If You Have A Fire Don’t Get Burned By: Peter L. Obremskey and Michael L. Schultz

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.

While you may be appreciative and relieved that the insurance adjustor has showed up with a contractor who is familiar with fire losses and is willing to secure your property and immediately begin the cleanup of the loss, keep in mind that he was brought to the scene by the insurance adjustor and in the final analysis owes his allegiance to the insurance adjustor. While there is a great deal of benefit in securing the loss, boarding up windows and doors, covering roofs with tarpaulin, etc., be careful that this initial assistance does not result in a long-term obligation for the contractor to continue to provide services to you with regard to the rebuilding of the building or the replacement of the personal property. You need to be particularly careful in the event the initial clean-up is contingent upon you executing a contract with him for these services. For example, ServiceMaster and ServPro each have a one page agreement that they will ask you to sign before they will begin their work. These contracts provide for broad employment of their services and may very well exceed what the insured would want them to accomplish. Virtually every one of these one page agreements call for the contractor to provide the service, to send the bill for the service to the insurance company, and requires that the insurance company pay the contractor directly. This is true in spite of the fact that the contracts are very explicit that the agreement is between the contractor and the insured, and not between the contractor and the insurance company. The dangers of entering into this contract are many, not the least of which is that the contractor owes its allegiance to the insurance company. A major problem is that the contractor bills the insurance company for the work with no oversight from you as to the quality or quantity of the work performed. The contractor is well-aware of the fact that he, in essence, is employed by the insurance company and as a result, it is to the insurance company’s benefit to keep the cost of the loss as low as possible so that the contractor will continue to get business from the insurance company. Another primary concern is the fact that the insured does not see the bill before it goes to the insurance company. It does not take a Phi Beta Kappa to understand that if the insured is not happy with the work performed by the contractor, he is not going to authorize the payment of the bill. This step, however, does not take place when the bill is sent directly to the insurance company and the insurance company pays the contractor directly. The net result, unfortunately, may very well be substandard work performed by the contractor and paid for by the insurance company with no final decision on the insured’s part as to whether or not the rebuilding has been properly performed.

Thankfully, there is some help even if you unwittingly entered into the contract with the insurance company’s handmaiden. If the contractor has been paid and the work he has left behind is substandard, help arrives in the form of the Home Improvement Contract Act, IC §24-5-11-1, et seq. This Act provides protection to a homeowner from unsavory contractors and sets forth several safeguards for the homeowner. It is virtually certain the contract entered into between the insured and the contractor who appeared on the scene with the insurance company representative does not comply with the terms of the Home Improvement Contract Act. See, e.g., Bunger v. Miller, 855 N.E.2d 716 (2006).

Thus, it may very well be more advantageous to reject the efforts of the insurance adjustor to hire the contractor he brings to the scene and for you to find a contractor in your local community in whom you have confidence and who enjoys a good reputation. It may take a little longer, but in the long run you will be better protected.

VI. The Cause of the Fire.

One of the first things the insurance adjustor will do, if not the first thing, is to attempt to make an initial determination as to the cause and origin of the fire. Accidental and inadvertent fires will be covered. Intentional fires caused by the insured or at the behest of the insured will not be insured. Many times the insurance adjustor attempts to find a cause of the fire under which the insurance company denies coverage. The first step in this process is to take a recorded statement from the insured. The insured is required to cooperate with the insurance company in the investigation of the fire loss and it is incumbent upon the insured to cooperate and provide the insurance company with the recorded statement. Obviously, the insured, not being an expert in cause and origin fires, needs to be careful about any comments, opinions or conclusions he may have as to what caused the fire and, obviously, should not venture any speculation as to what happened. There is a laundry list of things that will be covered in the recorded statement to determine if the insured had any involvement in the cause of the fire. That would include whether or not the family pet was in the house, whether or not items of personal property had been removed from the house prior to the fire, whether or not heirlooms and items, such as wedding dresses, were consumed in the fire, etc.

The adjuster will also pry into the financial condition of the insured, i.e. foreclosure, bankruptcy, debt collection, real estate and tax liabilities, phone records, as well as a history of claims, marital discourse, and many of the other reasons why fires are started for money.

Unfortunately, the insured can expect little help from the law enforcement authorities or the State Fire Marshal’s office, or from investigators from the local fire department. All too often these people are untrained and inexperienced and like nothing better than to find the cause of the fire to be arson. With regard to the State Fire Marshal’s office, through a quirk in the Indiana statutes, the insurance company and the State Fire Marshal’s office may exchange, and indeed have an obligation to share with one another, the results of their investigation of the fire. However, the insured has no right to receive the report of the State Fire Marshal’s office or a report from the insurance company provided to them by the State Fire Marshal’s office unless done so under the subpoena power of the courts. This has become increasingly more difficult given the fact that the State Fire Marshal’s office is now under the Department of Homeland Security and is looking for terrorists under every rock.

The cause and origin of a fire is a highly sophisticated, specialized science that requires persons skilled through education, training and experience to conduct an adequate cause and origin investigation. Unfortunately, local fire departments in many cases do not have this expertise, nor does the State Fire Marshal’s office, whose investigators in most instances are made up of firemen who may have practical experience but little or no scientific background to support their opinions and conclusions. The Bible for the investigation of fires is contained in NFPA 921, and a copy of which is mandatory if a contested issue as to the cause and origin of a fire exists.

(Part 3 of 7. Part 4 will be posted on 6/3/10.)

The statements contained herein are for information purposes only and are not to be considered legal advice and should not be construed to form an attorney-client relationship. If you have questions regarding this article, please contact an attorney.