In the case of Jefferson County Schools v. Tennessee Risk Management Trust, et al., No. E2017-01346-COA-R3-CV (decided March 15, 2018) (Jefferson County Schools v. TN Risk Management), the Tennessee Court of Appeals addressed the question of whether a Fire Marshal’s directive qualified as an “ordinance or law” for purposes of insurance coverage. Following a major rainstorm, a building at the Jefferson County High School collapsed. Continue Reading What Constitutes an “Ordinance or Law”?
Not so fast Mr. Adjuster, my assignment of claim is valid even if the insurance policy says its not.
We don’t usually post liability related matters on this blog, but every once and a while there is a ruling that warrants mention. That ruling was issued today by the Tennessee Supreme Court in Dedmon v. Steelman W2015-01462-SC-R11-CV (click on case for full copy of opinion). While I may disagree with the result, it is an extremely well written opinion from Judge Kirby. The bottom line is that the Tennessee Supreme Court unanimously held Tennessee law does allow plaintiffs to use the full, undiscounted amount of medical bills to prove their medical expenses instead of the discounted amounts paid by insurance companies and accepted by medical providers. The defense is no longer even permitted to introduce the amount of the discounted bills period. I commend the full opinion to your reading, as it contains an excellent overview and history of the collateral source rule, as well as detailed analyses of the differing rationales used by other courts to allow introduction of those discounted and accepted medical expenses.
This past Friday (Aug. 4, 2017), Mississippi’s Insurance Commissioner, Mike Chaney, issued a bulletin that alerts insurers that they should not be depreciating labor in Mississippi unless policy language clearly allows it, and even then, estimates must clearly delineate that labor was depreciated. I’ve quoted the bulletin below:
Parks recently posted about the new Rules adopted by the Tennessee Commissioner of Insurance that go into effect on October 9, 2017. The first of those rules makes clear the purpose “is to set forth minimum standards for the investigation and disposition of claims.” (Rule 0780-01-05-.01). While there are plenty of items worthy of discussion in the Commissioner’s soon-to-be effective Rules, the one that stood out to me relates to “matching.” Here’s what the Rule says:
I’ve just posted the new regulations promulgated by the Tennessee Department of Commerce and Insurance governing the investigation and disposition of claims arising under certain types of insurance issued to residents in Tennessee. We’ve attended the hearings that were held on these regulations, and followed the rulemaking process. Regulation 0780-01-05-.010, entitled Standards for Prompt, Fair and Equitable Settlements Applicable to Fire and Extended Coverage Type Policies with Replacement Cost Coverage, contains two provisions which may expand fire insurer’s obligations when calculating replacement cost:
On July 11, 2017, the Tennessee Department of Commerce and Insurance filed the final version of new regulations governing the investigation and disposition of claims arising under certain types of insurance issued to residents in Tennessee. These regulations will take effect October 9, 2017. These regulations are not intended to cover claims involving workers’ compensation or healthcare. The regulations are intended to define practices which constitute “unfair claims practices” as determined by the Commissioner. I’ll be making more posts about significant portions of the regulations, but until then, click here for a copy of the regulations may be downloaded here – TN Unfair Claims Regs. Stay tuned for more.
The Court of Appeals recently provided further insight on what type of misrepresentations increase the risk of loss. In the case of Freeze v. Tennessee Farmers Mutual Insurance Company, filed March 28, 2017 (Freeze v. TFMIC), the Eastern Section Court of Appeals upheld the grant of summary judgment to Tennessee Farmers in a case which alleged misrepresentation under T.C.A. § 56-7-103, which provided as follows:
As many victims of the East Tennessee wildfires are working through the claim process, this seems to be a good time for a quick word about soot testing. Smoke and soot from the wildfires likely affected hundreds of property owners whose properties were never touched by an actual flame. Even with no actual fire damage, the infiltration of smoke and soot into cavities of a structure clearly constitutes a covered loss under most policies.
