less than the estimate of damages.
        • If you have a replacement cost value (RCV) policy, they will write another check later in the claim
        • If you have an ACV policy, this will likely be the only check you receive.
      • Your check will include all named insureds as payees, including your mortgage company (or companies). You will have to obtain the endorsement of all payees before any of the insurance check becomes spendable money.
        • If the amount of damage is small (generally below $10,000.00) the mortgage company will usually sign the check and return it to you.
        • If the amount of damage is larger, the mortgage company will usually deposit the money into an escrow account and pay for the work as it is complete.
      • You should immediately contact any mortgage companies and find out the procedure for the insurance check
        • They will most likely have a bunch of paperwork for you and your contractor to sign.
        • Never send anything to the address you mail your payments to. This guarantees that your insurance check will be lost and you will have to start over.
      • I recommend that you sign paperwork allowing your contractor to deal with the mortgage company with you. They have a serious interest in making things happen with the mortgage company, and also the expertise.
        • No matter who deals with them, or where they are mailed, the checks from the mortgage company will usually name you and your contractor as payees.

If you have serious damage, you should consider hiring a public adjuster to represent you in your claim.

  • However, not all serious claims require the expertise of a public adjuster.
  • Despite what the ads on TV tell you, your insurance company is not on your side. They can’t be. You and your insurance company signed a contract (a policy), and at all times you are both on opposite sides of that contract. This is particularly true in the event of a claim.
  • That’s not to say that they don’t care, or that they automatically will do the wrong thing. In fact, most insurance claims are settled fairly and amicably, particularly when a competent contractor is in the mix.
  • The reality, however, is that your adjuster does not represent you in the claim. They represent the insurance company, no matter what they may say. You have to represent yourself in the claim, or hire someone to do it for you.

A final thought

  • Once the damage occurs, you are stuck with your insurance company until it’s over. Hopefully you selected a good one.
  • If you have no problems with the claim, tell everybody, and stick with that company.
  • If you have problems with your claim, tell everybody. Everyone deserves to know what they can truly expect from their insurer, and until a claim actually occurs insurance is very much theoretical, composed only of a piece of paper and million dollar ad campaigns

  Shameless plug:

  • These thoughts, and many more, are detailed in my book “How To Survive Your Homeowner’s Insurance Claim (and still be friends with your insurance company).”
    Go to www.surviveyourclaim.com to learn more!

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