Leland Advanced Member Posts:741  
| 08/06/2010 10:03 PM |
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Most adjusters are familiar with two lines of coverage that require the insured to "incur" an expense: law and ordinance coverage (commonly known as building code upgrade coverage) and ALE. Normally the insured is asked to provide receipts.
But what does incur actually mean?
Does the insured need to actually make a payment, or is it enough to owe the money to a third party ie. sign a contract?
Would you accept a signed contract between the insured and a general contractor for the code upgrade payment to be issued or would you insist on actual receipts? What does the law say? Please post your answers and then I will try to post the case law from courts addressing this exact question. If anyone would like to beat me to it and post the law that is welcome. Cases from any and every state would be great.
Also if anyone has wording from a claims manual, policy language defining "incur" or a good story about this issue please post away. The dictionary definition of "incur" is also welcome.
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Ray Hall Senior Member Posts:2443
| 08/07/2010 1:12 AM |
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Many of the international underwriters that I have worked for have pure "indemnity" policies. On the first day, I ask this question. What is pure indemnity? The answer was. The $ has been spent and they are asking for their indemnity, or the want to be indemnified. Most of these type losses were cost to clean up oil spills, well control by the experts, cost to put out a well fire etc. Had a big project and everthing was destroyed by a 100 year flood and every thing had to be replace before the underwriter was aware of the loss in some for off land. Review the proof of loss coc,s and send out the check. I see many people use indemnity as what the adjuster and the insured agree on the amount of the loss . One of my employers was Firemans Fund Indemnity Co. They also owned National Surety Corporation and a lot of large fidelity claims on employees and banks. When a bank got robbed or swindled they were "indemnified by their surety company. When the ole book keeper with 35 years stole $500,000. and gave it to the church and the SPCA, we paid off like the old slot machine. I still think indemnity means "the money is spent", guess I am a pure est. I also think that,s what incur means.
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| 08/07/2010 12:10 PM |
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I think every line item in an insurance estimate is an incurred cost. But there are few examples of expenses that occur in the future that an insured may or may not INCUR
I think the most common example most adjusters here will see is Mitigation of damages,.
2. Reasonable Repairs
a. We will pay the reasonable cost incurred by you for the necessary measures taken solely to protect covered property that is damaged by a Peril Insured Against from further damage
and if you look at the policy language in Duties of the insured it says
Saction 1 Conditions
B. Duties after a loss
4. Protect the property from further damage. If repairs to the property are required, you must:
b. Keep an accurate record of repair expenses;
Unlike ALE in
Saction 1 Conditions
B. Duties after a loss
8. Send to us, within 60 days after our request, your signed, sworn proof of loss which sets forth, to the best of your knowledge and belief:
g. Receipts for additional living expenses incurred and records that support the fair rental value loss;
It is easy to surmise from the policy that cost incurred means when the work was completed and invoiced or paid
Now I think what you are looking for that ties into that other thread
WHO incurred the cost ? Say the lady in wheelchair has her hot tub squashed by a tree and cant get her prescribed therapy. She has medicare that pays for these treatments. She did mot incur any additional costs because she is not the one paying and would be due nothing, even though ALE would be covered
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claims_ray Member Posts:293
| 08/07/2010 1:20 PM |
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This section needs some additional language:
Saction 1 Conditions
B. Duties after a loss
4. Protect the property from further damage. If repairs to the property are required, you must:
b. Keep an accurate record of repair expenses;
Add
c. Document (ie..Photograph) damage as it exists prior to repair or temporary repairs.
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LelandAdvanced Member Posts:741
| 08/07/2010 1:40 PM |
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Incur means to become liable.
If the insured has signed a contract to have the code upgrade work done, they are liable for the money, and the expense has been "incurred".
They do not have to actually write a check to get paid under the policy.