In some cases, a good old fashioned thorough cleaning with appropriate materials by trained professionals might do the trick. But in many other cases, smoke and soot deposits appear in wall cavities and other inaccessible places that require a much more invasive restoration protocol, including removal and replacement of sheetrock, etc. Smoke just has a way of getting into those hard to reach places, traveling through electrical outlets, conduit, HVAC systems, etc., and it’s important to get it removed.
Thankfully, there are many trained hygienists who can perform the necessary testing to determine the proper scope of fire, smoke, and soot restoration. The test samples are then shipped off to a qualified laboratory, which produces results that can assist the property owner or contractor discover how far the smoke traveled and how much work needs to be done to remediate it. The hygienist can determine what type of testing is needed, but I typically see both air and surface samples. On the surface samples, it is often necessary to make small test openings in the drywall or other wall covering to access the cavity that lays behind.
Policyholders are entitled under most properties to be put back in pre-loss condition so if there wasn’t smoke and soot in your walls before the fire, and there is now, there should be coverage for the cost of removing it.
Happy New Year everyone!
Several years ago I discussed a Sixth Circuit Court of Appeals case where the court determined that general contractor’s Overhead and Profit were recoverable if the insured would “reasonably be expected to hire a contractor to repair its property” See Parkway Assoc., LLC v. Harleysville Mut. Ins. Co., 129 Fed. Appx. 955 (6th Cir. 2005). You would think that this Sixth Circuit Court of Appeals opinion would have encouraged insurance companies to do the right thing and include Overhead and Profit in their estimates and settlements, at least in the state of Tennessee. Surprisingly, I still regularly receive calls about insurance carriers that are not paying Overhead and Profit (O&P) correctly. I hear that some companies do not pay O&P on ACV payments, but will pay for it after the work is complete. Some companies will withhold O&P from specific areas of the estimate like roofing, cleaning, mitigation, or debris removal. Some companies refuse to pay O&P all together, by stating that the claim isn’t “complex” enough to warrant O&P. Some companies even try to avoid paying O&P to restoration or mitigation companies after a fire or water loss. To be clear, all of the above examples are not only wrong, but they could be acts of bad faith by the carrier.
In Tennessee, there is only one question that must be answered to determine if O&P is owed and that is this – – is it reasonably likely that the insured would be expected to hire a contractor to repair the property? So who determines when it is reasonably likely that the insured would be expected to hire a contractor? Thankfully for policyholders in Tennessee, The Tennessee Department of Commerce and Insurance has answered this question for us. Effective January 1, 2014, the Board of Licensing Contractors issued a bulletin that clearly spells out when a policyholder is reasonably likely to hire a contractor. The bulletin can be found here.
To sum it up, a contractor is required on any project of $25,000 or more (excluding masonry) or when there will be more than one subcontractor or tradesman on the project. The Board of Licensing went so far as to say that a contractor’s license is required before anyone could even make a bid or given an estimate on a project of $25,000 or more or any project that will involve more than one subcontractor. The contractors who have taken the extra time and steps to become licensed should be compensated for their operating expenses (Overhead) and should be allowed to make a Profit from the work they have performed.
Do not let insurance adjusters or agents tell you otherwise – – O&P is not already built into Xactimate line item estimate pricing. Also, remember that the premiums you pay are based on a Replacement Cost Value and the software your agent uses to calculate the replacement cost will include the charges for General Contractors Overhead and Profit. Since you are already paying a premium for O&P, you should be compensated for O&P on any loss where there are at least two tradesmen (subcontractors) needed for the repairs and/or on any loss that is in excess of $25,000 and this does not exclude mitigation or restoration services. If your restoration company is also a licensed contractor, they are owed O&P for their services as well.
The last time I posted about this I received multiple calls from contractors around the State. If you are a contractor or roofer and you’ve had difficulty recovering payment of O&P, feel free to call – – I’d love to hear from you.