Claim Stories: Undisclosed Fire Losses for Remodeling Builders Risk
Each quarter, US Assure SVP - Head of Product Underwriting Rachele Holden joins us in the studio to share real builders risk claims stories and provides guidance to help you and your clients prevent similar mishaps.
Read the Video Transcript:
Tell us about this project.
This was a remodeler policy to insure renovations and the existing structure that was submitted online. It was to insure eight buildings that were going to be renovated. And based on the answers that were provided on their
application online, everything's through the system. Everything seemed to be okay on this risk.
What happened to result in a claim?
So, a fire was reported. The fire chief said that there was some chemical base found and it was an arson loss. And they suspected that it might be transients.
What did the adjuster discover?
The fire chief made a comment to the adjuster that there had been past transient issues before. Based on the fire report that the police chief had provided to them. It reflected that transients had set fire trying to keep themselves warm.
The adjuster starts digging and probing more, he finds out there actually have been four prior fire losses. But the signed application that we received reflected that there had been no prior losses.
How did Zurich respond to the claim?
Zurich does not write fire-damaged buildings — especially if there was structural damage — because of collapse.
Zurich started looking at the policy for a potential of a policy rescission, which means you void the policy, policy doesn't exist. If they decide on that, then they refund the premium to the insured and the policy would be canceled flat.
During that rescission discussion, they uncovered an MLS listing that was on Google, and it was at the time that the insured had purchased the property. The pictures in the listing showed all the buildings, and you could see how badly these buildings were damaged structurally.
Had we known this, the risk would not have been entertained. Fire-damaged buildings are not eligible under Zurich's program.
What did the agent get right?
The agent did get a signed application. So, that was right. They said it was a remodeling project. That was accurate. Those buildings were going to be remodeled. From what we understood, the other three buildings on the property were going to be leveled and treated as new construction.
What should have been done differently?
When we got the signed application from the agent, it was another carrier's application. So, instead of our agent printing the application after securing the policy through our online process, they created an application in their online system. Then they obtained a signature from the insured on that application.
Agents can do that, but I do not advise it. There is a reason we give you that "print" button on our application, because it gives you every question that was asked.
There is no doubt then, when that insured signs that application, that they did not misrepresent any of those answers to those questions.That's your protection.
And I would also make sure that you go through policy conditions and explain why we ask these questions, because this is how the policy was delivered.
If we find there's any misrepresentation, you know, the policy could be voided and rescinded and no coverage at all should a loss occur. So it's very important that this information is accurate.
How can agents confirm the structure condition for a remodeling policy?
Always check the Google search or get pictures from your insured, current pictures with dates on them. Maybe be a little bit of a detective and see if anything stands out that you need to probe for more questions for your insured.
And let me tell you, you'll be amazed with what you can find in pictures online.
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