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547 Posts |
 Posted - 08/29/2002 : 21:45:37
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Transfer: Posted Monday, July 29, 2002 - 5:20 pm: By Jim Flynt
Removed Why? |
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Admin
547 Posts |
Posted - 08/29/2002 : 21:48:30
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Posted on Tuesday, July 30, 2002 - 11:03 am: Clayton Carr
Ladies and gentlemen, excuse me, but I just can not stay quiet any longer.
Jim certainly doesn't need me or anyone else to wave his flag for the effort he puts into this site, and when our views differ I'll likely be the first to say so.
However people, and if I grasp the intent of whom this thread is for, the people whom I am addressing are those with at least less than 36 months of actual field claims experience; whether that took 3 years to accumulate or 8 years.
For all you "construction types" out there ready to conquer the cat claim world, what you see on this thread is real time examples of what you will be faced with at someone's kitchen table or alone late at night when there is no one to tap for the answer. Your construction "skills" give you somewhere between 33% and 49% of the "tools" needed to handle general property residential claims. I sincerely envy your skill level at construction and I do wish mine was stronger and better, but, without a good grasp of what is before you on this thread - it is not worth a brass screw.
I am amazed there has not been a lively response to this thread. This type of thread should / could be one of the great benefits of this site.
If you are afraid or embarassed to offer your answers here - what confidence do you have in your work product that is submitted to the paying client?
Come on people, this is the place to tune your skills and not just wait to read someone's answers.
Sorry Mr. Flynt for butting in, but if you are choosing to invest some (a lot) of your time in offering this type of forum; it burns me that no one is taking advantage of it - and I dare say there are lots that need to. |
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547 Posts |
Posted - 08/29/2002 : 21:49:42
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Posted on Tuesday, July 30, 2002 - 1:39 pm: Ghostbuster
Actually, guys, where is the usual foo-fa-raw in general? Either, everyone but us is out humping files, or they got a haircut and a real job, or they just don't care. Maybe the space aliens came and snatched them?
I can think of several important topics here that have not attracted much of a nibble of interest. Issues, such as this one, need to be aired out.
In any event, everything depreciates, even our hot little bodies. |
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547 Posts |
Posted - 08/29/2002 : 21:51:01
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Posted on Wednesday, July 31, 2002 - 1:46 am: Eric Carlson
Jim, as the others have said this sounds like a great topic but I can't comment on much other than point 6. I have recently had my eyes opened about how depreciation is handled by some in the industry. Without divulging any names I will say that I recently spoke with a couple of different adjusters, one who has in the past used "random" depreciation generated by a software program and another who used a 10% "default" depreciation for about a year without realizing it. HELLO! As a software developer it scares me to think that someone will blindly accept something just because a computer spits it out.
I remember way back about 30 years ago when I was a Cub Scout and we did a little play at one of our award dinners. I played the part of an old man (with a "floured" wig for gray hair) who walked into a room with some kids sitting around a box covered with tin foil that was supposed to be a computer. They were sitting around using it to do calculations for their homework or something to that effect. As the sage old man I unplugged the computer. The "kids" got kind of confused and threw up their hands and I shook my head and walked out the door. I didn't realize at the time that I would see the fulfillment of that little scenario within my lifetime.
From a legal standpoint, anyone who uses software for any type of task needs to take a minute and read the long-winded license agreement before they install the software. For example, here is a generic version of a paragraph from our product's license agreement that can be found in one form or another in almost every software license agreement:
A. Product X is being licensed to you and is provided on an "AS IS" basis, for your personal or business use. Company X makes no warranty or guarantee as to the software's performance or stability. Company X disclaims all warranties with respect to the software, including but not limited to the warranties of merchantability and fitness for a particular purpose. Company X is not responsible for any special, incidental, indirect, or consequential damages. In no event will Company X's liability with respect to this license agreement exceed the amount you paid to Company X for the software.
