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Reconstruction Man
124 Posts |
 Posted - 02/02/2004 : 10:54:10
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Please consider the following...
COMMISSIONER´s BULLETIN NO. B-0045-98
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June 12, 1998
TO: ALL PROPERTY AND CASUALTY INSURANCE COMPANIES
RE: Calculation of Actual Cash Value Under the Texas Standard Homeowner´s Policy – Form B
The Department has learned that one or more insurers have interpreted language in the Texas Standard Homeowner´s Policy – Form B to permit the deduction of contractor´s overhead and profit, in addition to depreciation, from replacement cost in calculating actual cash value. This interpretation has generated two class action lawsuits and inquiries to the Department regarding the Department´s position on this matter. The insurers are interpreting the following Loss Settlement provision of the Texas Homeowners Policy – Form B:
We will pay only the actual cash value of the damaged building structure(s) until repair or replacement is completed.
The purpose of this bulletin is to state the Department´s position that actual cash value of a structure under a replacement cost policy, when the insurer does not repair or replace the structure, is the replacement cost with proper deduction for depreciation. The deduction of prospective contractors’ overhead and profit and sales tax in determining the actual cash value under a replacement cost policy is improper, is not a reasonable interpretation of the policy language, and is unfair to insureds.
The Department´s position is based on the following:
-- Indemnity is the basis and foundation of insurance coverage. The objective is that the insured should neither reap economic gain nor incur a loss if adequately insured. This objective requires that the insured receive a payment equal to that of the covered loss so that the insured will be restored to the same position after the loss as before the loss. The calculation of this payment results in under-compensation if an insurer deducts prospective contractors’ overhead and profit and sales tax in determining the actual cash value under a replacement cost policy. Conversely, the inclusion of contractor´s overhead and profit and sales tax on building materials does not over-compensate an insured for the amount of the loss because these items represent part of the insured´s loss. Generally, the objectives of indemnity will be met if actual cash value is calculated as replacement cost with proper deduction for depreciation. In the rare situation that defies calculation of actual value on this basis, such as cases in which the structure has historical significance or the materials cannot reasonably be replaced, other factors may be considered. However, there is no situation in which the deduction from replacement cost of depreciation and contractor´s overhead and profit and/or sales tax on materials will be the correct measure of the insured´s loss.
--Premiums charged must not be excessive for the risks to which they apply. Under a replacement cost policy, the liability limits of the policy and the premium paid by the insured are determined on the basis of the replacement cost of the structure. The value of contractor´s overhead and profit, as well as sales tax on building materials, has been included in the limit of liability for which the insured has paid premium. If the insurer in determining actual cash value excludes costs that are included in the determination of liability limits, on which the insured´s premium is based, the insurer reaps an illegal windfall because the insurer receives premium on insurable values for which loss may never be paid.
--To deduct costs other than depreciation from the estimated replacement cost of the damaged structure is contrary to historical industry norms and practices. Historically, insurers have determined actual cash value on the basis of repair or replacement cost less depreciation. Only recently have some insurers deducted contractor´s overhead and profit and sales taxes on building materials. There has been no recent change in the language in the promulgated residential property policies to support such a change in determining actual cash value.
--The insurers’ argument that the cost of contractor´s overhead and profit and sales tax on building materials should be excluded from an actual cash value loss settlement because the insured has not incurred these expenses is not persuasive. Using this logic, an insured who opts not to repair or replace damaged property would not incur any of the expenses necessary to repair or replace the damaged property, including the costs of building materials, and would collect nothing under an actual cash value loss settlement. This result would be contrary to the purposes of the subject insurance policy.
The scope of this bulletin is limited to the calculation of actual cash value for dwelling coverage in replacement value policies by use of the practice described herein. This bulletin is not intended to, and does not, express any opinion of the Department as to the calculation of actual cash value in other contexts, such as personal property, or measures of the actual value of such property to the owners of such property.
The Department has concluded that an insurer providing property coverage under replacement cost residential policies that allow for the adjustment of covered losses to structures on an actual cash value basis may not calculate actual cash value on the basis of replacement cost with proper deduction for depreciation, less contractor´s overhead and profit, nor may the insurer deduct sales tax on building materials. Any insurer that determines actual cash value on this basis may be subject to disciplinary action for violations of the Texas Insurance Code, including unfair claims practices pursuant to Article 21.21 § 4(10)(a) and Article 21.21-2.
Elton Bomer
Commissioner Of Insurance
http://www.tdi.state.tx.us/commish/bulletins/b-0045-8.html
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okclarryd
USA
106 Posts |
Posted - 02/02/2004 : 11:09:33
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Are you still here??
Why do you persist in stirring the pot?? |
LARRY D HARDIN |
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Reconstruction Man
124 Posts |
Posted - 02/02/2004 : 11:16:40
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"Why do you persist in stirring the pot??"