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LelandAdvanced Member Posts:741
| 08/07/2010 2:48 PM |
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Here is a case from Florida that was mostly about something else bu the insurance company agreed that "incur" means become liable, the insured does not have to actually make a payment. http://docs.google.com/viewer?a=v&q...3uThUpi7DA The court mentioned the following: Citizens' counsel conceded in or- al argument that “to incur” means to be- come liable for the expense, but not neces- sarily to have actually expended it. We agree. So for example, if the insured has only $10,000 of code upgrade expense and they have signed a contract for $100,000 of repairs which includes $15,000 of code upgrades, that insured has "incurred" the code upgrade expense. Different states may have different rules or case law but I believe most of them are the same on this point. Flood policies might be different also, we would need to check the policy, claims manual, and federal law for those. If the policy specifically requires receipts have to be turned in that's different. |
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| 08/07/2010 3:34 PM |
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OK I broke it down barney style
now explain to the masses Liable
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LelandAdvanced Member Posts:741
| 08/07/2010 4:08 PM |
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to be "on the hook" for something
to owe money
or
the court says you need to fix something you did wrong to somebody
(Fred was GUILTY of murder but Susan was LIABLE for pedestrians slipping on her wet sidewalk)*
So if Mr. Homeowner signs a contract with Happy Days Closet Design for $3000 of new shelving, Mr. Homeowner is LIABLE for $3000.00
* the pedestrian will sue Susan and Susan will tell her insurance agen who will open a LIABILITY claim file. Ray Hall will be assigned to investigate Susan's LIABILITY and he will determine that she is not LIABLE because the sidewalk belongs to the city.
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LelandAdvanced Member Posts:741
| 08/07/2010 4:12 PM |
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to go back to the HO3 policy:
If your house burns down you have suffered a loss that your insurance will pay for and you can walk away without rebuilding.
but...
to get the code upgrade coverage paid you must "incur" the expense by:
1) spending the money
or
2) be on the hook for the money (liable) because you signed a contract with a general contractor
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| 08/07/2010 5:37 PM |
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3 and the work is performed
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Ray HallSenior Member Posts:2443
| 08/07/2010 7:16 PM |
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Swink, you have answered your own question. The 2 examples are past tense. Both require receipts that is the best definition of incur you can have. Your wife is out of town working. Could you be having white out? Now when the incurred loss is reimbursed, the circle is now complete.
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LelandAdvanced Member Posts:741
| 08/07/2010 7:39 PM |
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I have to apologize, I don't do HO3 much anymore. Does the HO3 require the code upgrade work to be completed? I can't remember. If so, Swink is right.
I do a lot of DP1 policies.
There is no requirement to actually complete the code upgrade work.
It just has to be "incurred", which means there has to be a signed contract.
Maybe the HO3 is different.
The purpose of my post was to discuss the correct meaning of "incur", not necessarily to analyze the HO3 code upgrade coverage.
And just to make sure you get what I'm saying Ray, "Incur" does NOT require spending money, although there may be some policies that do require that the money be spent.
That's the law in every state I know of.
Here's the wording form an Arizona case:
The court of appeals rejected the administrator’s argument, finding that “‘incur’ is generally accepted to mean ‘to become liable for,’ not ‘to pay for.’”
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| 08/07/2010 8:06 PM |
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Your definition of incur was when they became liable If i sign a contract with someone to build a fence
I am not liable to pay them until the terms of the contract are met . No fence no check
You're saying they are liable when they sign the contract ?
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| 08/07/2010 8:07 PM |
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Posted By Ray Hall on 07 Aug 2010 07:16 PM
Swink, you have answered your own question. The 2 examples are past tense. Both require receipts that is the best definition of incur you can have. Your wife is out of town working. Could you be having white out? Now when the incurred loss is reimbursed, the circle is now complete.
I never had a question other than Lelands definition of liable |
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LelandAdvanced Member Posts:741
| 08/07/2010 10:54 PM |
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Excellent question/point by Swink.
I don't know if that has ever been looked at by a court or how a carrier would look at that.