I'm not too much on legalese and I definitely wouldn't count too much on a paragraph such as the one above to cover my backside if I caused a major disruption in someone's business with "bad code" but I do think the overall concept is correct. The person using the software is ultimately responsible to make sure it does what they expect it to do before using it as part of their business process.
So my guess for question 6 would be "yes". I think a case could definitely be made for Bad Faith or Unfair Claims Practice if software was relied on too blindly. |
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547 Posts |
Posted - 08/29/2002 : 21:56:53
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Posted on Wednesday, July 31, 2002 - 10:30 am: Kile Anderson
Maybe no one is responding because most of us feel that we have a pretty good handle on depreciation or have never really had it come up as a major issue. I mean after all if you have a 12 year old roof that consists of 25 yr shingles then the depreciation is 12/25. Pretty simple and don't most people know that depreciation only applies to material not labor? Obviously things get a little fuzzier when you deal with things like paint or personal property, but that's why most companies have depreciation schedules and if all else fails simply negotiate the depreciation with the insured. Is it really this complicated? I haven't had a problem with it in handling claims. |
Roy Cupps -
CatAdjuster.org :: Contact\Feedback :: Adjuster Roster :: Current Forum |
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Admin
547 Posts |
Posted - 08/29/2002 : 21:57:44
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Posted on Wednesday, July 31, 2002 - 1:24 pm: Clayton Carr
No, I could not equally well teach this subject.
There is one aspect of depreciation that I do not understand. It relates to your question (2-3), Non-Recoverable depeciation. It is a concept that does not exist in Canada and a term I had not heard, until I worked in the USA.
I can dutifully apply the concept, but, I find no basis or specific reference to it in the residential policies I have been exposed to. I've always liked to be able to refer to a wording for applicability of any claims concept or practice and understand it so I can when required comfortably relate it to the insured. Further, I have come across a carrier that (in concert with their general stance of no depreciation under a pretty hefty limit) do not consider any N-R depreciation.
Therefore, I await with interest, some background on this issue, rational, and how to read that from a policy. |
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547 Posts |
Posted - 08/29/2002 : 21:58:42
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Posted on Wednesday, July 31, 2002 - 2:28 pm: Ghostbuster
Uhhhh...Clayton, didn't you know that what counts is what the adjuster says and not what the policy says??? Why, if it weren't for this time honored concept, there'd be no bad faith law on the books at all!
Anyways, Non-recoverable depreciation. It is differentiated from normal depreciation by the fact that you, (The Fine Insured), don't recover it with the rest of the normal depreciation after repairs are done. I.E. Let's take your plain jane Homeowners policy and the topic of ratty old fences in a wind/hail storm.
On our sacred Statement of Loss, we show the various componets of the loss. We gots the roof and its depreciation of 25%. We gots the siding and its 30%. And, we gots the garbage cans and their 20% depreciation. So far, the depreciation is recoverable after the construction dust settles and we have our reciept in hand from Walmart for the trash cans. (Are ya with me so far?)
Now, what about that damaged fence out back that is 50% worn out? Since the policy says that fences are at ACV only, we list the fence replacement and the 50% depreciation.
The fence depreciation is the only depreciation that cannot be paid. It is nonrecoverable.
So, on the Statement of Loss, we total the RC, deduct the total depreciations to arrive at the ACV, apply the deductible and issue the first check. Then, as a footnote over to one side, explanations and computations as to what is recoverable and what is nonrecoverable depreciation are outlined.
There are variations on this depending on the carrier outlines, but it all works out the same in the end. (Have I missed anything so far?) We then close the file and months later, the cleanup folks get to reopen it and take care of the loose ends. But, that's just the nature of the business.
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547 Posts |
Posted - 08/29/2002 : 21:59:49
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Posted on Wednesday, July 31, 2002 - 3:01 pm: Clayton Carr
Thanks Ghost, I understand and have dutifully applied the approach you have given an example of. However, other than the FWUA DP policy, which does clearly state ACV only for x,y,z, items; other USA HO wordings as I recall have not been so specific and further some carriers "list" of items (not personal property) subject to ACV only (i.e. N-R dep) differ.
