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Last Post 10/08/2010 12:21 PM by  okclarryd
Tear off of composition roof layer.
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Ray Hall
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08/29/2010 7:52 PM
    Lots of opines on this subject. The one in this discussion is the following: Does tearing off one or more layers of composition shingles enhance the property in any way. The answer is yes. If property is enhanced in any way then the soft word for depreciation is used, betterment. The betterment definition is subject to a % depreciation in all states that I am aware of. (Leave CA. out) 
     
    Now don,t fall back on the company policy is.... what ever the carrier tells me to do.... just try to think this out yourself and see if you use your own mind and wrap it around this topic..... Will your mind change to think yes its subject to a percentage of depreciation based on age and condition.
     
    Remember I know the history on this subject in several states, and you all know how I think on this subject.
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    okclarryd
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    08/29/2010 8:08 PM
    I'm of the opinion that tear-off is labor and "labor" doesn't depreciate.

    Last time I worked, the carrier treated tear-off as labor and no depreciation was applied.

    However, installation of roofing, which includes labor, depreciates in total.
    Larry D Hardin
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    ChuckDeaton
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    08/29/2010 8:11 PM
    Would someone show me a policy, any policy, where the word "betterment" is used. I want to see a definition of "betterment" in any policy, commercial or residential.
    "Prattling on and on about being an ass with experience doesn't make someone experienced. It just makes you an ass." Rod Buvens, Pilot grunt
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    mjpsmurphy
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    08/29/2010 8:35 PM
    I am firmly of the opinion that tear off is labor and is not going to be subject to depreciation. However, what I think is depreciable or not makes no difference in the field. Whomever is signing the checks is going to be correct. It is an easy rule.
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    CatAdjusterX
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    08/29/2010 9:50 PM
    Posted By mikey on 29 Aug 2010 08:35 PM
    I am firmly of the opinion that tear off is labor and is not going to be subject to depreciation. However, what I think is depreciable or not makes no difference in the field. Whomever is signing the checks is going to be correct. It is an easy rule.


    I must agree with you on this,
     tear off is labor and not subject to depreciation,
     however the labor in replacing a new roof is subject to depreciation.
     
    I looked up a recent court case for guidance, please note I have only posted the relevant issues here , to read the entire cause of action please follow this link          
     
                                               http://openjurist.org/311/f3d/1241/...ompany-inc
     
     
     

    311 F.3d 1241

    Eldon Carl BRANCH, Plaintiff-Appellant,
    v.
    FARMERS INSURANCE COMPANY, INC., and Farmers Group, Inc., Defendants-Appellees.

    No. 00-6385.

    United States Court of Appeals, Tenth Circuit.

    November 20, 2002

     
     

    ¶ 17 An insurance policy is a contract. The same principles generally apply to the construction of a policy of insurance as apply to any adhesion contract. Dodson v. St. Paul Ins. Co., 1991 OK 24, ¶ 10, 812 P.2d 372, 376. In Johnny F. Smith Truck & Dragline Service v. United States, 49 Fed.Cl. 443 (2001), the Court of Federal Claims resolved a contract dispute between the plaintiff and the United States regarding debris removal in a flood damaged area. The dispute involved the definition of "debris." That court used a similar definition as the Branch court: "1. a. The scattered remains of something broken or destroyed; rubble or wreckage. b. Carelessly discarded refuse; litter." American Heritage Dictionary of the English Language (4th ed.2000).

    53

    ¶ 18 If a roof has been damaged by wind or hail to the degree that it must be replaced, then the damaged portion is rubble or wreckage. If the whole roof must then be torn off to repair or replace the damaged portion, then those materials also must be considered wreckage. Farmers Union Mutual Ins. Co. v. Oakland, 251 Mont. 352, 825 P.2d 554 (1992). See also, Manduca Datsun, Inc. v. Universal Underwriters Ins. Co., 106 Idaho, 163, 168, 676 P.2d 1274, 1279 (Idaho Ct.App. 1984). Replacement costs include the cost of the labor to install the new materials forming the new roof. Removing damaged materials, and materials that have to be removed as a result of storm damage to the roof in order to install the new roof, must all be treated as rubble, or in the contract language, debris. If the insurer intended to exclude debris removal of damaged roofing products, it could have done so. To answer the question of the 10th Circuit, labor costs to tear off an old roof are not included as a necessary part of the replacement costs of installing a new roof.

