My clients lived in a nice, upper middle-class single family home in the San Francisco Bay area. They had a premium homeowners policy, not just minimal coverage. A fire occurred, which, at first glance, appeared to damage two rooms out of eight in the house. A deeper investigation and analysis would be the appropriate next step, but that’s not the strategy adopted by their insurance company.
The company tried at every turn to limit the recognized scope of the damage and the quality of the rebuilding work. There was even a question at the beginning whether the family would be reimbursed for staying in a motel, since arguably only two rooms had been taken out of commission. Imagine, they wanted the family to live in a fire-damaged home.
We countered with two main factors: One, there was smoke damage in other parts of the house. Two, a full home inspection hadn’t been done to establish whether or not there was structural damage, so we weren't sure if the home was safe to occupy.
The insurance company stuck to the position that damage was limited to the obvious two rooms, with no need for a structural report. They said they had done an investigation and obtained a contractor, and they were going to pay only what the contractor said he would charge to fix those two rooms.
In cases like this the policyholdersare always eager to get back into their house. A lot of people would go along with the carrier’s offer because they’re in a very difficult spot. Their home is damaged, they are stressed out, and they have the prospect of staying in a motel for an unknown amount of time.
I counseled a combination of patience and persistence. We hired another contractor, who found that there was structural damage, and that a thorough, intrusive inspection was needed to determine the extent of the rebuilding work needed. In addition, smoke damage had to be assessed throughout the house – all the clothes, furniture, and other property.
Initially, we undertook the letter writing campaign, but that went nowhere. The insurance company held firm. They offered only $80,000 instead of the $260,000 the repairs and smoke mitigation would actually cost, so we filed suit.
After one deposition, it became clear that the insurance company's instruction to their investigator had been, don't look for trouble. If it looks like the damage is limited to two rooms, find a friendly contractor to say it’s two rooms, and stop there. Then the insurance company could reject the additional damage as just an overreaching family looking to get remodeling paid for out of their insurance.
The insurance company has a duty to look for all the damages that might be covered, and all the coverage that the policy might provide. In this instance, they didn't do that. Instead, they hoped that by wearing down their own policyholder, that they, being in a stressful situation, would accept what the company offered. And many people do figure that's as much as they would get. My client was tempted to give up, too, but instead fought back with my help.
After this deposition, the company increased its offer to about $200,000. This was close enough to the cost to repair the full damage that my clients decided to take it and move on.