The pot needs cleaning... |
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olderthendirt
USA
370 Posts |
Posted - 02/02/2004 : 11:54:03
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| And your point is????? |
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KileAnderson
USA
875 Posts |
Posted - 02/02/2004 : 12:14:42
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| That means that it is not proper to deduct O&P when it is owed. On a roof only job it is not owed. |
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JimF
USA
1014 Posts |
Posted - 02/02/2004 : 12:44:24
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Three points:
(1) I think most of us here are familiar with the information contained in this 6 (Six) year old Bulletin from the Texas Department of Insurance.
(2) Kile is correct that Overhead and Profit (O & P) are not payable by any carrier absent 3 trades.
(3) The aforesaid Bulletin is applicable ONLY to those claims in the State of Texas, and should not be interpreted to mean that the same rules are applicable in any other states. Always check with the carrier for whom you are working and laws within that state regarding issues and the proper treatment of claims issues within a specific state.
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Edited by - JimF on 02/02/2004 16:44:19 |
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Linda
USA
127 Posts |
Posted - 02/02/2004 : 14:35:07
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Reconstructionman, may I suggest you read this in part and the full text on the Texas Department of Insurance site. You may find it possibly applies to you and whatever it is you are attempting to prove by your postings on this site. You seem to be walking an extremely fine line between contractor and acting as a public adjuster. I am sure the great State of Texas will be more than happy to take your application and allow you to post your surety bond to become a legitimate, licensed public adjuster and jump through the rest of the hoops required.
You seemingly fail to realize you are addressing a group of fairly intelligent persons who could care a whit less about whatever your personal agenda is. We all are literate and for the most part are current on our industry. I believe I can speak for most members of this site and relate to you that there are public adjusters for whom we have a great deal of respect and are more than willing to listen to anything they have to say. We are not so proud or egotistical that we claim to know everything and by listening to someone whom we respect we just might learn something. If you will notice, the keyword is "respect."
Being offensive and condescending is never a good idea but I would think you had gotten that message by now. Obviously not.
If, as you hold yourself out to be, a successful contractor, then how in the world do you have the time to post on this site as much as you do. I have been an owner of a company and the last thing I had time to do was to sit at a computer and post to a group who had no interest in what I had to say or why.
The following is not six years old and perhaps you haven't read it yet:
ARTICLE 3. LICENSING OF PUBLIC INSURANCE ADJUSTERS
SECTION 3.01. Subsection (b), Section 1, Chapter 407, Acts
of the 63rd Legislature, Regular Session, 1973 (Article 21.07-4,
Vernon's Texas Insurance Code), is amended to read as follows:
(b) "Adjuster" shall not include:
(1) an attorney at law who adjusts insurance losses
from time to time and incidental to the practice of law, and who
does not advertise or represent that he is an adjuster;
(2) a salaried employee of an insurer who is not
regularly engaged in the adjustment, investigation, or supervision
of insurance claims;
(3) persons employed only for the purpose of
furnishing technical assistance to a licensed adjuster, including,
but not limited to, photographers, estimators, private detectives,
engineers, handwriting experts, and attorneys at law;
(4) a licensed agent or general agent of an authorized
insurer who processes undisputed and/or uncontested losses for such
insurer under policies issued by said agent or general agent;
(5) a person who performs clerical duties with no
negotiations with the parties on disputed and/or contested claims;
(6) any person who handles claims arising under life,
accident and health insurance policies;
(7) a person who is employed principally as a
right-of-way agent or right-of-way and claims agent and whose
primary responsibility is the acquisition of easements, leases,
permits, or other real property rights and whose claims handling
arises out of operations under those easements, leases, permits, or
other contracts or contractual obligations; [or]
(8) an individual who is employed to investigate
suspected fraudulent insurance claims but who does not adjust
losses or determine claims payments; or
(9) a public insurance adjuster who is licensed under
Article 21.07-5, Insurance Code.
SECTION 3.02. Subchapter A, Chapter 21, Insurance Code, is
amended by adding Article 21.07-5 to read as follows:
Art. 21.07-5. PUBLIC INSURANCE ADJUSTERS
Sec. 1. DEFINITIONS. In this article:
(1) "Licensee" means a person licensed under this
article as a public insurance adjuster.
(2) "Person" includes an individual, firm, company,
association, organization, partnership, limited liability company,
or corporation.
(3)(A) "Public insurance adjuster" means:
(i) a person who, for direct, indirect, or
any other compensation:
(a) acts on behalf of an insured in
negotiating for or effecting the settlement of a claim or claims for
loss or damage under any policy of insurance covering real or
personal property; or
(b) on behalf of any other public
insurance adjuster, investigates, settles, or adjusts or advises or
assists an insured with a claim or claims for loss or damage under
any policy of insurance covering real or personal property; or
(ii) a person who advertises, solicits
business, or holds himself or herself out to the public as an
adjuster of claims for loss or damage under any policy of insurance
covering real or personal property.