    54

    II. IF TEAR-OFF COSTS ARE PROPERLY INCLUDED AS NECESSARY REPLACEMENT COSTS AND LABOR COSTS ARE DEPRECIABLE GENERALLY, MAY THE LABOR COSTS INCURRED DURING TEAR-OFF ALSO BE DEPRECIATED?

    55

    ¶ 19 We have answered that tear off of the old roof is not included as a necessary part of the replacement costs of installing a new roof. The debris removal clauses in the insurance policies before this Court are identical, and do not mention depreciation. Therefore, the labor costs in debris removal may not be depreciated

     
     
     
     
    Robby Robinson
    "A good leader leads..... ..... but a great leader is followed !!" CatAdjusterX@gmail.com
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    host
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    08/29/2010 10:38 PM
    Some companies include removal as part of the complete job and thus subject to depreciation. Labor is also included in the replacement, why would labor not be subject to depreciation if it contributes to the value of the item that is being replaced.
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    Ray Hall
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    08/30/2010 8:30 AM
    If all the people who "feel" tear off a layer of shingles is not subject to depreciation would explain this argument" why not leave it in place if its not distorted or has the appearance of rubbish ?
     
    Also why would a painter clean, dry, sand and smooth out old painted surfaces before applying the first finish coat? 2nd question is does this labor intensive part of the job enhance the building as a whole.
     
    Now wrap your adjusting logic around this question. Age and the elements are the factors that cause property to loose value by wear and tear.If restoration will bring the value of property up to a higher level or drop it to a lower measurable level is never static and subject to the ACV rule.
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    ALANJ
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    08/30/2010 8:35 AM
    Maybe I am missing something. But, I didn't see anything in the case that said labor to install was subject to depreciation. This case is a 12 th circuit case. Most hurricane prone states are either in the 5th or 11th circuit. Thus, this 12th circuit case is not binding on the other circuits. If you are ever ask "why does labor to install depreciate" I hope everyone who follows that school of thought has a good answer. Material always depreciates but never labor.
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    Ray Hall
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    08/30/2010 1:31 PM

    We are talking about unit prices for an operation. A unit price is thought of as drive out price. Turnkey several other terms.

    Lets use this example of replacing a quarter panel on an automobile. You pull up all the numbers for the operation and get a drive out price. This is the  cost amount of the RC loss. Now what is the price that will be paid on an ACV auto policy if the panel had old damage that was never repaired, but this event would have required total replacement, notwithstanding the "old" damage. The question now is any enhancement of the auto involved. The answer is yes.

    Property law of all states apply to all property damage claims and some reduction for new for old is allowed. Oop, not in this case because the drive out price was 70% labor involvement.  Are we now saying roof claims and auto claims are both property damage claims...... but, roof claim labor is not depreciated in the unit price like it is in the auto claim?

    By the way Chuck, betterment is in the same page of the insurance policy (Homeowners) as the word indemnity. (I think we all know its not in their but we know what it really means and some of us think.... depreciation and betterment is one and the same and most courts may agree.

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    CatAdjusterX
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    08/30/2010 2:35 PM
    Posted By ALANJ on 30 Aug 2010 08:35 AM
    Maybe I am missing something. But, I didn't see anything in the case that said labor to install was subject to depreciation. This case is a 12 th circuit case. Most hurricane prone states are either in the 5th or 11th circuit. Thus, this 12th circuit case is not binding on the other circuits. If you are ever ask "why does labor to install depreciate" I hope everyone who follows that school of thought has a good answer. Material always depreciates but never labor.

