Will this invalidate an insurance claim?

Question

Hi All-

I purchased a property from a Trustee foreclosure sale. The risk of loss (fire, accident etc) passes on to the purchaser from the purchase date. It took me a few days to get in touch with the occupant who was a tenant at the property- not the most cooperative guy.

I insured the property a few days after the sale. The tenant, by oral agreement, vacated the property within a few days of the property being insured. He wouldn't sign anything or produce any documents.

Our agent was at site when the guy was vacating- so far so good.

Two days late, the agent carried out a spot check on the property discovering a massive water leak because of what appeared to be a faulty diverter.

An insurance claim was filed the same day due to the extent of the damage. The filed inspector came out almost two weeks later. From the very start, he seems to have an adverse/hostile approach. He has suggested that if the property didn't have heat, it "may" be a problem. A plumber has identified a faulty diverter as the cause of the water leak which has nothing to do with whether the heat was working or not. There were no burst water pipes etc.

It appears that between the tenant leaving the property and the day of damage (2-3 days) the power was off and potentially no heat, is that a ground for declining the claim. The adjuster attempted to suggest that a lack of heat may have caused the diverter to malfunction. I asked him whether that is the view he is grounding himself in? If so, perhaps I should be getting a public adjuster.

He changed his tone, telling me to help him so he can help me etc and provide certain documents which I don't have such as lease agreement etc, as the tenant was already in the property.

The focus of my question is, can the insurer reject the claim on the basis that the property had no heat? Even where lack of heat itself had no bearing on why the diverter gave out in the first place.

The damage is easily in 30K plus range, so I am quite concerned and  just being proactive.

Alisha Wilson · Answer

You need to request a "full" copy of your insurance policy. Look at the "Exclusions" section to see what exclusions there are related to plumbing leaks. Also, in the "Perils Insured Against" section, look at what is not covered related to plumbing leaks. Make sure you read through the entire policy including any endorsements because there could be exceptions and changes in coverage. I've been in the insurance industry for over 20 years and based on the facts you describe above, this sounds like it would be a covered loss. That said, there are typically exclusions for water losses that are long term in nature. Most states require an insurance company to quote the policy language they are relying on when denying your claim. If the adjuster is telling you the claim will be denied, make sure you ask the adjuster what policy provision they are relying on specifically. What page is it on, what section and subsection? And ask the insurance company for a letter in writing explaining the coverage determination.

Also, insurance companies will sometimes hire independent adjusters to do their field inspections and they may not be employees of the company, and have no authority to make coverage decisions. If that is the case, speak with the desk adjuster who normally is an employee of the company. This is the person who will typically make the final coverage determination.

Finally, document EVERYTHING. Take pictures of everything, get receipts, etc. The more documentation you have the better. And make sure you do everything you can to mitigate your loss. Most policies require this. Good luck.

Alisha Wilson · Answer

Jacob,Ultimately, it is up to you on how you choose to handle your claim. However, if it were my claim, I would take pictures of everything in its damaged condition before making any repairs or doing any mitigation. I would also put everything I want to do in writing to the insurance company. Most insurance policies put a duty on the insured to mitigate their loss and take reasonable steps to prevent further damage. In water losses, this could consist of removing water damaged building materials and placing drying equipment. I would write to the insurance company and include in the communication what specifically I would like to do to mitigate the loss (i.e. remove drywall, place drying equipment, etc.) in an effort to prevent further damage. I would indicate that I am putting the company on notice that I intend to do the work described on a specific date (something reasonable like within 10-14 days from the date the communication is sent) and request that the insurance company complete any necessary inspections prior to the start date. Also, I would keep any building material removed in the garage or some other location so that if the insurance company has to do an inspection after the repairs/mitigation are done, they can still inspect the damaged materials. The reason for all of this documentation is so the insurance company cannot claim that I prejudiced their claims investigation. As a final note, keep all receipts/invoices for the repairs. Typically, for a covered claim, insurance policies will cover the actual cost incurred for reasonable and necessary repairs made with building materials of like, kind and quality. Insurance policies normally do not cover upgrades. Hope this helps.

