How and why have victims been short changed?

Insurance carriers make more money the less they pay in claims. Many people involved with the claims adjusting process make more money, directly or indirectly, by reducing claims payments.

Victims are shortchanged by their property insurance and flood insurance carriers in the same ways. Adjusters are often very poorly trained and have little experience. Inexperienced adjusters have no reason to doubt their training and their training is often at odds with the policy language. This situation allows carriers to reduce their losses thereby increasing their profits.

Yet in a catastrophic situation, victims are often suffering from severe stress and in some cases shock. They are at their weakest and most vulnerable. Victims have little reason to doubt the adjuster who speaks with authority, the “nice young man that called before he came and offered to bring me something from the grocery store, pet food or medicine.”

The nice young man arrives, and proceeds to tell the victims all the reasons why damages aren’t covered, or in many cases, presents an estimate of damages that cannot be verified with a knowledgeable third party. Months later when the victim is able to obtain a contractor, it becomes apparent that an offer for pennies on the dollar was received from the adjuster. Unable to commit to the repairs, the victim tries to contact the adjuster, only to face an endless sea of phone calls and red tape. This approach works for the insurance carriers. In the industry it is referred to as stonewalling and low-balling.

In the end, most victims get worn down by the process and accept what they were offered. In many cases, their stories have ended in bankruptcies, divorce, stress related illnesses and a myriad of consequential damages. If the victim does not succumb to the pressure, without proper leverage, they will next learn that it is in the carrier’s best interest to litigate the claim.

Flood adjusters and their carriers often tell victims that they have nothing to gain by shorting them – the loss will come from premium dollars held in a treasury account. However, the carriers do not make it known that they fear if they fairly pay a flood claim, it will set a precedent on the payment on their non-flood loss. This is one reason that flood claims are routinely low-balled.

For example, if the adjuster fairly pays a flood claim for the first floor, drywall at $2.00 per square foot for example, then the adjuster will also have to pay the same rate on the second floor where a tree fell through the roof. In the case of the tree damage, the related costs would come out of the carrier’s pocket. In an effort to lower the carriers’ loss, in many cases the adjuster will tell the victim that federal law requires that a certain price not be exceeded, say $1.46 for example. That is not true; however, most victims have no way to know that.

Last Modified: 100305 0029