    Here is section 19 of the above titled "cause of action"
    19

    Labor costs for a new roof were "replacement costs" and, therefore, could be depreciated when using the replacement costs less depreciation method of valuing a loss covered by a homeowners' insurance policy.
     

    "A good leader leads..... ..... but a great leader is followed !!" CatAdjusterX@gmail.com
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    WILLIS
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    08/31/2010 4:01 PM

    I have two carriers that treat "labor and removal" uniquely.  They will depreciate both labor & materials if the roof is not replaced. They will delete a dumpster cost until the roof is replaced.     They want the labor separated from the replace.  They then withhold 100% of the cost to remove + 100% the cost to haul off  until the roof is actually replaced. The roofer or contractor  submits his actual incurred cost showing his labor rates + documents supporting actual payment of that labor and the use of dumpsters.  Once it is supported,  they will pay the full cost.  You would be amazed how much lower their actual costs are vs prices from Xactimate unit pricing.

     

     

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    rickhans
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    09/04/2010 2:42 AM

    Willis, how does the contractor report his actual cost when dumpsters are not used. Many, actually most in Dallas, own their own dump trailers and a truck to tow.  I don't see how it is anyones business as to what the contractor's raw costs are so long as his total price per square is in line with the market rates.  Ray, a painter scrapes and sands not to make the job better, but to make the paint apply properly and not start peeling later.  It is part of the job so is not betterment.  Likewise, tearing off existing layers could not be considered betterment because he got shortchanged on the previous re-roof when the roofer failed to tear off the damaged shingles, although the carrier is incurring an additional cost.  Shingles can not be properly installed and a good warranty given if an overlay is done.  If damage occurs later because of the overlay, the warranty will most likely be voided, therefore it would not be betterment to pay for the tear off.

    I have sort of a question that you probably know the answer to: why are shingles depreciated on the current new cost instead of basing it on the price of the shingles at the time they were originally installed?  I recently learned that the warranty on shingles is calculated this way. 30 year laminated shingles at 20 years are depreciated 66% of the 1990 retail price of the shingles which leaves almost no cash to pay for replacement shingles at today's prices.

     

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    CatAdjusterX
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    09/04/2010 3:17 AM
    Posted By rickhans on 04 Sep 2010 02:42 AM

    Willis, how does the contractor report his actual cost when dumpsters are not used. Many, actually most in Dallas, own their own dump trailers and a truck to tow.  I don't see how it is anyones business as to what the contractor's raw costs are so long as his total price per square is in line with the market rates.  Ray, a painter scrapes and sands not to make the job better, but to make the paint apply properly and not start peeling later.  It is part of the job so is not betterment.  Likewise, tearing off existing layers could not be considered betterment because he got shortchanged on the previous re-roof when the roofer failed to tear off the damaged shingles, although the carrier is incurring an additional cost.  Shingles can not be properly installed and a good warranty given if an overlay is done.  If damage occurs later because of the overlay, the warranty will most likely be voided, therefore it would not be betterment to pay for the tear off.

    I have sort of a question that you probably know the answer to: why are shingles depreciated on the current new cost instead of basing it on the price of the shingles at the time they were originally installed?  I recently learned that the warranty on shingles is calculated this way. 30 year laminated shingles at 20 years are depreciated 66% of the 1990 retail price of the shingles which leaves almost no cash to pay for replacement shingles at today's prices.

