AAA Public Adjusters

A Thing or Two About Homeowners Insurance


Feasterville-Trevose, PA -- (ReleaseWire) -- 05/01/2018 --The United States property and casualty insurance industry has trillions of dollars in assets, has staggering profits of over $70 billion a year, and pays its executives more than any other industry in this country. With that said, insurance companies still engage in trickery and unethical behavior to boost their bottom line. The current trend in the property and casualty sector of the insurance industry is to get approval from the state insurance commissioners for various homeowner's policies that are so restrictive that they hardly pay for anything! For example, let us look at Farmers Smart Plan Home Policy. Is it really smart to buy Farmers Smart Plan Home Policy? Let us take a look at an excerpt of the coverage section of this policy.

"16. Limited Matching Coverage for Vinyl or Aluminum Siding and Roof Materials for Composition Shingle Roofs.

If the Declarations show a stated limit for Limited Matching Coverage, then:

a. when a loss event requires replacement of vinyl or aluminum exterior siding, roof materials for composition shingle roofs, soffit or fascia (herein the "property") on a damaged building structure, and the replacement property does not match with the existing undamaged "property" because the existing undamaged "property" is obsolete or discontinued, we will pay up to the Limited Matching Coverage stated limit to replace existing undamaged "property" with the same materials that are used to replace covered damaged "property", which replacement may be greater than that required to achieve a reasonably uniform appearance;

b. you must actually replace the existing undamaged "property" with the same materials that are used to repair or replace the covered damaged "property" to collect any payment under this Extension of Coverage; and

c. item c.(1)iii. of Section I - Property Conditions, How We Settle Covered Loss, will not apply to loss involving the "property" on a damaged building structure.

This is not additional insurance. All payments for this Extension of Coverage are subject to the applicable Coverage A or B stated limit."

What does all this insurance lingo mean to the insured that has this policy? What if the insured has a $15,000.00 15-year-old composition shingled roof that has a life expectancy of 25 years and was just damaged by a wind storm that blew off 40 shingles from two slopes of the roof? First, we must look at Farmers Scheduled roof payment percentage. Since the roof is 15-years-old and the shingle has a life expectancy of under 30 years, Farmers would owe you 50.1% of the $15,000.00. There goes $7,500.00 that you will never see again. Farmers will pay you upfront to replace the 40 shingles, say at the most $500.00. If the insured has a $1,000.00 deductible, Farmers will pay you nothing upfront. If the insured with the $1,000.00 deductible is confused after all this, can the insured still collect the $6,500.00. The simple answer is yes, if the insured pays for the roof out of his pocket first as outlined in section b. above. Also, do not forget to look at Section I - Property Conditions 5. How We Settle Covered Loss a. (2) Roof Materials for further policy confusion. Wait a minute; I thought that homeowners insurance was supposed to help the insured pay for the losses that they sustain!

Let us look at another excerpt from the definition section of this homeowner's policy.

"28. Plumbing system - means all water supply and distribution pipes, plumbing fixtures and traps, valves, and drainage and vent pipes of a building structure or structures, or an in-ground sprinkler system on the residence premises. A plumbing system does not include any of the following:

a. any bath or shower units (not including the bath tub), enclosures or pans, including, but not limited to, curtains, tile, grout, sealants or doors;

b. a roof drainage system, including, but not limited to, gutters, drain pipes and downspouts;

c. a sump or sump-pump, sump-pump well or related equipment, pipes or connectors;

d. any part of a drainage ditch or channel;

e. that part of any system designed to remove or drain water from the residence premises which part is not: (1) within; or (2) directly under the slab or foundation of; a building structure on the residence premises; f. any removable hose, tool, device, appliance or implement attached to the plumbing system; or

g. a sprinkler system attached to water distribution pipes by any type of hose or a fire suppression sprinkler system."

Without question, the every day insured believes that a shower pan, bath or shower units are all part of a plumbing system. I went around to all of the plumbers I know and questioned them about this policy verbiage. The short of it is, they could not believe what they just read. Watch out, the exterior drainpipes connected to your interior drainpipes are not a part of your plumbing system. Furthermore, "an in ground sprinkler system" is part of a plumbing system, but a sprinkler system attached to water distribution pipes by any type of hose" is not part of a plumbing system. Where do they dream up this policy language?

God forbid that the insured disagrees with Farmers payment of their homeowners claim and wants to initiate the independent arbitration condition called Appraisal. Let us first take a look at Farmers Smart Plan Appraisal Condition and then let us take a look at the Appraisal Condition in an ISO form HO-3 policy.