Jacob Beg · Answer

Thank you all for the insight.

@Alisha Wilson Do you think it is wise for me to start the repair process. I have the liquid funds to put the property back to its original state va having it sit idle while the adjuster makes a decision?

For example, it would be beneficial for me to take the damaged walls down vs starting to hire equipment to dry the walls that would have to come down due to water damage.

Or is it advisable to sit it out in case if the adjuster has to come out. They have issued a letter suggesting that the question of whether the loss is covered is still pending and they may hire contractors or investigate the issue further.

Any thoughts?

Nathan Patterson · Answer

Obligatory liability statement: So I don't know who you have for insurance or what your policy states so you would need to get specifics from your adjuster/agent.  This is coming from my experience as a previous property adjuster for a Big 5(Geico, Progressive, Allstate, State Farm, Nationwide?) insurance company.  This is my interpretation of the policy I had to enforce & in no means is insurance/claim advice.  I do recommend getting a copy of the policy & reviewing it &/or having the adjuster point out what they are using to deny, if it does go that way.

To address your question, yes an adjuster can deny a claim due to no heat being on in the property. It falls under that the Insured(you) must take reasonable measure to prevent damage form occurring to the insured property.  So if the pipe did burst in that 2-3 day time span, then there is a good chance it will be denied.  I recommend having a plumber inspect & take photos of the damaged pipe & have them include why they believe the pipe broke/burst.  Now if it did break due to age, then I don't see how it would be denied.  Typically a company won't cover the repair to the pipe but the resulting damage to the property would be covered.  This is just from my experience. It could also be denied if the break/burst happened prior to the policy taking effect, if so then you would need to go to the previous insurance company for potential coverage.  What the adjuster said "help me help you" is true.  As an adjuster we always try to find coverage but if the evidence is stacked against us then we will end up denying per what the policy states.  Lastly, they may deny due to long term damage, now this is rarer but I've had claims where the leak was going on for weeks or months(rooms completely full of mold from floor to ceiling).  It was blatantly obvious so that would also be a denial.  Now in your case, if it is a true 2-3 day leak time span then I highly doubt the long term denial would even be considered. Hate being the bearer of bad news but yea, this could be a denial due to no heat.  Get the plumbers report & take photos of the damaged diverter to provide to the adjuster.  If you have other questions, feel free to reach out & I can try & help.    Also, something I like to tell people, if you feel that the claim was unjustly denied/investigated you can reach out to your states Department of Insurance (DOI) & they can investigate for any potential wrong doing.

John Mocker · Answer

Jacob,

As Alisha mentioned, you need to review your policy.  The other thing you need to look for in the policy is a "warranty".  It is a part of the policy where you warranty (agree) that a condition exists.  I just renewed one with a warranty for heat called a Protective Safeguard endorsement.  Wording was as follows:

"DOMESTIC WATER SHUTOFF WARRANTY; PIPES DRAINED OR HEAT MAINTAINED AT 60 DEGREES DURING THE DATES OF 10/1 THROUGH 5/1 TO PREVENT FREEZING PIPES."

These type of endorsements are more common on excess (suplus) lines policies from carriers such as Lloyds.

Aaron Porter · Answer

Document everything, and keep as detailed of notes as possible with a timeline.

If the adjuster says the carrier is going to deny coverage based on the lack of heat you may have to get an attorney to start the litigation process.

Sometimes a public adjuster can be extremely beneficial to help a claim move forward in the direction that a property owner hopes for.

There may be some issues where there was a few days of gap where the property had no insurance as once the sale is processed the old owners' insurance is no longer valid.  So your carrier may try and push the liability off to the old insurer or say that the damage happened during the gap of time when there was no insurance.

keep in constant contact with your adjuster, the more that you bug them, usually they are more likely to process the claim to your satisfaction.

and again document everything

Will this invalidate an insurance claim?

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