    Whilst I believe that labor on tear off should not be subject to depreciation and work many claims without the depreciation,

    TWIA did apply depreciation for both labor on tear off and install during Ike

     

    Robby Robinson 



     

    "A good leader leads..... ..... but a great leader is followed !!" CatAdjusterX@gmail.com
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    Ray Hall
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    09/04/2010 8:55 AM

    Well it seems we are seeing the evidence of "Tex adjuster thinking". How many times have you heard these words out of a misinformed Texas Adjusters mouth. "It was too old to repair' so we replaced it". Think of all insured property as real or personal and yoy MAY understand

    Now we all know that misguided logic is ripe for lots of depreciation as the complete restoration is about 90% betterment by definition on real or personel property. Now switch to personal property on an old pair of sneakers that has labor and material in the selling price. (" Labor can,t be depreciated !)
    How would you pay the claim amount if the property owner had no intention of repairing or replacing the damaged property, real or personal ?

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    RandyC
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    09/04/2010 11:01 AM

    Personal property (without Replacement cost endorsement) would be paid at actual cost value. With the RC endorsement, that would be paid after replacement.

    Where in the policy does it say labor is not to be depreciated? If it is a state law, or a rule from the department of insurance,or case law, I understand, but where in the policy does this "labor is not to be depreciated" come from? If I'm told this at JIT meeting, I don't have to be told twice I do what the carrier wants, but I'm interested to know where this comes from? Where is it written? In all things material, I see two components--raw material and labor. Raw materials without the value added of labor either in transformation or transportation has little value (unless it is something like gold which is still not worth much without the labor to extract it from the mountain).

    Please do not mix labor on repair with labor in replacement , unless I've got it wrong. There is no betterment on repair; after repair the item is still as old and used up as it was before the repair...only repaired. I don't believe it has anything to do with "labor", except in states where they are less concerned with long public policy against insured making a profit off an insured event. It has to do with the item being the same old item. You don't depreciate the material or labor on a repair unless something old becomes something new.

    In the states where there is no holdback, I assume public policy  is more concerned with the windfall of the insurer collecting replacement cost premiums on items that will never be replaced than the windfall of an insured that gets paid for full replacement of a patio cover, he never plans to replace.

    Back to actual cost settlement, there should be no requirement for the insured to replace that item. In theory, he is only paid the actual cost value of that item. Even if he hates the item, if it has actual cost value, he has lost that value and should be paid. If it has no value, no loss...no payment.

    If you have life insurance, you don't have to get a new life to collect. (That was a joke :-)

    If I've got something wrong in my understanding, please enlighten me.

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    Ray Hall
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    09/04/2010 7:00 PM

    Randy this is what I have admired in you, you have a great mind that can think..... lets talk about real property for all you Texas adjusters that was told something that was not correct. Real property can be raw land, improved sectiond of land with improvements (think buildings) or real property in/.on/ or around this building(Dwelling) three thinks come to mind on only the value of these three. 1. appreciation,2 depreciation or no movement. Now we all know what makes the values move. Forget land as hazard insurance can not be purchased on land. This leaves real and personal property with movement up or down. If the property is sold (this includes insurance hazard claims)

    A measure of property not as good as new  is called depreciation and we all know its based on age and condition all over the world. Or the western world who use the old english common law (USA law).

    We all understand hazard insurance to not have a profit motive. So how can you say labor and meterial cost to IMPOVE property is not betterment, enhancement and subject to the common law on property. Depreciation % is mearly a measurable guide  agreed or not not agreed between two parties.

    I have worked for 3 insurance companys in recent months that take 99% depreciation on old wood shingle roofs that was the "nailable surface for a composition shingle membrane". They would take more as the old wood shingle "deck" has 0% value as a roof that is turning water as it was intended.

    To give an example on personal property loss, if the heat from the fire cause the old work out sneaker shoe laces to break and a new pair cost $1.00 I would recommend a payment of 50 cents on an ACV loss policy.

    These rules are made by insurance carriers for several reason when their trainers, or worse 3 day schools say "no depreciation on labor"

    Thanks Randy, lets watch the roof thumpers jump on this on.

    And I can not resist this one..... what do you say to a Texas Adjuster who makes this statement...".. Thats not the way I was trained" I try to show my soft side and whisper "you were trained wrong". Open your mind and just try hard to learn property law and property principals in insurance contracts.