To read this in full please go to:
http://www.capitol.state.tx.us/cgi-bin/tlo/textframe.cmd?LEG=78&SESS=R&CHAMBER=S&BILLTYPE=B&BILLSUFFIX=00127&VERSION=5&TYPE=B
Members of this site have asked you as politely as we can to please resist from posting here but you insist on doing so. Why you insist is beyond me.
If, as you have posted, you are receiving favorable personal emails then may I suggest you keep them personal and continue your conversations in that manner and off this site.
This site is for adjusters, staff and independent, however, as the name implies, "catastrophe" adjusters are our majority. As much as I love the State of Texas, there are 49 others just as important and on occasion; Canada, Puerto Rico, the U.S. Virgin Islands and a few other places.
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Edited by - Linda on 02/02/2004 15:09:36 |
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CCarr
Canada
1200 Posts |
Posted - 02/02/2004 : 15:18:01
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Linda's comments should / could bring a fitting close, to our irrelevant exposure to Roger Recon.
The time seems right to stop responding or acknowledging any posts from Roger Recon. Once we accomplish this, we cease to be an audience for his cause; and like all people on missions of this nature, he will seek a new receptive audience.
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Cecil
USA
35 Posts |
Posted - 02/03/2004 : 08:15:57
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All that we do or don't do regarding OH&P are practices unless there is a law in a particular jurisdiction or edict from a particular regulatory agency.
The usual practice regarding taxes and OH&P on ACV settlements is to pay the OH&P and taxes only on the ACV amounts and then only when appropriate.
I believe roofmanjacks argument is that OH&P is payable based on the RC claim under all circumstances. |
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Reconstruction Man
124 Posts |
Posted - 02/03/2004 : 23:46:04
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True or False--Under a replacement cost policy, the liability limits of the policy and the premium paid by the insured are determined on the basis of the replacement cost of the structure.
True. Until it's figured out how to "poof" structures into existance.
True or False--The value of contractor´s overhead and profit, as well as sales tax on building materials, has been included in the limit of liability for which the insured has paid premium.
True. Insurers gotta' account for all anticipated costs to repair / replace damaged stuff.
True or False--If the insurer [daily / cat adjuster] in determining actual cash value excludes costs that are included in the determination of liability limits, on which the insured´s premium is based, the insurer reaps an illegal windfall because the insurer receives premium on insurable values for which loss may never be paid.
True--To logically pre-determine what is to be paid, charge for it, then ignore that logic when it's time to pay is illegal.
True or False--We have experienced two cat rated storms in our south Texas area in 18 months and the cat adjusters have used the illegal settlement practice mentioned by TDI.
True. And the implications are quite relevant to adjusters that are affecting other areas of the country, policyholders and businesses with the same estimating practices. Our postings have been submitted with the intent of finding out if adjusters who know these claim settlement practices exist are disgusted with the illegal practice, or just annoyed with the disclosure of those facts.
The reply results have been interesting...and a sort of behavioral barometer. We thank all who have realized the positive reasons for our communications and observations and have responded accordingly. To the
others...well...hope you the best too...
--Linda
We are quite aware of TDI and other governmental entities definition's of an "adjuster". G.C.'s do not adjust the value of a loss...we use our expertise to figure out how to restore / rebuild the loss as business owners who plan on staying in business. Big, big difference.
And the 6 year old information designed by TDI [as a rather nice warning to those that the warning applies to], is based on timeless indemnity principles and promises. Unless of course the definition for like and kind indemnification promises change...opps...maybe they already have and no one told a bunch of trusting consumers...
"Members of this site have asked you as politely as we can to please resist from posting here but you insist on doing so. Why you insist is beyond me." Polite...hardly. And, repetition is after all...the mother of retention.
We hope it is understood by all who feel pressured to bend to any carrier demands, which promote underhanded cat claim settlement practices, that "Claim Severity Control" tactics are no longer secret...and haven't been for a good while.
--CCarr
"The time seems right to stop responding or acknowledging any posts from Roger Recon. Once we accomplish this, we cease to be an audience for his cause; and like all people on missions of this nature, he will seek a new receptive audience".
Speak for yourself alone...and stop presuming so much...there are other cat members that do not share your mindset...And, the "mission" stops when the illegal stuff stops. Also, you are mistaken about the actual audience we "seek"...the people you will be settling claims with is the "audience".
"Irrelevant exposure"...how quaint to have, and then promote, that thought...
-Cecil
"I believe roofmanjacks argument is that OH&P is payable based on the RC claim under all circumstances.
Actually Cecil...that would be the understanding of anyone who understands the plain language TDI bulletin and it's underlying indemnification points...repay the pure and inherent value factors of a loss. Period.
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Unfair Claim Settlement Practice Exposed
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