In 2012 I published The Christchurch Fiasco: the Insurance Aftershock. The book was developed as a result of my frustrations with IAG/State Insurance and the treatment of our claim which five years later is still, unresolved. That book was not about our claim per se but examined the insurance industry as a whole – looking at how insurance works from a global perspective.
Following the publication of my first book, I am now in the process of completing a second book, The Anatomy of a Claim: A Policyholder’s Guide To Property Insurance which focuses on the practical steps required to ensure that YOU, the policyholder, get the most out of your insurance policy. While it is not legal advice it will assist the policyholder in understanding your rights and the ins and outs of what you, the policyholder is expected to do to prove your claim. It is not my intention to use this site to publish it all, but a few basic reminders here may be useful.
We are often told that an insurance policy is the single most important security investment a homeowner can make to ensure the protection of his/her home and contents. Yet most of us have no idea how the policy is actually structured or what we are required to do in order to have it work to our best advantage. In addition, the insurance industry does not produce any form of publication to assist homeowners, meaning that the public is unaware of their obligations and the correct procedures to pursue a claim. This confusion assists the insurer and usually results in delays in settlement for the policyholder. Insurers are in the business of collecting premiums, not paying out on major claims and it is important that the policyholder understand the ‘product’, the anatomy of a claim, and learn the rules in order to play successfully.
So in the next couple of blogs I will concentrate on providing some information in the latest book which will assist you in playing the game. My intention is that the book will show you what you need to do and what needs to happen in order for you to improve your chances of a successful outcome.
So let’s start with understanding the ‘product’:
I think most would agree that what we have all found during this post earthquake phase is that nowhere in our policies does it actually explain how you, the policyholder, is supposed to go about doing what you need to do to get through the insurance policy obstacle course and find success. Over the past five years many people have been grappling in the dark, trying to work out how the process actually works and what they are required to do. Meanwhile the insurers use the policyholder’s lack of knowledge and understanding of the product to manage these claims to their very best benefit in terms of both time delay and minimisation of cost. The larger the claim, often the larger the challenge for the policyholder.
Once a disaster has taken place in New Zealand there are four parties involved in the resolution of the claim:
- You the ‘policyholder’;
- The Earthquake Commission (EQC);
- The insurer (who will be responsible ultimately for paying the bills if your claim is ‘over cap’);
- The service providers – such as engineers, architects, builders, surveyors etc. (whose costs and work will ultimately determine the final cost of the disaster to the insurer). See https://thechristchurchfiasco.wordpress.com/2015/07/17/finding-the-cold-hard-facts-and-ensuring-the-most-cost-effective-solution/
The problem with this mix of parties is that each one has their own agenda and their own view of the event – the only aspect of the claim they share in common is their financial motivation -minimizing your claim and maximizing the insurer’s savings. The big problem for the homeowner is that in order to resolve your claim at some point, each of these parties is going to have to agree on ‘the price’. In order to reach that point of agreement, considerable time may be required and the point of agreement will be heavily determined by how well you, the insured, have prepared and documented the claim. This is critical – as policyholder, you have to be dedicated to being very well prepared.
Most of us are now well past the first phase of the claim process so even though this part of the process is equally important, I will not concentrate on those early stages other than to say that once the incident has taken place, you will have documented the damage, called your insurer and instigated a claim (rung EQC and have claim numbers), got your insurance certificate (which shows that you have paid your earthquake levies), EQC has instructed an assessor or loss adjustor and they have made an appointment to come and visit the property to make an initial assessment. The EQC assessor will determine whether the damage is over or under the EQC cap. If it is over, the insurer will then be notified and the process begins again. They will then send their loss adjustor to determine the extent of damage.
Here are a few initial steps that you should take to ensure the best possible outcome for your claim.
Documenting your loss: If you are having to pay bills because of the situation you find yourself in e.g. accommodation, meals, transportation, telephone calls, plumbers, emergency services make sure you keep all these receipts for later payment by the insurer. Documenting your loss is critical. And document every aspect of the damage – photograph or video it. Have other people witness the damage e.g. friends or neighbours.
However do not use the services of friends or family in an attempt to save the insurer money as this is likely to backfire. Unless the services are speciality services provided by recognised professionals, the insurer is likely to deny any of the costs associated with your claim. If you have emergency work done and you did it yourself the insurer will not reimburse you as you ‘did not incur any expense’. I know this seems counterintuitive, but this is how the policy works. The insurer has to be able to justify all bills to be paid. Make sure you employ a specialist to save your property and time – insurers will be obliged to pay for these services.
Damage mitigation is critical – if you fail to mitigate further damage, the insurer’s claims staff may attempt to deny the claim e.g. a home was badly damaged, the roof leaked or a header tank came loose during the earthquake and hundreds of litres of water spill through the property – as the years have gone on the delay in the unresolved claim has caused mould damage and further damage to contents. The claims manager may simply deny the claim saying that the damage falls under the heading ‘hidden gradual damage’. In some instances the insurer will state that the policyholder failed to take appropriate steps to avoid additional losses. Of course the fact situation is always more complicated than at first sight. In these situations the issue of proximate cause arises. This is a legal term that refers to whether or not the resulting damage that occurred was a direct result of the earthquakes and the issue revolves around causation i.e. what was it that caused the actual damage. Sometimes there may be more than one effective cause of damage. An insured is under an obligation in good faith to take reasonable steps to minimize loss, but this requires only what is reasonably necessary, having regard to the interests of the insurer as well as the insured’s own interests. If an insurer denies your claim after you have followed the correct steps, then legal advice is likely to be required.
Mitigation may involve the costs associated with employing specialists to carry out emergency repairs etc. Be sure to keep all receipts associated with this work. It is not a good idea to employ family members or friends to carry out such work or do the work yourself. If you do you may be at risk of the insurer refusing to honour or to pay the account.
Save everything: don’t throw anything out. Put everything that has been damaged and that the loss adjustor is likely to want to see, to one side so that they can see the evidence of the damage. Do not remove anything until you have been told by the insurer that it is OK to do so. And make sure you’ve got a dated note of that conversation. Make lists of damaged items, the cost at the time of purchase and the current replacement cost. This is time consuming, but essential.
If you are communicating with the insurer by letter and not email, make sure you use certified mail. With a return receipt requested. Having a certification trail, this eliminates any doubt.
Many policies state that you must ask the insurer before you spend any funds – if that’s the case in your policy then be sure to write and ask your insurer to pay for storage of furniture or accommodation etc. If you have asked your insurer and they refuse to accept the request and later more damage occurs, they can then hardly tell you that the damage is because of your failure to mitigate There is, of course, a lot more to it than these few pointers, particularly when it comes to dealing with experts/loss adjusters/claims managers etc. I will cover some of these issues in later blogs.