Page 6
— Property Management Quarterly — August 2015
I
nsurance fraud is illegal but,
make no mistake, despite accu-
sations from insurance indus-
try representatives, those guilty
are not limited to policyholders.
Policyholders and their represen-
tatives, whether an attorney, public
adjuster, consultant or other, must be
as accurate as possible when provid-
ing information and records to insur-
ance company representatives while
obtaining coverage and while making
adjustments to a property claim. The
policyholder is responsible for filing,
submitting and supporting a claim
for damages. The claim could include
costs for damages to repair a build-
ing, repair, clean or replace equip-
ment and business personal prop-
erty, and any business income loss.
Claim payments issued by insur-
ance companies can be made as
advances on the claim or undisputed
payments, based on a review of avail-
able records and internal authoriza-
tion. Policyholders must not provide
intentionally false or inaccurate
information to the insurance com-
pany on any claim.
On property claims, insurance
company representatives often ask
the policyholder to obtain multiple
repair estimates. Policyholders are
free to retain a contractor of choice.
To cooperate with the insurance
company adjuster, multiple esti-
mates may be obtained, however,
they are not required. On certain
claims, the insurance company
adjuster, who likely is not a contrac-
tor, may prepare an estimate, or the
adjuster may have a contractor, who
knows he won’t be retained by the
policyholder, prepare a repair esti-
mate; therefore, the
accuracy of such
estimates may be
suspect. The scope
and costs reflected
in the estimates
may vary dramati-
cally. If the contrac-
tor who the poli-
cyholder retained
estimated the cost
for required loss-
related repairs at
twice the amount
of the insurance
company adjuster, you may ask,
“How can the differences be so sig-
nificant?”
Before any accusations of fraud are
made, the parties must communicate
in an effort to narrow and, ultimately,
resolve differences. This is done by
having each party provide support
for how the estimates were prepared
and damages captured. Yet there is
no doubt that in this scenario, which
is all too common, one estimate is
significantly inaccurate. When the
disparity of the initial estimates
approaches or exceeds 50 percent,
a timely and proper adjustment of
the claim is made all the more diffi-
cult. Resolving the differences delays
when repairs can begin. At no time
will the policyholder want to com-
mence with repairs if proper and
supported repair costs are twice the
amount acknowledged by the insur-
ance company. The delay also will
impact the policyholder’s business
income claim, especially if payments
are limited to 12 months.
Written communications from
many insurance companies include
the following language – “It is unlaw-
ful to knowingly provide false,
incomplete or misleading facts or
information to an insurance compa-
ny for the purpose of defrauding or
attempting to defraud the company.
Penalties may include imprisonment,
fines, denial of insurance and civil
damages. Any insurance company or
agent of an insurance company who
knowingly provides false, incomplete
or misleading facts or information
to a policyholder or claimant for the
purpose of defrauding or attempting
to defraud the policyholder or claim-
ant with regard to a settlement or
award payable from insurance pro-
ceeds shall be reported to the Colo-
rado Division of Insurance within the
Department of Regulatory Agencies.”
The duty and obligation to be as
accurate, thorough and ethical as
possible in adjusting and resolving
property insurance claims in a timely
manner is equally borne by the
policyholder and the insurer. Any act
committed with the intent to obtain
a fraudulent outcome from an insur-
ance claim is considered insurance
fraud, including when an insurer
knowingly attempts to limit or deny
a benefit covered by the policy. The
motive typically is financial and
deceitful practices may be prevalent.
The penalties described in the
language appear rather different
depending on which party commit-
ted the fraud. The penalties policy-
holders may face in the insurer’s
admonition quoted above include
imprisonment, fines, denial of insur-
ance and civil damages. Yet should
company representatives intention-
ally mislead an insured or wrongfully
deny benefits, punishment appears
reduced to informing the Division of
Insurance, whose authority to repri-
mand the guilty is very limited.
Differences of opinion in the extent
of damage on each claim, differences
on how repairs can be completed,
equipment that may be damaged, or
the amount of a business income,
are accepted, and the need for dia-
logue is acknowledged. However, all
damage must be investigated. The
claim should not attempt to expand
damages that have no relation to the
covered cause of loss. Nor should
company representatives improperly
attempt to limit the damage or sug-
gest unknown and internal adjust-
ment guidelines or practices that
prevent extending certain coverage
or issuing payment for required and
substantiated costs.
Recently, national attention was
drawn to the handling of certain
Hurricane Sandy claims with allega-
tions that company representatives
intentionally altered expert engi-
neering reports to limit or exclude
damage and submitted the altered
reports to the insureds. The practice
of changing independent consultant
and expert records is not limited to
hurricane claims back east – it hap-
pens in Colorado. If your property
sustains damage from a covered loss,
work cooperatively with represen-
tatives of your insurance company
– but hold them to the same ethical
standards you are held to – and insist
they attempt to accurately capture
all damages and offer the indemnifi-
cation provided by your policy.
s
Insurance
Chris Rockers
Partner, Claim
Solutions Group,
Northglenn
