Insurance Claim Negotiation

Anchorage Construction Management, Inc. specializes in water / fire damage repairs, and catastrophic-loss reconstruction projects. We inspect damages to our client’s real property and negotiate with their Insurance Companies over the actual value of their loss which is usually substantially greater than what their Insurance Company will offer to pay for their claim. We generally find that initial adjustments are 10% to 50% lower than the actual cost of reconstruction because:

1)    On damage repair claims, adjustments are performed prior to demolition work which exposes the full extent of the damage. If you can’t physically inspect the hidden damage, you can’t account for it.

2)    The nationally averaged cost database used by adjusting software is often incorrect, cannot be altered to match local conditions, and does not adequately pay for design consultant expense, means and methods of construction, code requirements, and/or jobsite specific conditions such as access, shipping, material handling, etc.

3)    Adjuster errors in taking field measurement, quantities, and false assumptions about how to rebuild the project may also lower the value of a claim. Most Adjusters do not come from a construction background. 

As General Contractors, we have the ability to pull all aspects of the project together for our Clients such as demolition, design consultants, permits, subcontractors, inspections, etc.  We work directly for Owners, and represent their interests to the best of our ability. This is different from Contractors provided by Insurance Companies who are bound to work within the parameters of the initial adjustment, which usually results in Owners being deprived of sufficient funds to reconstruct their lost property to its previous level of finish, quality, and/or current codes.

Insurance companies use various strategies to reduce their claim losses, which are detrimental to policyholders. Company adjusters, and their outside "independent" adjusters, are trained to keep claims payments to an absolute minimum. Adjusters are instructed to try and settle every claim for the least possible dollar amount the policyholder is willing to accept. They do so without regard for the policy’s guaranteed coverage, or the promises made to the policyholder in the contract. Policyholders soon discover that the “Good Hands” wear Boxing Gloves.

Additionally, most insurance companies have retained financial consultants to advise them on how to specifically improve their bottom lines. The most notable of these is McKinsey & Co., which has consulted for Allstate, State Farm, and others. McKinsey & Co. has devised a claims handling policy known as the "Three Ds" i.e. “Deny, Delay and Defend” by which an Insurance Company will (1) Deny as much coverage as possible during the adjustment process, (2) Delay a final resolution of the claim for as long as possible, and (3) Defend against litigation by the Insured. All of which is designed to frustrate any attempt by policyholders at getting fair market value for their claims.

Policyholders on sizeable commercial losses routinely hire Public Adjusters to estimate the actual repair or replacement cost value of an insurance claim to counter the Three D’s strategy. On typical Homeowner and Small Business property losses the policyholder’s best defense against the Three D’s strategy is to hire an independent Licensed Contractor that is neither affiliated with nor recommended by the Insurance Company.

At Anchorage Construction, we negotiate with insurance Adjusters over the actual repair or replacement cost value of a claim on behalf of our clients. In the event that negotiations with the Adjuster reach an impasse, we recommend hiring an attorney experienced in insurance claims. We have found that this strategy is the best defense of an Owner’s interest in a catastrophic property damage loss claim.

The attached Survival Guide for Adjusting Insurance Claims is provided to help you better understand the insurance adjusting process.  We would like to meet with you to review the extent of your loss to see if we can be of assistance. Should you have any questions, please contact us by telephone or e-mail at the numbers on the letterhead.

Survival Guide for Adjusting Insurance Claims

If your residential, commercial, auto or personal property was destroyed, severely or moderately damaged, you will be filing a claim with your Insurance Company. The Adjustment Process for recouping your losses will be difficult. The following “Survival Guide” explains what every policyholder should know about adjusting a catastrophic loss.

1. Read Your Policy Thoroughly and take notes. If you don’t have a copy, contact the Agent who sold you the Policy and he will provide you with one.

2. Make a list of those items that are covered by your Policy, and what the monetary limitations are on these Coverages. You may have Coverages that you are not aware of. Always remember that your policy is a Contract between the Insured and the Insurance Company, the language of which is critical to discovering what is or is not covered, and what your contractual rights are under the Policy.

3. Make a list of all Coverage Exclusions in the policy. These are usually hidden in the “fine print” or were attached by addendum several years after you bought the original policy. Very often what you think is covered, was excluded by the Insurer without your knowledge (they sent you an endorsement a few years back but you never read it).

4. Three very important Coverages for catastrophic losses are:

   1. Code Upgrade which provides coverage for rebuilding the structure to current building codes, which are significantly more restrictive than when the structure was originally built. Note: TRPA regulations will also affect reconstruction costs in the Tahoe Basin.

   2. Replacement Cost which guarantees payment of current construction costs which are also significantly higher than when the structure was originally built.

   3. Loss of Use which will provide you with either the rental cost for an equivalent home to live in while yours is being rebuilt, or lost rental income if your property was a rental unit. This coverage varies between policies.

5. The Insurance Adjuster assigned to your claim is there to minimize his company’s exposure to financial liability for your loss. He is not there to solve all of your problems, nor can he. Always remember that the Adjuster represents the Insurance Company, and not you who are responsible to represent your own interests under the Insurance Contract.

6. Adjusters work from nationally averaged cost databases, the accuracy of which may or may not reflect the actual cost of construction in your local area. Snow load requirements in the Sierra Nevada Mountains result in Engineered Structural Designs incorporating steel moment frames and/or heavier wood framed construction. This is a very different type of structural frame from what is prevalent in most of the US. There are also seismic requirements in all areas of the West Coast and newly adopted energy codes. Accordingly, it is questionable as to whether or not a nationally averaged cost database can provide a fair settlement of your claim.

7. Additionally, in the Tahoe Basin there are TRPA requirements which are unknown in the rest of the country. These requirements add significantly to the costs of design, permitting, and construction.

8. The ultimate monetary amount of an Insured’s settlement is entirely dependent upon what the Insured can prove, and not what the Insured would like the settlement to be. Photographs and documentation are extremely important to the settlement process. Unfortunately, catastrophic fires usually destroy the best evidence.

9. Dealing with personal property losses such as household goods, artwork, financial and computerized records, etc. is an area of expertise unto itself, and best left up to Specialty Appraisers and Public Adjusters. Destroyed works of art very often have a higher value than do the structures in which they were housed. Lost financial records can cost significant sums to reconstruct.

10. Sentimental value is not covered under your Policy, so don’t waste anyone’s time trying to collect for it. Frivolous, irrelevant and/or fraudulent claims must be avoided because they will either cause your claim to be rejected, or result in criminal prosecution of the Claimant.

11. It is extremely important that you gather together and thoroughly document all of the various aspects of your claim to insure that you receive a fair settlement from your Insurance Company. There is a lot of work involved with this process that takes considerable time and effort. The rule of thumb is, “The more that you can prove, the more that you can collect.” In short, surviving the Adjustment Process is not easy as evidenced most recently by Katrina, Angora, and San Diego County fire victims.

12. If negotiations between the Insured and the Insurance Company over the value of a claim reach an impasse, have your Attorney review the file and write a letter. It just may break the deadlock. If all else fails, there is always Civil Court for those who are willing and able to prosecute their claims. This option is not for the faint hearted.