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January 10, 2008
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Wildfire Roadmap to Recovery: Meeting #4, January 10, 2008Rancho Bernardo Community Presbyterian Church
Strategies for dealing with underinsurance
Wildfire Roadmap to Recovery: Meeting #4, January 10, 2008Rancho Bernardo Community Presbyterian Church
Strategies for dealing with underinsurance
Karen Reimuswww.unitedpolicyholders.org
Fine print:
Information provided in this program is intended for general educational purposes only. It should not be construed as legal advice.
The speakers at today’s program are volunteering their time as educators.
Neither United Policyholders nor the Rancho Bernardo Community Presbyterian Church endorse or warrant the message or services of any volunteer speakers.
Underinsurance: The bottom line
Underinsurance has become such a common problem after large scale disasters that United Policyholders has an entire section of our website devoted to the subject. (“Claim Tips” section, “Underinsurance Help”)
Homeowners use a variety of strategies to cope
You will hear rumors about other people’s outcomes
There is no “one size fits all” path
Pursue all avenues to get the insurance company to cooperate informally
If you have a strong case, use our civil justice system – a cornerstone of our democratic system.
If you do not have a strong case, pursue alternatives
United Policyholders is working hard to help current and future disaster survivors avoid and deal with this problem
Scoping out and adding up your total losses is important…whatever path you choose
WHAT:A package of documentation that includes:
- A well prepared scope of loss (Dwelling)- Personal Property inventory (Contents)- Receipts for all incurred expenses (All categories of coverage)
WHY:1) You’ll need this for whatever strategies you use (insurance, tax code provisions, loans, etc.)
2) Replacement cost policies pay for the cost to replace what you had. Your insurer doesn’t owe you full replacement unless you prove you have spent or will spend all you’re owed.
3) Your insurer may waive policy requirements and give you flexibility in using your policy benefits but having a scope of loss/cost basis agreed upon up front makes it more likely they will.
** People run into trouble all the time when they try to negotiate building a different house BEFOREthere’s an agreement on the amount of money owed for the house they had and lost.
HOW:1) Get ideas and guidance from your Disaster Recovery Handbook2) Hire a qualified professional to prepare your dwelling scope of loss
Scope of loss basics:WHAT: Defines, describes, details “as it was” dwelling loss
HOW: Trades/materials/quantities should be clearly spelled out, format should look professional
WHY: The cost to replace your old home, “as it was” is generally what your insurer owes. You need to know what that cost was before you can negotiate to build something different.
- A scope of loss is not the same as an estimate - A scope of loss should allow estimates to be prepared and compared
“apples to apples”- A scope of loss is the basis for an independent, credible
repair/replacement estimate- A professionally prepared scope of loss
can cost @ $3,000-$7,000
Paths others have used:
Private Construction LoansSBA Loan – (DEADLINE past)Group RebuildBuilding a smaller or cheaper homeShifting non-dwelling insurance funds to fund dwelling replacementManufactured and Modular homesCasualty loss deductions permitted by the IRS
What are the alternatives to suing to settle a claim dispute?
Mediation, Arbitration, Appraisal are three of the most popular alternatives to insurance litigation.
In MEDIATION, the parties work with a third party to negotiate aresolution of their dispute in an informal, voluntary process.
An ARBITRATION may be binding or non-binding, and is more formal than a mediation. The arbitrator may dictate the result, or simply work with the parties to reach a result.
APPRAISAL is a procedure mentioned in most policies as a way to resolve a dispute over the value of a loss. It is done by a third party, but may not be legally binding.
Pre-Mediation/Arbitration“To-Do” List:Seek a mediator/arbitrator who is experienced in litigating or resolving insurance coverage and bad faith cases
Seek a mediator/arbitrator who is disinterested and reasonably priced.
Insist that the insurance company rep must have sufficient dollar authority to pay what you need
Make sure to exercise your right to get copies of “all claim related documents” in your insurer’s files prior to the mediation/arbitration. (CA. Ins. Code sec. 2071)
Consult with or bring an attorney, especially if the insurance company is bringing one
Keep your expectations low and be ready to walk away without settling. Many disputes settle after the initial mediation/arbitration, so you may only be laying the groundwork for a future settlement
Prepare, Prepare, Prepare
Giving the mediator/arbitrator a written summary of your position in advance of the meeting is always very helpful
Don’t be intimidated – You are a powerful participant in the process
Our heartfelt thanks to:
The Rancho Bernardo Community Presbyterian ChurchAll our UP Mentors and SponsorsTonight’s speakers
Taking Out A Private Construction Loan to Rebuild and Firsthand Overview of the Rebuild Process
David R Shalinsky, [email protected]
Considerations for Paying Off Existing Loan
Balance and interest rate on existing loanvariable or fixed rateloan term/years remaining
In our case, Variable rate21 yrs remaining w/ $290K balance Equity ≥ $450K
Initial insurance proceeds >$600K
*10/26/03Firestorm
12/2003Site cleared
Nov - MayDealing with change, change, change…Paid off old home loanChoosing architect/buildersDesigning home/ HOAs, Permit processSecuring new loanSecured construction loan
March – NovemberHoping & Praying: Ground Breaking
6/14/04Blessing Land
9/18/04Foundation Poured
11/20041st Floor framed
12/2004Leave ofAbsence
2/20052nd Floor framed
8/14/05Home!
Growing anxiety
Choosing paints, decorations,furniture, decisions, decisions!
{Planning your move – Ordering Furniture, 3 – 4 month lag}
Don’t forget the landscaping - 6 mo!
Shalinsky Family
*
Construction Loan
Special incentives/discounts/sensitivity
Decided to shorten loan term15 year term fixed rate historic lows (4.87%, Spring 2004)
Some leverage for Rebuild situation ultimately waived extension of fees when rebuild
lasted longer than 2 yrs
Be aware of the term: Clock is ticking when loan closes (15 yrs from COE)
Got a nice surprise here!
My SBA Loan Experience
Strategy - Consistent, true messageDon’t depend upon it
My SBA Loan Experience -continued
Told “Don’t pay off your mortgage”Have to establish that you are under insured But, SBA wants to be sure you have spent insurance. (catch 22)Owner-Builder complicates situation (my situation). Be prepared to wait. Keep log of calls.Could be phone “on hold” for long timeHave to be qualified for loan
Whatever it takes…my experience
My strategy First build the house and then worry about filling it later…
Prioritizing fundingMaximize contents and insurance dollars College daze all over…
Whatever it takes…my experience continued
Contents money is yours today! Work to get a full check paid. I was not required to provide ANY receipts for content replacement – they didn’t care…Built my extensive list over 6 months (available to share if you’d like, your kitchen probably looked a lot like mine…)
Target the bottom line to exceed limits for full payment
Building your Contents List –not easy, but often necessary…
Mentally visit each area of houseBe careful not to underestimate qty, costRecommend outlining each itemRemember it’s REPLACEMENT cost, not what you paid at the time…Estimate depreciation to calculate bottom lineSubmit as partial (since I still recall what I forgot to include…)
It’s your money…
Provide even a partial list ASAP to get your money ASAP. Once limits are met, don’t care how you spend it…
CDI Mediation Program
Leone TiffanyChief of Consumer Services Division,
California Department of [email protected]
Break Out Sessions
Open to 9:30 pm: Firm Stop timeUpstairs:
State Farm : Dormer WestFarmers : Skylight WestAllstate : Upper Courtside East
Sanctuary
