When you’ve lost your home due to fire, the last thing you need to be concerned with is investigating your own claim. Believe it or not, that’s what some insurers are doing. According to experts, it can be a tactic used to deny or limit claim damage payouts and leaves insureds confused, angry and often at a loss for words.

Bob Scott, a partner with the Advocate Law Group calls the practice cagey. “The carrier tries to shift, in a very cagey way, the responsibility to investigate and work the loss, meaning getting a contractor, getting remediation going, getting all of that. They try to shift that to the insured saying it’s your responsibility to find a contractor. It’s not going to be our contractor. Now, they do that basically for one reason, so that if the contractor screws up, the insurance company is trying to insulate itself from the responsibility of that contractor.

In most cases, I don’t think they can, but it’s critical that the insured (at the beginning of a claim) understands what this risk shifting process is, denies it and writes to the insurance company and says, ‘I do not have the expertise to know what is and what isn’t a good contractor,’ when in fact the insurance companies – every one of them – have a list within their claims department of approved contractors that they use time and again.”

The permit process

Hiring contractors to repair or rebuild your home is only part of the process. Obtaining permits is another part and it’s also an area where some insurers are shifting the burden to policyholders. Scott continued, “Insurers know that there’s a city or county that’s going require permits for rebuilding. They’re going to require a licensed contractor and they’re going to require certain segments of the work to be done in a certain schedule so that their city inspectors can come and inspect it. All those things are very technical. If studs are placed in a different sequence than they normally should be, it will fail the framing permit, so these are all very important – the plumbing, electrical, and so on. These are things for which the insured would almost never have experience. The closest thing they ever did was buy that portable shed from Sears and bring it home and set it up.

When they now shift that duty to the policyholder, or attempt to, they’re trying to take a huge step back when we look at it globally. They’re trying to back away from what is really their responsibility, which is to be there to assist the insured, investigate the loss, determine what the scope of the loss is and then find a contractor who will bid on it.”

Why is this happening?

Shifting the burden of investigating a fire loss, dealing with contractor and pulling permits sounds a bit unbelievable, yet it happens all the time. But why? We asked an expert, Dave Peterson, a 30 year insurance industry practitioner and fire insurance expert, to explain. “One of the reasons that the insurance companies do this is to build in delays in the claim process so that they can keep their money that much longer and not have to spend it. By reversing the duty to investigate and putting it on the insured’s back, the insurer is stalling because the insured is too busy trying to cope with the loss and, in most cases, there are huge delays by the insured in doing this because they don’t have the experience of dealing with contractors, getting estimates and for getting the scope of the loss. It’s just a subtle ploy by the industry to hold onto their money.”

Adding insult to injury

As if that wasn’t enough, insurers sometimes use the situation to further their bargaining position. Bob Scott thinks it’s an insurance industry tactic to save a buck. He explained, “The insurance company has now moved you and you’re starting to burn up that additional living expense, so at some point, it’s good for them because they’re going to say, ‘Oh well, you’ve used up all of your additional living expense,’ and at that point, use that as a lever to try to invoke a settlement with you that (a) may be improperly timed, (b) may have improper motive, and (c) may be something they’re trying to use merely to save a buck.”