I would like to put my finger on it in a policy, as I can in the DP2 Loss Settlement section.
The concept in general has little logic to me, the lowly garbage can has recoverable depreciation, but my fence to keep the neighbours dog away from sniffing it slides permanently into worthlessness as a non-recoverable depreciated item. |
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547 Posts |
Posted - 08/29/2002 : 22:00:51
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Posted on Wednesday, July 31, 2002 - 5:49 pm: Lee Mushaney
Ghost:
Clayton just thru something else in your mix on the Fence. He has a neighbor, so woops there goes an additional consideration that has to be addressed when properly completing the statement of loss. |
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Admin
547 Posts |
Posted - 08/29/2002 : 22:02:47
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Posted on Wednesday, July 31, 2002 - 8:19 pm: Ghostbuster
Yep, Ms Mushaney, our fairest damsel of Bakersfield, if one resides within the confines of a state wherein a shared fence is a legal mandate, as is yours, then the ACV fence repairs must be split twixt the benefactors of that scraggly old collection of sordid lumber. We can also bring up the split deductible issue as well, if no other elements of the loss are present.
Hokey smoke, Bullwinkle! Why is life so complicated? |
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Admin
547 Posts |
Posted - 08/29/2002 : 22:03:39
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Posted on Wednesday, July 31, 2002 - 8:58 pm: Clayton Carr
The neighbour thing was a bad example of the root of what I was getting at, but yes, the split loss and deductible came as a surprise to me when I did the first of that type in California.
I'm still muddy on the theory / concept of NRD. Was it something brought about years ago as a soft stop to reduce losses or ease premium increases? Much like the deductible jumps over the years from the days gone by of $50.?
I don't have my policy binder with me right now, but I want to be able to know where the NRD is related to in the wordings, other than DP2.
I've never felt I had good logic or explanation for an insured for NRD, just template answers that I wouldn't want to hear much of on a hot day. If I knew more about it, I could "sell" it with conviction as I can do with R-D.
Sorry to press, but it's an issue I am not yet comfortable with. |
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547 Posts |
Posted - 08/29/2002 : 22:04:53
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Posted on Wednesday, July 31, 2002 - 9:02 pm: Lee Mushaney
Yep Ghost, life is so complicated and just the issues we have discussed in just the post on this one thread should tell the newbees, the want-to bees and those who think they is adjusters there is NO SUCH THANG AS TO MUCH KNOW-N'S. I am not trying to put anyone down here but there are so many varibles and possibilities in this business just knowing the minimum about adjusting claims is going to put you at risk of being privileged to work for all those Insurance Carriers and Vendors. |
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547 Posts |
Posted - 08/29/2002 : 22:05:45
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Posted on Wednesday, July 31, 2002 - 9:29 pm: Kile Anderson
Jim, thanks for the test. I see your point. My last post wasn't meant to sound cocky or boastful. It's just that I have very rarely run into situations where this has been a problem because I work for a carrier that sells mostly RCV policies. The only time it really comes into play is on Manufactured Home policies and even then I have never had a problem explaining to the insured in simple straightforward language what depreciation is and how it is calculated. I've only been questioned on it a couple of times and when I was I was able to negotiate with the insured a fair figure for depreciation.
I always explain to my insureds how to claim their RC benefits and if necessary what depreciation isn't recoverable. The point I was trying to make is 99% of the time I have had no problems with depreciation and maybe that's why this thread isn't taking off the way some people feel that it should.
Obviously I am interested in learning that's why I'm here. I want to be the best adjuster I can be and I'm more than willing to listen to anything anyone can teach me. I will keep reading this thread and hopefully learn something that I will one day apply on the job. |
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Admin
547 Posts |
Posted - 08/29/2002 : 22:07:57
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Posted on Wednesday, July 31, 2002 - 10:08 pm: Clayton Carr
Well folks, thank you Jim, Ghost & Lee.
