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Dale, you are, of course, correct. I know that some companies tell the vendors and then the vendors pass on the information that the adjuster is required to use the database prices in the estimating system. Hence, some claims are underpaid, deliberately, in my opinion. This solves several problems for the carriers. The adjuster gets paid less for his work, and some insured's go ahead and pay the difference. This should be stopped as a practice.  When the initial period starts, prices are somewhat normal, but if it is a big bad storm, prices will increase due to greed and the law of supply and demand. Database prices should reflect this change ASAP. This is a boon for PA's. Free lunch, as they say.

I agree with all three of you pro's

Posted By Tom Toll on 07 Jul 2009 11:50 AM

...if it is a big bad storm, prices will increase due to greed and the law of supply and demand. Database prices should reflect this change ASAP.  

From my limited observation, this is more of a problem with MSB than Xactimate pricing.  I have seen Xm8 create rapidly updated prices for specific large storms by regions that aggressively keep up with reality.  Large carriers like State Farm (that use Xm8) also watch regional costs and increase their database as needed (especially roofing). 

We all saw roofing skyrocket during IKE when gas prices were also high (shingles linked to petroleum) and the vendor I was working with made it fairly easy to get agreed prices with contractors and Insureds.  Just don't want it to seem like all carriers & estimating software are chronically late to update changing prices.  

Of course we don't want to encourage run-away price gouging either, and that brings up the other point about PA's.

We had another thread about Florida PA's about 6 months ago, I think the example was one chipped ceramic floor tile that went on to become a 50,000 repair (Wes was providing the info).  My Claims manager for 10 year in California went on to become a Florida claims mgr for Universal, then Hartford, and from what I hear the solvency of carriers may be challenged as much by inflated PA's as it is by the weather.

The PA that started this thread is basically asking adjusters to join in with finding dirt on their employers. 
All I can say is he will hear silence on the other end of the phone from me.
 

Whoops - I thought it was a PA...

S'pose I am an equal opportunity offender.  Usually it is "Law Offices of XYZ", or "Joe Blow, Attorney at Law" 

Maybe they had a "Makeover" and prefer the concept of "Professional". 
I wasn't used to seeing that in the areas I work.

As some of you may have seen in Claim Magazine's online update this week, a large class action was just settled by Nationwide in Oregon. They settled it by offering to pay an extra 20% on claims brought by members of the class (of people who, over the course of years had not been paid O & P).

If the insured's were actually entitled to the O & P, and the settlement was what was owed them - paid years later - it is not the insureds who won here.  It was Nationwide and the attorneys on both sides.

Yeah, I read about that yesterday and thought it was interesting that the mutual agreement (out of court) between Nationwide and the Plaintiff was to allow O&P on 3 or more trades.

That was industry standard practice for many years, but it seems some litigation several years back changed many Insurance carriers perception about O&P, specifically:

A). That it didn't matter so much WHO did the work.  In other words if 2 houses sustained the exact scope of damages and one hired a General Contractor and one didn't, or even did all the repairs himself, they were both entitled to O&P.

B). A focus on the coordination of trades (as separate from a specific number of trades).  Was coordination of the trades required, or not.  Example: call the drywaller after the burned framing and electrical have been replaced.

Real world issues include someone with a $7,000 roof replacement (roofing) and a stain on the ceiling that requires some drywall to be removed, and maybe even allow for some insulation.  Do you give them a 20% bonus on the roof replacement cuz they have a stain on the ceiling?  Is it OK to bury their deductible and perhaps force the Insd into profiting from an Ins claim because you give them 20% yet the roofer only wants (contract amount) and the interior work is something that can be done at anytime, in any sequence to the other claim damages?

Is the one single bat or 2 of insulation something that will require an insulation contractor, or is the guy in the truck sent out from XYZ restoration going to take care of this small project himself.  Consider it only needed drywall & paint.  Add the roof replacement, and that is 3 trades.

Of course we know that those who specialize in water-fire restoration tend to expect O&P on everything but emergency service dry-out, but they aren't usually the same "General Contractor" co-ordinating the roof replacement part of the project.  Sometimes they are.

At the end of the day, licensed adjusters are relied upon to make decisions.  If there is a "trend" of incorrect decisions that catches the attention of Dept of Ins or a semi-large group of disgruntled homeowners, then I suppose the topic comes up and gets resolved.
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2 cents: I have attended a lot of "Alternative Dispute Resolution" events with opposing parties butting heads.
It would be easy to visualize a scenario where a large Insurance company is defending these allegations, and there are a Ka-Zillion potential claim files to be reviewed and compared against some sort of yardstick.  The Mediator, or Judge, or whoever is trying to get these opposing sides to "meet in the middle" before hitting the wall (court->trial). 

You can't analyze each claim that was settled in the past and come up with a perfect answer to this question, then tabulate the result.  They would have to come up with a more practical, expedient answer to what "standard" they should have upheld.  So the old 3-trades thing gets dusted off and held up as the yardstick.

If anyone out there is thinking that Nationwide arbitrarily held back O&P on all claims, I can tell you from personal experience that this is not the case, and I will leave it at that.

Since this is a topic that all our comments may be used in a class action suit  be careful. Bob hit on the head on his example of a new roof and slight inside damage. All adjuster I know add O &P if the following conditions exist. 1. A general contractor is doing all the work.2 The owner lives out of town and has to have one.3 The insured's age or health condition does not allow any other way. And #4 its just required for some other reason.

 Carpet-pad and appliances are still not allowed on NFIP flood losses on dwellings. A restoration contractor is only allowed federal minimum wages on muck out on his own house. Now these are real class action suits.