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Last Post 05/25/2010 12:20 AM by  Ray Hall
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RandyC
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05/24/2010 11:46 AM
I just spent some time pleasure reading through various policies. Calif. earthquake lists artwork as "property not covered" and NFIP has a special limit of $2500 for artwork. For other policies, the limitation language for art seems to be parked in replacement cost for personal property endorsements. For antiques, an equal quality replica would probably satisfy the contract, but replicating a painting for payment is probably against the law. At the least it would be a copyright violation.

I don't think the HO-3 policy owes an exact replacement or even a match, but like kind and quality is probably a higher standard than just paying any old painter to paint a few trees and a mountain to replace a Thomas Moran painting. For an appreciating asset, AC is not that much less than RC.

I've just read several different ISO DP and HO policies and found very little that limits coverage on paintings. I see a lot of different limiting language about antiques, fine art, historical value in the replacement cost endorsements, how would that limit coverage for the ACV of a painting that is worth more today than when purchased? I see some "functional value" language in guidelines, but I can't find any policy language like that this morning.

Before I was an adjuster, I was an art dealer for several decades. We helped adjusters find comparable prices for damaged paintings and prints and we helped appraise values of art for insurance purposes. It wasn't our place in those days to worry about whether they were covered under the HO policy or SPP but I don't remember any adjuster asking us to paint a replacement. I know there are adjusters that deal with this everyday. Maybe one of them will chirp up!
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RandyC
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05/24/2010 12:18 PM
I wrote that wrong. We didn't help adjusters find replacements for paintings. We helped them find market prices for certain artists and certain subject matter. For instance, Porfirio Salinas is known for painting bluebonnets. A bluebonnet painting by him of a certain size would be worth a certain range. Other subject matter might be worth more or less. We just located a number of available pieces as similar in subject matter and size as possible. I don't know what they would do with this information to settle the claim. We did this as a free service. We got restoration work on frames and print sales for trouble.

In those days, there were dealer networks. Today, with computers it is much easier to find the value of these things through subscription services.

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Ray Hall
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05/24/2010 2:48 PM
This topic of broader coverage on "household goods" (NY Std) definition has been very good for me as it seems I have forgotten something that I learned many years ago. This is the definition of the TX. policy which I think is a copy of the NY standard fire policy in many aspects. Household Goods-Insurance on household goods, shall include all personal property, usual to a residence, of the insured and family. Then the lines 8-13 spell out the excepted property. This policy does not cover, accounts, money, currency, securities,deeds or evidence of debt: nor, unless specifically named heron, cloth awnings, and books of records(except their physical value in blank), manuscripts, bullion, animals, motor vehicles, or aircraft.
 
Leland I am sorry I called you out, I have learned a lot and can see why your are cleaning up DP,s for adjusters that thought they were dealing with a MIC-3 Homeowners.
 
I think my excuse is I was out insurance adjusting from 1972 until 1982, when the DP,s were adopted in TX. The next time we send in adjusters for fire claims, we will have to get them on DP 1, DP2 and DP3 Policy form. Ah shoot lets start a certifications class, as many people will not learn from this back and forth post.
 
 
 
 
 
 
 
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Ray Hall
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05/24/2010 2:50 PM
Posted By Ray Hall on 24 May 2010 02:48 PM
This topic of broader coverage on "household goods" (NY Std) definition has been very good for me as it seems I have forgotten something that I learned many years ago. This is the definition of the TX. policy which I think is a copy of the NY standard fire policy in many aspects. Household Goods-Insurance on household goods, shall include all personal property, usual to a residence, of the insured and family. Then the lines 8-13 spell out the excepted property. This policy does not cover, accounts, money, currency, securities,deeds or evidence of debt: nor, unless specifically named heron, cloth awnings, and books of records(except their physical value in blank), manuscripts, bullion, animals, motor vehicles, or aircraft.**** Thats makes you and the Underwriters @ Lloyds correct**
 
Leland I am sorry I called you out, I have learned a lot and can see why your are cleaning up DP,s for adjusters that thought they were dealing with a MIC-3 Homeowners.
 
I think my excuse is I was out insurance adjusting from 1972 until 1982, when the DP,s were adopted in TX. The next time we send in adjusters for fire claims, we will have to get them certified on DP 1, DP2 and DP3 Policy form. Ah shoot lets start a certifications class, as many people will not learn from this back and forth post.
 
 
 
 
 
 
 
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Leland
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05/24/2010 3:13 PM
Look, Ray I have to admit I'm not real clear myself on the precise way to adjust a fine art painting on an HO3 because I don't do a lot of HO3 personal property. I do know that it is always good to think these things through and even if some of these issues don't come up that often it's the one time it does come up that can bite an adjuster in the behind.