All I can say is that I have been told to pay code upgrades on DP1 policies when the insureds present signed contracts proving that they were liable for the amount.
Are they really liable if the work hasn't been done or started?
The Arizona case is interesting.
Some lady had medical bills from an accident. She signed an agreement at the hospital agreeing to pay. That made her liable. Some other carrier (not hers) paid the bill. She sued her insurance company when they wouldn't pay her.
If I understand the case correctly she was basically arguing, "Hey, when I signed that paper I became liable. Therefore my insurance has to pay me. It doesn't matter if someone else paid the bill."
Her insurance argued that if she didn't pay the bill, she didn't "incur" the expense and wasn't entitled to a settlement.
The court ruled in her favor. She was liable for the money; she incurred the expense.
Seems like the court made a strict construction of the contract.
Re Swinks comment that the person signing a contract isn't liable until the work is done:
Not exactly right, I suppose you could say that in a practical sense, yes, you don't have to pay the bill if the work doesn't get done, but at the time the contract is signed the homeowner is liable for the money. He may not have to pay right away, and he can get out of the liability if the contractor breached the agreement by not doing the work, but at least at the moment he signs he is clearly liable.
Legal Liability
1. Obligation with specified terms and conditions by which a defined payment amount in money, goods, or services is to be paid within a defined time period in return for a current benefit.
If I sign a contract on Monday for $2000 of drywall to start on Friday, and first payment to occur in 60 days, I am liable for that $2000.
On Tuesday if the drywall contractor and all his employees are killed in a plane crash I am no longer liable for that money.
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Ray HallSenior Member Posts:2443
| 08/08/2010 11:44 AM |
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I will not debate any more. I will say this seems you two are really wrapped up in "case law, before getting into a pissing content on both."instead of contract law; It also seems both of you could use a couple of semesters in a aw school
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| 08/08/2010 1:51 PM |
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Posted By Ray Hall on 08 Aug 2010 11:44 AM
I will not debate any more. I will say this seems you two are really wrapped up in "case law, before getting into a pissing content on both."instead of contract law; It also seems both of you could use a couple of semesters in a aw school
But its so much fun discussing things. : )
Presenting a case from Florida (a valued policy state) a state that threw out the loss settlement part of the policy is not a great place to pull case law from.
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LelandAdvanced Member Posts:741
| 08/08/2010 9:17 PM |
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Let me tell you why I started this post:
I used to think, like you, that "incur" meant the insured actually had to pay the money.
Then I had several times where management of the insurance company was telling me to go ahead and recommend payment of code upgrades when the insured simply presented a signed contract.
I assumed the carrier was just using their discretion to be nice to the insured.
Eventually, because I am a curious and opened minded person (able to learn) I realized that signing a contract is "incurring" the expense.
MANY COURTS HAVE AGREED AND I ONLY POSTED ONE DECISION- THERE ARE MANY OTHERS.
now as far as conflating the terms "contract law" and "case law".
Case law can and often is about questions of contract law.
In fact the case I posted is exactly that- a case, which establishes precedent about questions relating to a contract.
In fact the case I cited quotes still other case law and contract law both.
Lawyers and the contracts they write use terms in very precise ways. If you read the case I posted the judge interpreted the words in a very precise way. He decided the the woman became liable. His way of looking at it is 100% opposite yours. You would probably say she was not liable because someone else paid the bill. The judge said she WAS liable EVEN THOUGH someone else paid the bill.
Why did I even bother posting this whole subject?
Because I think it is important to understand the insurance contract to be a good adjuster. Because I realized I had a wrong understanding of a word used in those contracts. Because I enjoy learning how to understand those contracts better. And I like contributing something that I think is positive to the community.
This is also a very practical discussion.
I have a personal experience where a major California carrier had a different understanding of their policy than I did. And the misunderstanding I had IS THE SAME MISUNDERSTANDING MOST OTHER ADJUSTERS HAVE.
