Indiana Business Lawyer Blog

XI. The Insured Always Loses.

The sad part about a catastrophe such as a fire is that it leaves the insured always in a worse position than they were before the fire. In addition to the obvious emotional toll, the time needed to devote to the developing of a claim is substantial and impossible to replace. Additional living expense, usually a maximum of $5,000.00, would provide some immediate cash to replace clothing and living essentials necessary within a few days of the fire. Then comes the issue of where does the insured live? Initially there would be accommodations provided by the insurance company in a hotel that may or may not be adequate for the insured’s needs. Longer term requirements include the renting of a house or other facilities, as well as furniture and household goods necessary to maintain a living during the pendency of the claim. Depending upon the policy, additional living expenses can be for a “reasonable period of time” or a specific limitation of one year or more depending upon the terms of the contract.

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IX. Actual Cash Value vs. Replacement Cost.

Insurance provided by any fire insurance policy is either an indemnification policy that indemnifies the insured for the loss, or a replacement policy. Depending on coverage, the loss can be based on the actual cash value of the property loss or on the replacement cost of rebuilding and replacing the lost buildings and property.

The actual cash value of property typically is not defined in the policy. Indiana courts employ the “Broad Evidence Rule” to determine the actual cash value of property subject to a loss. See, Travelers Insurance Co. v. Armstrong, 442 N.E.2d 352 (1982). In simplest terms, this means that any information that is available to the insured can be included in a determination of what constitutes actual cash value. The insurance company will attempt to limit the actual cash value to the cost of the item less depreciation. It is a mistake to let them determine the actual cash value on that basis. For example, a couch lost in a fire in a home with four active children has had a lot more wear and tear and the actual cash value is significantly reduced when compared to the same couch purchased at the same time by an elderly, retired couple. Actual cash value should be determined on a case-by-case, item-by-item basis and not by broad determinations of depreciation as determined by the insurance company’s adjuster for each item in the loss.

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VIII. Proof of Loss.

Within a day or so of the fire, an insurance adjustor will provide to the insured claims forms for what is called the “Proof of Loss.” The Proof of Loss itself is a one page document in which the insured summarizes the amount of the loss and then signs it and swears to it that it is accurate and does not contain any fraud, etc. The insured needs to be careful when sending in the Proof of Loss and must make sure that it is reasonably accurate. This does not mean, however, that the Proof of Loss can’t be amended; it can and should if new evidence indicates that the loss is greater than initially anticipated. Also along with the Proof of Loss will be a great many pages of forms provided by the insurance company in which the insured is obligated to identify the items of personal property that were lost in the course of the fire as well as the extent of the damage to the structure.

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VII. Special Investigations Unit (SIU).

If, after taking the statement under oath and conversing with the fire or police authorities, the insurance adjustor calls in the Special Investigations Unit (SIU), look out. It’s time to seriously begin protecting your own interests. The insurance company’s SIU investigator is there for the sole purpose of attempting to find the cause and origin of the fire to be the insured and to deny coverage. That is the sole purpose of his existence. If not before, it is now time for the insured to hire a cause and origin expert of his own to obtain a balanced approach to determining the cause and origin of the fire. In order to do so, it is important that the fire scene remain intact and no efforts be made for cleanup until your investigator has an opportunity to view the fire scene. There are many competent cause and origin investigators available.

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V. The Insurance Adjustor.

There will be one, and very well may be two insurance adjustors assigned to your claim. One adjustor may specialize in structural damage while a second adjustor may deal with the loss of household goods and personal property.

It is now time for you to be careful. In many instances, indeed most instances, the insurance adjustor may very well show up at the scene with a contractor or a company that specializes in dealing with insured fire claims. The first step will be securing the premises and preserving the remains of the fire for two purposes. First, for making the determination as to the cause and origin of the fire, and secondly, to make an initial determination as to the personal property, furniture, household goods and appliances that the insured owns and may be the subject of future adjustment to the claim.

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III. Coverage.

The insurance agent has dictated the information contained in the application, photographs submitted to the company, and the desires of the insured to obtain maximum coverage. It is important, on the other hand, that the coverage provided has a relationship with the fair market value or actual cash value of the building being insured. That is to say, if the building is over-insured for its value, the insured may bear some of the risk of the loss, or have coverage denied. The same is true if the building is insured for less than its actual cash value as then the 80/20 provision applies which dictates that the insurance coverage must be at least 80% of the actual cash value of the property.

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I. Introduction.

Short of a death or serious personal injury, the most devastating thing that can befall a family is to have their home or business destroyed by fire. It is hard to imagine the emotional upheaval to stand by and watch the fire department attempt to save your hopes and dreams as they go up in smoke. It is at this juncture you would expect your homeowners or commercial insurance policies to step in and provide the protection for which you have paid insurance premiums for those many years. Unfortunately, there are many pitfalls which you must be aware of if you are going to protect your interests and receive just compensation from the insurance company for the loss that you have suffered. It is important to understand that the damage to your home or business is not only caused by the fire, it is also caused by the smoke, the water and the destruction created by the fire department in an attempt to put out the flames. As the fire department leaves the scene, your thoughts must go from the smoldering ashes to what’s next.

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