Claim Stories: Invalid Address and Percentage Complete

Claim Stories: Invalid Address and Percentage Complete

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4 min

We're going to go through a claim that occurred, which will be a lesson learned. And so we'll learn what went right, what went wrong, and what could have been done differently.

Tell us about this project.

The agent secured a new construction, one-shot policy for a single-family dwelling. It was $415,000.

What led to a claim being filed?

So, we had a hail event. As we hear about these now more and more, the hail happened. It caused damage to the structure, and a claim was reported.

What did the adjuster discover?

The first thing the adjuster uncovered was the address. You know, when adjusters get a claim, they have to look at the location. The address has to match the loss location that was reported. The application showed “TBD,” with the name of the subdivision. There's no way an adjuster can match that. So they had to stop in their tracks, and couldn't proceed until that address is changed.

Well, in order to change the address now, since a loss has occurred, it requires a policy reformation request. Luckily, we were able to do that on this case. So, now the adjuster gets to start their investigation. Water was able to penetrate through the roof and some of the windows and damage some of the walls. They find out the damage.

Well, now they uncover something else. Now, our application was submitted as not being started. Brand-new construction, from ground up. The adjuster uncovered it was 45% completed before our policy was written. That's a problem. The 40471 form, under “property not covered” has an existing inventory exclusion. And that means any work done prior to our policy is not going to be covered at all.

What was the outcome?

The adjuster was able to determine the roof and the windows were done prior to policy inception. They could not trigger coverage for that. And now they're looking at getting the cost breakdown and the invoices to determine the damage on how much it was for the painting, to get that fixed. And that ended up being under the deductible.

Not only was the insured denied coverage for the windows and roof because now it's not eligible. now they're being told that it's under the deductible so they get no dollar amount on this claim.

How can agents confirm percentage complete?

When you start these for new construction, ask your insured. “OK, you said it hasn't started. Let me review this existing inventory because I just want to make sure.” Because anything over 30% complete, any work performed prior to our policy will not be covered. “So, we haven't started, right?” And just do a confirmation showing that existing and ask them to initial it to show you did read it to them.

To properly do the percentage, ask the insured how much has been spent to-date and divide that by the total completed value, for your percentage. That's exactly what claims is going to use.

What should an agent do if they discover an incomplete or inaccurate address when coverage is already in place?

If an agent finds that they do have a policy with no complete address on it, they need to go ahead and find the exact information. Either the 911 address has already been assigned, get that endorsed, and if it still has not been assigned, at least go get the legal description. Get the lot, the block, the subdivision name and get that endorsed before a claim occurs.

Anything else an agent can do to avoid a situation like this?

If the agent just goes one more step further and starts reviewing some of the exclusions or limitations in our forms, I think it will go a long way. Once you've set this pattern with your clients, repeat clients are more likely to understand the coverage forms and recognize they should tell their agent when certain conditions apply that might have some limitations or exclusion that are involved.

So it's always good to review those conditions, exclusions and limitations on the policy with your insureds. You know, they're your partners and they're dependent on you to make sure that they're educated and understand what they're getting.

This is intended as a general description of certain types of insurance and services available to qualified customers. Any description of policy provisions is meant to give a broad overview of coverages and does not revise or amend a policy. Refer to the policy coverage form for a complete representation of the scope of coverage, terms, conditions, exclusions and more. The policy is the contract that specifically and fully describes your coverage. Some products may not be available in all states and may only be offered on a non-admitted basis. Product availability is subject to change.