Smart Plan Appraisal Condition:

"10. Appraisal.

a. If you or we fail to agree on the actual cash value or the incurred property damage of your claimed loss, either you or we may make a written demand for appraisal. The appraisal shall be made in strict conformance with the terms of this Appraisal condition. Neither you nor we may assign the right to demand appraisal, whether before or after loss or damage. Any assignment shall be void.

b. (1) Within 20 days of the receipt of a written demand for appraisal, you and we each shall:

i. appoint a qualified individual person as an appraiser; and

ii. notify the other in writing of the appraiser's name and contact information.

(2) In order for a person to be qualified to act as an appraiser, the person must be competent, independent, neutral and impartial. A person:

i. who has performed, or who is employed by any entity which has performed any work, or a person who has provided any service for either you or us in relation to any claimed loss under this policy, whether or not such work or service has been or will be paid; or

ii. who has or may perform, or who is employed by an entity which has or may perform repairs or replacement of your property; shall not be qualified to serve as an appraiser.

(3) Upon acceptance of the appointment, each appraiser shall within 5 days disclose in writing to you and to us any known facts which a reasonable person may consider to affect the independence, neutrality or impartiality of the appraiser, including without limitation

i. any financial or personal interest in the outcome of the appraisal; and

ii. any current or previous relationship with you or us, or your or our counsel, other representative(s) or experts, or with the other appraiser.

c. You and we may provide the appraisers, and the umpire if appointed, with estimates, expert opinions, appraisal forms or any information you or we believe to be relevant to the appraisal. Any such documents and information must also be provided to the other party. However, no formal legal discovery shall be conducted by either the appraisers, any umpire, or you or us during or for the preparation of the appraisal, and no court reporter shall be used. The rules of civil procedure and the rules of evidence shall not apply to the appraisal process, and no hearing shall be conducted by the appraisers at which either you or we provide any evidence pertaining to your claimed loss.

d. (1) The appraisers shall determine the incurred property damage, if any, to each of the component parts of that property for which you have claimed loss, and the actual cash value of the incurred property damage, as of the date of the loss. In determining the actual cash value of the incurred property damage, the appraisers shall only use reasonable costs of materials of like kind and quality unless the policy expressly provides otherwise.

(2) The appraisal shall separately state and itemize the following for each individual component part of the incurred property damage:

i. a description of each component part of the property;

ii. a description of the distinct and demonstrable physical injury to or destruction of each component part, if any, without reference to what caused the damage;

iii. a description of the reasonably necessary repairs or replacements for each component part of property;

iv. the estimated costs of the reasonably necessary repairs or replacement(s) to each component part of property;

v. the estimated amount of proper depreciation and/or obsolescence to each component part of property; and

vi. the actual cash value of the incurred property damage.

(3) The appraisers will provide detailed, verifiable support:

i. of the reasonableness of the costs, including unit costs;

ii. that the materials are of like kind and quality, if the policy loss settlement requires like kind and quality settlement; and

iii. of the factors and basis used to determine depreciation and/or obsolescence

(4) The appraisers may consider and provide you and us with a separate statement of the estimated cost(s) for any repairs or replacements which may be required by building laws, but the appraisers may not determine whether such amounts are covered by this policy.

(5) The appraisers shall submit their written appraisal in strict conformance with this subsection d., to both you and to us, and the amounts agreed upon by the appraisers will be the incurred property damage and the actual cash value of the incurred property damage to each component part of property for which you have claimed loss and will be binding. Substantial conformance with this Appraisal condition does not satisfy the terms of this Appraisal condition.

(6) The appraisers are not authorized to, and shall not decide the cause, or causes, of your claimed loss or any incurred property damage.

(7) The appraisers are not authorized to decide whether any incurred property damage is covered by this policy. As appropriate, each of the foregoing shall also apply to theft.

e. (1) If the appraisers cannot agree on the incurred property damage or the actual cash value of the incurred property damage, they will advise each of us of their failure to agree and of the need to appoint an umpire to resolve their differences. The appraisers may then agree on an umpire. If the appraisers advise each of us that they cannot agree on an umpire, you or we shall then first request the American Arbitration Association (AAA) to select an umpire.

(2) Only if the AAA advises you and us in writing that it cannot appoint an umpire may we then jointly request a judge of a district court in the judicial district where the residence premises is located to select an umpire. A judge of a district court does not include a commissioner or a judge of a county court at law, a justice court, a municipal court, a probate court, or of a commissioner's court.

(3) In order for a person to be qualified to act as an umpire, such person must be qualified and meet the conditions as required in subsection b.(2).

(4) Upon the appointment of an umpire by the appraisers, AAA or a district judge, the umpire shall within 5 business days disclose in writing to you and to us the information required in subsection b.(3).

(5) Within 20 days of a qualified umpire being appointed, each of the appraisers shall then submit to the umpire, and to both you and us, their appraisals. Their appraisals shall contain all of the information required in subsection d. above, and shall identify each specific matter upon which they disagree and explain in detail why they disagree. Both appraisers and the umpire shall then together meet and confer. The umpire shall then prepare an appraisal. A written appraisal in strict conformance with and setting forth all the information required in subsection d. above, agreed upon and signed by the umpire and either one or both of the two appraisers will determine the incurred property damage and the actual cash value of the incurred property damage of your claimed loss, and will be binding.