So maybe some adjuster reading this will someday have a claim where the insured has signed a contract and the policy says the cost must be "incurred". Maybe that adjuster will tell the insured, no, you must spend the money first and then you can be reimbursed. Maybe that adjuster will be you. Maybe that adjuster will be right, because the policy says receipts are needed, or maybe the state law is that way. But maybe that adjuster will be working in California or Arizona (I think Georgia is another one; there are more) and that adjuster will be wrong. Maybe that adjuster will remember this topic and ask their supervisor if the claim should be paid. Maybe the supervisor will tell the adjuster to pay it like my file examiner did. Maybe they won't. But if someone somewhere can do a good job, avoid a bad faith claim, and an insured can get what they are legally entitled too, then I'm glad I brought the subject up.
I have been blessed to work claims from many different carriers. I respect you guys that do a lot of CAT work, you guys have some experience I don't. But one thing I've learned about this business is there's an awful lot of people who think they are real knowlegeable when really all they know is one form with one carrier in one state. They don't want to hear that it is done differently in Florida until they work a claim in Florida and get schooled. Then the become an expert on that issue from Florida, thinking that it should apply in Missouri too, and not realizing that their supervisor was using Florida case law.
If you come to California and think ACV on a total loss is Marshall and Swift or rebuild cost, whichever is less, then you are ignorant about California case law. You might be smart, you might be experienced, you might have worked a 100 hail claims, you might have a Texas license, but you are ignorant about California case law, specifically the case that says ACV is based on appraised value. I think it's called the Johnson case.
And if you work California claims and think you need to hire an appraiser on a Texas total loss you would be ignorant about Texas law.
Now I'm real ignorant too. I'm super ignorant on workers compensation claims and I'm fairly ignorant about automotive. But if I had to work those claims I would try to think like a supervisor and not like a worker bee.
I can't remember how many many times on this website people have gone back and forth about how to handle a certain issue and never brought up the type of policy or what state.
Incur means to become liable. Judges agree.
When you sign a contract you become liable. That's contract law 101. Maybe you don't have to pay the bill if the work is not done but by the same token maybe my aunt would be my uncle if she had male parts.
With all due respect to Ray, come right out and tell me specifically where I'm wrong. Spell it out or don't snipe.
Saying I could use a few semesters in law school is an ad hominem attack.
You are attacking the messenger. And saying the case I quoted is a bad example is a cheap shot. Quote your own case.
FACT: IN MOST STATES INCUR MEANS TO BECOME LIABLE.
FACT: WHEN YOU SIGN A CONTRACT YOU BECOME LIABLE
FACT: unless the policy has additional requirements like turning in receipts, SIGNING A CONTRACT MEANS THAT INSURED HAS INCURRED THE EXPENSE.
Why don't you step up to the plate and refute one or more of those three facts.
Prove me wrong.
Don't tell me I need to go to law school or I quoted a dumb case.
Can you get a insurance defense attorney to say I'm wrong?
Can you find a case that says an expense is not incurred if a contract was signed but not paid? (there probably are some, depends on the state)
Can you get Texas DOI to say I'm wrong?
Put up or shut up.
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| 08/08/2010 10:36 PM |
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Posted By Leland on 08 Aug 2010 09:17 PM
Let me tell you why I started this post:
I used to think, like you, that "incur" meant the insured actually had to pay the money.
Then I had several times where management of the insurance company was telling me to go ahead and recommend payment of code upgrades when the insured simply presented a signed contract.
I assumed the carrier was just using their discretion to be nice to the insured.
Eventually, because I am a curious and opened minded person (able to learn) I realized that signing a contract is "incurring" the expense.
MANY COURTS HAVE AGREED AND I ONLY POSTED ONE DECISION- THERE ARE MANY OTHERS.
now as far as conflating the terms "contract law" and "case law".
Case law can and often is about questions of contract law.
In fact the case I posted is exactly that- a case, which establishes precedent about questions relating to a contract.
In fact the case I cited quotes still other case law and contract law both.