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    Ray Hall
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    09/04/2010 7:10 PM

    If you live and work in the Texas Coastal counties how much depreciation do you take on a 30 year shingle that is 10 years old. Nope the answer is not 33.3% its 10/25 or 40%.... Why we all know depreciation come of the expected life- not the mfg. limited warranty time. Roofs are worn out before 25 years down this way and really most will go more than 20 years before replacement.

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    ChuckDeaton
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    09/04/2010 7:44 PM
    This issue has the makings of a class action suit. Best not to depreciate labor where labor can be broken out from the materials cost.
    "Prattling on and on about being an ass with experience doesn't make someone experienced. It just makes you an ass." Rod Buvens, Pilot grunt
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    Tim_Johnson
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    09/04/2010 7:50 PM
    My X is set to "dep materials only
    Tim Johnson
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    RandyC
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    09/04/2010 11:40 PM

    My XM8 changes to carrier values. Sometimes they change in the middle of a storm. I don't know which changes more often, depreciation rules or base service charges.

    The class action has already happened in Calif. but other states do things differently. Florida does it's thing, but the carriers I'm certified to work for still want the depreciation decisions to be documented even if there is no "deferred depreciation."

    Here's what Calif. Department of Insurance says their courts say:

    http://www.insurance.ca.gov/0400-ne...013-07.cfm


    SACRAMENTO - California Department of Insurance (CDI) protections for homeowners filing claims has been upheld by the California Superior Court. The Court ruled that insurers may not depreciate the cost of labor when paying on homeowners' insurance claims. That practice by insurers forced homeowners to make up the difference and increased their out-of-pocket expenses to repair damage to their homes.
    The ruling comes in response to a 2003 lawsuit filed by insurance trade organizations which challenged almost every section of CDI's amendments to the Fair Claims Settlement Practice Regulations. The Department of Insurance's sweeping amendments increased protection to consumers and set more stringent standards for insurers. All but the "depreciating labor" issue were settled through negotiations. "
    This is good news for California homeowners," said Insurance Commissioner Steve Poizner. "When you pay for homeowners' policy and file a claim, you should get the coverage you pay for. We were confident the court would agree."
    At issue was whether labor costs could be depreciated. The Court ruling upheld CDI's view that unlike physical property, the labor does not lose value through the passage of time, and therefore can not be depreciated. Whether you are installing new replacement carpet or old replacement carpet, the cost of installing it would be the same.




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    RandyC
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    09/05/2010 12:42 AM
    Ray, you could depreciate the shoe strings to ACV, or you could view the strings as a repair item on the shoe. If you elected to repair the shoe with new strings, you could justify the full price of the strings and a little for the labor to put them in the shoe. If there was one string broken and the other was still good but dirty from age, would we change both strings or just the one?

    Recently I worked a storm where windows were depreciated on individual basis, but the screens were only depreciated if all of one side were replaced. As many ways as there are to decide things, almost all of them make some sense.

    There is often more than one way to settle a claim fairly. Adjustment decisions are like snow flakes; no two are exactly alike.
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    CatAdjusterX
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    09/05/2010 3:39 AM

    Ray

     

    In regards to the Texas windlift argument, would you depreciate the labor cost to physically re-sealing each lifted shingle ?

    In regards to the "SLAB" claims, how would you write the claim as with nothing left, it is obvious that the monies received by the insured will NOT go towards actually repairing their property.

     

    Great topic by the way

     

     

    Robby

     

     

    "A good leader leads..... ..... but a great leader is followed !!" CatAdjusterX@gmail.com
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    Ray Hall
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    09/05/2010 1:48 PM

    To reseal a comp roof that is wind lifted is a perfect example of how to apply depreciation on a loss. NO depreciation in this case. WHY no betterment.