Since my first sortie into the USA claims world and my exposure to Non Recoverable depreciation, I've looked hard and listened long to find something that wasn't there.
I see now it is as simple as when the policy loss settlement section says items x.y.z, are settled at ACV only - that in effect is the NRD "clause".
I feel pretty foolish that it is that simple, I've read and read over the years trying to grasp this one element so I could understand it better - looking for that one paragraph that had the words non-recoverable depreciation in it.
It is clear to me now, a clearly laid out policy provision. For as long as I will remember my address, I'll remember "ACV only" is the reference to NRD; and I'll remember where and how I became comfortable with the term.
Thanks for the help. |
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Admin
547 Posts |
Posted - 08/29/2002 : 22:09:42
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Posted on Thursday, August 01, 2002 - 12:08 am: Clayton Carr
It's time to give some thought to some answers to the questions posed.
(1-1) I arrive at a valid and realistic ACV for a partial loss estimate by being aware of any instructions on the issue from the vendor, properly interpreting the specific policy relative to the issue, applying any vendor / carrier specific depreciation factors, or in the absence of the former applying fair depreciation deductions from materials of LKQ replacement costs based on age and condition to consider the actual physical depreciation and any economic obsolesence that may be applicable.
(1-2) For a total loss estimate, the factors above relative to the vendor / carrier instructions are the same. When I get to the point of "doing my own adjusting" - i.e. applying my estimation of fair depreciation deductions - I look at building systems or components in place of LKQ replacement to check myself that the entire (for example) HVAC system is fairly depreciated as well as considering that I minimally depreciated the ductwork but more heavily (if warranted by the factors considered in an ACV computation) depreciated the actual mechanical unit. Subject to the whims of the carrier, I can not ignore the "broad evidence rule" and should explore the structure that was from a market value prospective.
(2-1) jeopardize E&O - yes, basis for a bad faith claim - yes; if sufficiently harsh or vindictive - if truly excessively improper and triggered the bad faith "triggers".
(2-2) It is the adjuster who computes the loss based on his/her attendence and observations of the damaged property and applied the incorrect schedule. Steps the adjuster should take to avoid such a bad faith risk would be to inquire of / and obtain from - the carrier depreciation "tables" or inquire through the vendor if the "tables" the adjuster intends to use are applicable in the locale being worked, subject to justifable adjuster discretion. Of course, the "catch all disclaimer" on the estimate should be of appropriate language to clearly show the intent that the estimate of both RC and ACV factors are subject to insurer review and acceptance.
(2-3) I'm not sure, logic may suggest that the items subject to NRD are rapidly depreciating items (i.e. not lengthy lifespans of utility) and statistics may show that NRD items are those that have proven to be the least often replaced items.
(2-4) Items that have a rapidly declining RC, such as technical or "hightech" items - from microwaves to computers, VCR and other "hightech" gadgets. Real life example, I bought a "state of the art" 2 head VCR 20 years ago, paid $850. and it took two of us to carry it to the car. No one is going to depreciate it more than 80%, so I'd get an ACV of $150. to $170. You would have a hard time today to spend more than $125. for a good 4 head VCR.
(2-5) example - according to DW2 (7/00) - loss settlement, personal property - at ACV at the time of loss, but not more than the amount necessary to repair or replace. So, now I'm down to getting $125. Why, it all goes back to the principal of idemnity.
(2-6) A person should never rely solely on the software "automatically" defaulting depreciation amounts. I think they should be considered as guides; to me it is part of the "adjustment process" to apply a fair depreciation based on what you see relative to the damaged property. If using auto default a basis for bad faith, no, I don't think so - in itself. If I plugged in the right territory/region to utilize and entered the correct material data and depended on the reasonable template depreciation in the software - I don't think that act - if proven to be wrong - would be a bad faith claim, but may be interpreted (if widespread similar usage by adjusters for the same carrier) as an unfair business practice.