(6) If a vacancy should occur regarding the umpire, the vacancy shall be filled in accord with the foregoing process by which the vacating umpire was appointed. Any appointed umpire is subject to (3) and (4) of this subsection e. f

f. Each party will pay the costs of the appraiser it chooses. The costs of the umpire, including if appointed by AAA, and all other reasonable expenses of the appraisal will be shared and paid equally by you and us. If AAA appoints the umpire, we will pay AAA's process fees.

g. The appraisal shall not:

(1) determine whether your claimed loss or any incurred property damage, or any part thereof, is covered by this policy;

(2) determine the cause or causes of the claimed loss or any incurred property damage;

(3) make any factual finding which directly or indirectly determines whether your claimed loss or incurred property damage, or any part thereof, is covered by this policy;

(4) interpret this policy;

(5) award or determine any interest or penalties;

(6) determine whether property which has not sustained incurred property damage is to be matched with materials used to repair or replace property that has sustained incurred property damage, or any amount for matching;

(7) determine whether the services of a general contractor will be required to manage, supervise and coordinate the repairs, or any amount for general contractor's fees or charges;

(8) determine loss settlement under a loss settlement provision of this policy; or

(9) be considered to be adjustment of your claimed loss.

h. Any demand for appraisal must be made within the contractual suit limitations period stated in this policy. After that time neither you nor we may demand an appraisal.

i. If you or we timely demand an appraisal, then upon request or motion made by either you or us for abatement of any suit for or involving the claimed loss, the suit shall be abated until after an appraisal award is made in strict conformance with this Appraisal condition.

j. Even after an appraisal award, we retain the right to deny any claimed loss or incurred property damage, or any part thereof. "

HO-3 Policy Appraisal Condition:

E. Appraisal

If you and we fail to agree on the amount of loss, either may demand an appraisal of the loss. In this event, each party will choose a competent and impartial appraiser within 20 days after receiving a written request from the other. The two appraisers will choose an umpire. If they cannot agree upon an umpire within 15 days, you or we may request that the choice be made by a judge of a court of record in the state where the "residence premises" is located. The appraisers will separately set the amount of loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon will be the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will set the amount of loss.

Each party will:

1. Pay its own appraiser; and
2. Bear the other expenses of the appraisal and umpire equally.

The Smart Plan Appraisal word count is close to 10 times more than the HO-3 Appraisal word count. Look at the difference in verbiage between the Smart Plan Appraisal Condition and the H-03 Appraisal Condition. Pay attention to sections g., h., i., and j, of the Smart Plan Appraisal. These sections make it more restrictive than the HO-3 Appraisal Condition. It gives Farmers the right to interfere with a process that is supposed to be independent. Farmers in many instances have reduced Appraisal awards using the above-referenced language. When an insurance company can interfere with an independent arbitration process such as Appraisal, the insured will less likely utilize Appraisal and go directly into suit. This type of Appraisal language will be more costly to the insured and the insurance company alike. I guess farmers does know a thing or two about insurance.

Farmers is not the only insurance company in America to mislead the American public. Some of America's most widely known insurance companies—the ones that spend millions upon millions of dollars on advertising to earn the trust of homeowners—have endeavored to delay, deny, and defend insurance claims. According to the American Association for Justice, some of the nation's largest property and casualty insurance companies— Allstate, Liberty Mutual, and State Farm among others—have denied valid claims in an attempt to boost their profits. Let's face it; insurance companies improve their profits when they do not pay valid insurance claims. These companies have rewarded employees, whether it is staff or vendors, who denied claims and fired employees who would not. Many insurance companies routinely delay or deny claims, knowing full well that many policyholders will give up and take no action against them. Long-term care insurers, often take advantage of their policyholders' age and declining health to improve their bottom line. They'll do anything to avoid paying, because they know if they wait long enough, the insured will eventually die. Insurance companies will confuse policyholders with contracts that are some of the most dense and incomprehensible documents that a consumer is ever likely to read. Do not go it alone! Let AAA Public Adjusters help you navigate through the claims process.

After a loss, consult with AAA Public Adjusters and schedule a free consultation. Call toll free 800-410-5054 or visit their website at

About AAA Public Adjusters
AAA Public Adjusters, LLC, is a property loss consulting firm headquartered in Philadelphia, PA. Additional offices are located throughout Pennsylvania, New Jersey, Maryland, Florida, Delaware, Virginia, and North Carolina. AAA Public Adjusters have been fighting insurance companies for over 25 years. AAA Public Adjusters, Maximizing Your Claim!