And I do think that many people tend to just fall back on some rule of thumb that may not always be correct. Like the adjuster in the court case I mentioned who the judge says was doing it wrong for 20 years. Maybe it was the judge who was wrong but it didn't seem like the adjuster could give a good explanation of why he was doing it the way he was doing it.

I think it's important to be able to explain why a loss was settled a certain way (using policy language) rather than say "that's how we always do it". That way, even if someone disagrees it is harder to claim bad faith, because the adjuster thought it through etc.

I love the heartland of this country and someday hope to move to a farm in Texas. So I don't mean any disrespect at all but there are parts of this country where claims are filed for damaged farm equipment, hail damage to mobile homes, and livestock hit by cars. I happen to live in an area where I get claims for gunshots hitting buildings in one part of town and rich people with $20,000 antique walking cane collections. I would be lost trying to handle some of the claims you are familiar with and the reverse might be true also.

Keep in mind that if you feel like fancy artwork questions don't come up that often for you think about it from my perspective: I've never handled a hail claim. We don't generally have hail in California.

One mistake a lot of Cat adjusters make on California claims is that they will start adjusting the HO3 without asking or realizing that the HO3 is DIC and secondary to the DP1 that I am adjusting. A lot of times the CAT adjuster will have recommended payments without realizing the insured has a primary policy with a DP1 carrier.
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RandyC
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05/24/2010 3:22 PM
Back to that PICASSO, if it had been burned or stolen, how much would the loss be worth?  Remember no one thought it was worth anything. There was no documentation. You probably wouldn’t have felt much pain. It probably wouldn’t have brought much on the claim.

Now you have documentation, but what if it really wasn’t real but you and the insurance company think it is. If you scheduled it for an agreed price based on the value of a genuine Picasso, and then it was later stolen, damaged, or destroyed, how much would your claim be for? What's the chance of the adjuster looking at the ashes and saying, "This was a fake!"

Would it even matter that it was a fake if both the insured and the insurer thought it was real and agreed on its value?

There are famous forgers whose fake paintings are worth more than the original artists they forged.

The market value of art is a perception, but the insurance contract is real.
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Leland
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05/24/2010 4:05 PM
Great question.

I think it is probably like stated value in Louisiana. In Louisiana, if a house worth $150,000.00 is insured for $200,000 and burns down due to fire, the insurance company must pay the $200,000. In Louisiana the time for the insurance company to disagree with the valuation is when the policy is underwritten, not once the house burns up.

I could be wrong but if the insured gets an item scheduled as a genuine item for a certain dollar amount I think the carrier has an opportunity at the time of underwriting to disagree. Once the carrier agrees to schedule the item as genuine I don't think they can back away later, except maybe if they can prove fraud. My guess is maybe the burden of proof probably shifts: for an unscheduled item the insured needs to prove what it was worth. For a scheduled item the carrier has to prove it was NOT worth what was claimed.

Just my guess. Not that many people have scheduled personal property. And I could imagine state case law would make a difference.

Maybe someone who handles scheduled PP can tell us, thank you.

"Would it even matter that it was a fake if both the insured and the insurer thought it was real and agreed on its value?"

My wife was worried about dropping off her wedding ring to be cleaned because she has heard stories of jewelers switching out the diamond and giving the ring back with cubic zirconium.

So I could easily imagine a situation where somebody could have a fake item that they thought was real and the insurance company also thought it was real and paid the claim.

Fake Rolexes also come to mind- every once in a while somebody will have a fake Rolex that they think is real. They might wear it for years thinking it is real. If they make a claim of course they will want the money for a real one.
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Tim_Johnson
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05/24/2010 4:19 PM
Big Red requires a certified appraisal on anything you want to schedule on your HO policy. They do have the option of using one of the replacement services.
Tim Johnson
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Ray Hall
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05/24/2010 5:57 PM
I have worked HOC which is all risk on A & C coverage and inland marine since I was trained in property. Most wealthy people schedule these expensive items and this stops the conversation, ut we do have the right to replace. I have replaced many diamonds "that fell out of the setting"   "was flushed down the sink with the dish water" " lost it on the beach at Hilton Hotel in Miami" the inland marine and the broadest HO policy do not argue, then get the stone replaced by a friendly jeweler, furrier, art dealer etc. It,s what adjusters do.
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CatAdjusterX
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05/24/2010 9:11 PM
Hey Leland , you brought up in Louisiana about a home being worth 150,000.00 yet insured for 200,000.00 obligates the insurer to pay the latter.
Whilst working claims during Katrina,
I had a friend who I had spent a few years in Law school with, I washed out after my second yr( the whole story is on another thread) and this gentleman was an attorney and was involved with being retained by insureds not happy with their settlements from Katrina/Rita
 
A woman retained his firm claiming Allstate shorted her flood claim as she was insured for the maximum at that time for a residential structure of 250,000.00 and only recived 180,000.00.
 