(2-7) An adjuster should have a good grasp of the life expectancy of personal property item/class types, and be able to adjust those factors based on their observations of actual physical deterioration noted - a couple in a home with no kids will have their furniture far outlast a family of 5 with 3 rug rats. The adjuster should be aware of normal life expectancies of building materials, systems and components; and become aware of how the geographical location of the loss may vary that life expectancy either way from another region (normally stereotyped to their "home" region).
(2-8) You will encounter one of these "types" every few years of active field claims work. A carrier executive, a major principal at an agency, or some form of attorney. It is a "test", if they put you to the test. While I am on the road I do not carry all 9 of the policies you mention, but will have the relevant one in my clipboard and at least one other in the truck. I will glady go "A-Z" with any of these types regarding their policy (even more comfortable now as we speak regarding my new found ease with NRD) and if I feel I should respond (usually "politically" motivated) to a comparative analysis, I'll ask for a glass of water while I go to the truck and retreive another wording (normally the most basic wording of any I have in the truck). This is why I like to be able to put my finger on the clause/provision that is relative to the question being raised. I did not create the wording, I am not there to defend the wording; but I'll gladly show where the clause/provision is in the policy that is necessary to answer a question.
Look forward to reading others viewpoints. |
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Admin
547 Posts |
Posted - 08/29/2002 : 22:10:39
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Posted on Thursday, August 01, 2002 - 10:00 am: Clayton Carr
Some more answers for debate and critique.
(4-1) keeping the term depreciation within the context of insurance, there are two categories (not types - of which there are more than two) of depreciation - recoverable and non-recoverable. Your comment infers an affect on the total indemnity beyond that realized by recoverable depreciation. Therefore, I suggest an explanation of your comment is that any applicable non-recoverable depreciation will restrict the potential total indemnity and leave an insured with an unrecoverable portion of the loss beyond any deductible that is applicable.
(4-2) illustrate a financial model of a Statement of Loss, with a significant amount of items subject to NRD.
(4-3)That is a puzzle.
(5-1) If instructed and required to apply depreciation to labor and debris removal, we will first conclude that the issue is past any reasonable point of discussion with the vendor/carrier; to convince them otherwise. As a cat adjuster you must then decide whether to accept/work the files which have that exposure. If you decide to do so and within the instructions of the carrier, irrespective of having a written directive on how to deal with the issue presented - each such file diary would carry a notation along the lines of; ".... as per your specific instructions we have applied depreciation to labor and debris removal ....". Depending on my personal concern at the time for my relative bank balance, I may add another line; ".... however, we suggest that the reported case of 'Davis vs Mid-Century Insurance' illustrates that this is an incorrect practice ....". As well, the disclaimer on each estimate would reference the issue and include; ".... depreciation that has been applied is in accordance with the insurers instructions ....". However, I raise a question. It all relates to "know before you go". An adjuster just should not expose themselves to this type of thing. How do you ever really know to this extent before you are actually at a storm office meeting?
(6-1) to (6-6) Good questions, but as they are directed to Kile, I'll let him step up the plate first.
(7-1) Yes - imperative. Detailed scope notes are critical to me. It is a terrible feeling late at night trying to put together an estimate and realize at that point that this type of info was not gathered in sufficient detail.
(7-2) Yes - imperative, for a number of reasons. I need this info as stated above. Plus it keeps the insured involved, informed and aware of the effort I am making.
(7-3) Yes - can not imagine doing it without.
(7-4) Yes, it's fairer, and to me reflects in the estimate and reporting that a conscious effort was made to differentiate. I think it also helps "sell" the total package to both the insured and insurer.
(7-5) You can not use minimal, generalized depreciation applications. Depreciation should mirror age, actual physical condition and economic obsolesence if required. |
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"ACV Problem" in Insurance Policies"
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