    The Texas wind seal lift is not about depreciation or betterment is is about blackmail. This is how it works. the first driver is the TV lawyers who advertize they will get you thousands more. This is a true fact a windlift shingle claim that  get in the hands of these attorneys follows this path. The insurance carrier is notified and has 6 days to settle the demand letter amount or suit will be filed. If the carrier does not demand appraisal inside the 6 day window suit is filed. Now after suit is filed its too late to work out a settlement, because you had you chance to be fair in 2008 when you sent your adjuster out to my clients house.

    The judge now ask the defense attorney to attend the first mediation set for a date. The demand is about $250,000 for severalo insults you have done to my client. Its not settled on the first mediation as the black mail amount is too high. Several weeks or months it comes up on the court docket for the 2nd mediation. The carrier is now sweating out all the ongoing leagal expense of $250.00 per hour plus experts on depositions etc. The 2nd mediation is more in line with the carriers and his high priced legal teams thinking and is dropped to $125,000 and that case is settled in mediation and  off the insurance carriers list of law suits and the courts docket of several thousand is reduced by one. The firm for the insured gets its 40% plus expense anf the insured gets about 50% and sure enough its thousands more as the roof was replaced by the first insurance check, but in 2008.

    But, its not all bad for the IA,s who work these reopen IKE losses like myself. We meet the roofer and pay for wind lift and the roofer gets the insured a new roof and does not steer the insured to appraisal or a law firm to work this claim in the "lawyer mode". As you can see the lawyers are the roofers best bud and vice versa.

    I have a flat rate for my reinspections and recommendation.... business has been good in 2010, but will slow down after 9/13/2010.

    The citizens of the USA will have to rise up and demand the appraisal clause be changed in all property policy's to give the carrier more rights to make the clause more like an arbitration clause; before SUIT can be filed. Licensed arbitrators must be used, but not always lawyers or members of the American Arbitration Board. Most American policy holders would like protection at a reasonable cost.... not rate increases ever year.

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    WILLIS
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    09/05/2010 4:03 PM

    Richjans   Believe it or not this approach works very well. Very few roofers balk at producing paid expense or showing their cost.  The carrier is just forcing the insured to do what the policy wants, replace the roof  and if not, prohibits an insured from profiting off his loss.

    This wind lift issue will eventually get stopped by carriers who are tired of getting soaked.  Laws are made by politicians, who are mostly plaintiff lawyers. The current push for 6 days or sue is confirmation.  You have to get ahead of a problem.  Carriers should automatically replace the roof as soon as the wind claims are reported. Pay the insured and tell them to replace the roof. If not, then defending their failure to protect the property from futher damages, is more winable since they were paid to replace the roof.  Eventually,  the Texas wind policies will restrict or somehow eliminate wind from the coverage, simply due to all these ridiculous claims,  similar to removing water damage,  thus removing mold issues or restricting their exposure to a stated value.  The Texas wind policy is a joke even now with only a few covered perils. Remove wind and see how Texas residents like it.  Carriers will also force insured's to pay higher wind deductibles say 5% or 10% of Covg A to slow down frivolous claims. 

    Carriers are not going to continue to get soaked when they can reivse the policy to remove a costly problem.  They did it with asbestos, then mold,  flooding, and will do the same with wind.

    Carriers could all but eliminate an IA with the current technology. One inside IA could order a GPS roof measurement, that are all more accurate than any IA diagram I have ever seen,  then replace the roof  to eliminate claims due to leaks. If there are leaks most insured's can measure a room and photo interior damage, and if not there are building records that will.  Most carriers already handle Contents and ALE inside.  

    I am surpised some IA firm doesn't embrace this approach to a carrier. We will handle every one of your claims inside the office saving you time and considerable expense and problems.

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    ChuckDeaton
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    09/05/2010 6:04 PM
    There is that word "betterment" again. Would somebody show me where the word "betterment" is used in any policy. I want to be there when any adjuster uses the word "betterment" while being deposed.
    "Prattling on and on about being an ass with experience doesn't make someone experienced. It just makes you an ass." Rod Buvens, Pilot grunt
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