This woman also felt Allstate should have paid a second 250,000.00 because after her neighborhood was drained of Katrina's floodwaters, her neighborhood was one of the parishes that was also flooded from Rita's floodwaters, my buddy had a good chuckle after that statement as she honestly felt entitled to a second award.
He gently stated that unless she was the only person affected that was able to rebuild her home completely and then go through another flood event one month later that she was not entitled to receive a second award.
 
Anyway , this claim was closed with no additional claim award as it was explained  she couldn't receive the full award as her home was only valued at what she received around 180,000.   Seems somebody stepped on their D@#K at the Allstate underwriting deptartment, my question is how can a risk be insured at substancially more than the risk is worth ? Was she really entitled to the full award when it's obvious a mistake is made in the underwriting department?
I would think my buddy who is a good attorney would have went after Allstste with a vengeance if that was the case !! Maybe under an errors and ommissions claim , maybe ?
It only seems logical to only receive what the home is worth and only legal, this was before the big sub prime mortgage meltdown , so this wasn't a home that was at one point worth the 250,000 and them devalued down to it's current market value, it was refinanced 8 months prior to Katrina at 180,000
She received around 75,000.00 from her Allstate wind policy as roof was gone before the flood waters put her home under 20 ft of water.
 
Between both policies and content she received well over300,000.00, yet she was screaming bloody murder at Allstate !!
 
Before you attack over the Attorney repd insured being parasitic and all the likes, I implore those inclined to comment on that, please read the thread "THE UGLY SIDE OF ADJUSTING THAT YOU DON'T KNOW OF"as I wrote in great detail about what my thoughts are on the matter Look for the posts by catadjusterx.
Leland, In regards to flood , between value of home and being insured for more , it doesn't seem llogical that insurer would number #1 even write a policy like that , but with so many underwriting screwups, It isn't hard to see something like that occur, but to be legally obligated to pay doesn't seem plausible, please take no disrespect on this as none is intended, I'm just looking for clarification
 
 
Robby Robinson 
"A good leader leads..... ..... but a great leader is followed !!" CatAdjusterX@gmail.com
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Leland
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05/24/2010 10:27 PM
I remember reading that the Louisiana stated value law only applies to FIRE total losses, not other perils. Apparently it might apply to other perils too, but not situations with combinations of covered perils and uncovered perils.

try this Insurance Journal article:

http://www.insurancejournal.com/mag.../68089.htm

Here's a link to an attorney's commentary on how insured's are trying to collect stated value on perils other than fire.

http://papers.ssrn.com/sol3/papers....id=1547243

I had no idea anybody was even trying this; i thought the policy language was clear that it only pays policy limit on total loss fire.

Going back to the scheduled personal property I asked another California adjuster with a lot more experience than me. About 10 years ago he worked for that really big national carrier that is switching to Xactimate. He said as far as he could remember, any total loss scheduled personal property would be almost automatically paid at the scheduled amount with little or no investigation, other that to verify that the item was actually destroyed. He told me as far as he remembers there was no effort to re-evaluate the value of the item, the insured would get the scheduled limit. Of course that was 10 + years ago, things may have changed.

So at least in his example, the total loss scheduled personal property gets paid just like a total loss fire house in Louisiana: the insured gets a check for the stated limit.

I would love to hear from other adjusters what their experience is with total loss scheduled personal property.

Now in the example Robby R. mentioned it is my experience that there isn't much liability for over-insuring a property. Think about it- the insured could really only make two claims: 1) because my agent overinsured my house he set me up for an emotional let down when I didn't get all the money I was expecting for a loss I didn't suffer, and 2) I overpaid $400 of premiums over that last year. The first claim would get thrown out of court and the second is not enough money to bother with.

The other issue you bring up is pretty well established in the adjusting world: if the insured had a previous loss that they were paid for but didn't repair, the carrier doesn't owe to pay twice on that portion. So if after Rita the insured was paid $10,000.00 for extensive shingle repairs and the insured never made any repairs, once Katrina comes around and the adjuster estimates $50,000.00 for total roof replacement the insured will only get the $40,000 difference. This is why adjusters are supposed to pull the previous claim files.
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Ray Hall
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05/25/2010 12:20 AM
Texas is one of the dtates that has a valued policy, that is liquidated for the face amount from a fire on the BUILDING only.
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