Lawyers and the contracts they write use terms in very precise ways. If you read the case I posted the judge interpreted the words in a very precise way. He decided the the woman became liable. His way of looking at it is 100% opposite yours. You would probably say she was not liable because someone else paid the bill. The judge said she WAS liable EVEN THOUGH someone else paid the bill.
Why did I even bother posting this whole subject?
Because I think it is important to understand the insurance contract to be a good adjuster. Because I realized I had a wrong understanding of a word used in those contracts. Because I enjoy learning how to understand those contracts better. And I like contributing something that I think is positive to the community.
This is also a very practical discussion.
I have a personal experience where a major California carrier had a different understanding of their policy than I did. And the misunderstanding I had IS THE SAME MISUNDERSTANDING MOST OTHER ADJUSTERS HAVE.
So maybe some adjuster reading this will someday have a claim where the insured has signed a contract and the policy says the cost must be "incurred". Maybe that adjuster will tell the insured, no, you must spend the money first and then you can be reimbursed. Maybe that adjuster will be you. Maybe that adjuster will be right, because the policy says receipts are needed, or maybe the state law is that way. But maybe that adjuster will be working in California or Arizona (I think Georgia is another one; there are more) and that adjuster will be wrong. Maybe that adjuster will remember this topic and ask their supervisor if the claim should be paid. Maybe the supervisor will tell the adjuster to pay it like my file examiner did. Maybe they won't. But if someone somewhere can do a good job, avoid a bad faith claim, and an insured can get what they are legally entitled too, then I'm glad I brought the subject up.
I have been blessed to work claims from many different carriers. I respect you guys that do a lot of CAT work, you guys have some experience I don't. But one thing I've learned about this business is there's an awful lot of people who think they are real knowlegeable when really all they know is one form with one carrier in one state. They don't want to hear that it is done differently in Florida until they work a claim in Florida and get schooled. Then the become an expert on that issue from Florida, thinking that it should apply in Missouri too, and not realizing that their supervisor was using Florida case law.
If you come to California and think ACV on a total loss is Marshall and Swift or rebuild cost, whichever is less, then you are ignorant about California case law. You might be smart, you might be experienced, you might have worked a 100 hail claims, you might have a Texas license, but you are ignorant about California case law, specifically the case that says ACV is based on appraised value. I think it's called the Johnson case.
And if you work California claims and think you need to hire an appraiser on a Texas total loss you would be ignorant about Texas law.
Now I'm real ignorant too. I'm super ignorant on workers compensation claims and I'm fairly ignorant about automotive. But if I had to work those claims I would try to think like a supervisor and not like a worker bee.
I can't remember how many many times on this website people have gone back and forth about how to handle a certain issue and never brought up the type of policy or what state.
Incur means to become liable. Judges agree.
When you sign a contract you become liable. That's contract law 101. Maybe you don't have to pay the bill if the work is not done but by the same token maybe my aunt would be my uncle if she had male parts.
With all due respect to Ray, come right out and tell me specifically where I'm wrong. Spell it out or don't snipe.
Saying I could use a few semesters in law school is an ad hominem attack.
You are attacking the messenger. And saying the case I quoted is a bad example is a cheap shot. Quote your own case.
FACT: IN MOST STATES INCUR MEANS TO BECOME LIABLE.
FACT: WHEN YOU SIGN A CONTRACT YOU BECOME LIABLE
FACT: unless the policy has additional requirements like turning in receipts, SIGNING A CONTRACT MEANS THAT INSURED HAS INCURRED THE EXPENSE.
Why don't you step up to the plate and refute one or more of those three facts.
Prove me wrong.
Don't tell me I need to go to law school or I quoted a dumb case.
Can you get a insurance defense attorney to say I'm wrong?
Can you find a case that says an expense is not incurred if a contract was signed but not paid? (there probably are some, depends on the state)
Can you get Texas DOI to say I'm wrong?
Put up or shut up.
This sounds like a lecture
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