The storm has passed and a new wave of obstacles and hurdles are sure to follow in its wake. Out-of-state adjusters have already flooded the area, and not all of them know and understand policyholders’ rights in the State of Tennessee. Here’s a few tips on a few areas that we at McWherter Scott & Bobbitt often run into when handling storm-damage claims:
- Matching – In the fall of 2017, the Tennessee Commissioner of Insurance adopted a rule requiring that in claims involving replacement cost policies, the insurance company must replace items “so as to conform to a reasonably uniform appearance,” at least in policies that don’t specifically contain language that makes clear that matching is not insured. This means that insureds are entitled to a matching, uniform appearance, not patch-work repairs that leave a bad appearance. Here is the link.
- Consequential Damage – In that same rule, the Commissioner of Insurance also made clear that “when a loss requires repair or replacement of an item or part, any consequential physical damage incurred in making such repair or replacement not otherwise excluded by the policy, shall be included in the loss,” and “the insured shall not have to pay for any cost except for betterment and any applicable deductible.”
- Overhead and Profit – In Tennessee, general contractor’s overhead and profit must be included in the actual cash value payment as long as the work is of the type for which a person would reasonably be expected to utilize the services of a general contractor. This is true even if the owner does the work himself or doesn’t perform any repairs at all. In one of our recent cases, a federal court in the middle district of Tennessee held that our client stated a claim for bad faith and punitive damages when an insurer failed to include overhead and profit on a large, commercial roof-only project.
- Causation – Tennessee follows the “substantial factor” test when two losses operate together to cause a loss. This means that if there are two perils that jointly contribute to a loss (one of which is covered and one of which is not), then the entirety of the loss is covered as long as the covered peril was a “substantial factor” of the loss or damage. This means that losses are often covered even when wear and tear, deterioration, improper workmanship and materials, and other excluded causes contribute.
- Labor Depreciation – In one of my recent cases, the Tennessee Supreme Court ruled in Lammert v. Auto-Owners that labor may not be depreciated when calculating the insurer’s actual cash value payment obligations unless the policy clearly allows it. Use of improper settings within estimating software can have a dramatic impact on claim payments.