Flooded and Can't Access RCV

[Caroline430]

Jurisdiction

Washington

Hello everyone. Thanks for any advice. Last fall we were flooded, in a federally declared natural disaster. Last month we finally were able to move back into our nearly finished home. The flood insurance isn't FEMA, but private through Lloyds of London... NFIC (commercial), with Crawford managing. We are at the threshold of our ACV ($150,000) and are looking to complete the repairs on the home using the recoverable depreciation or RCV.. which is $210,000.

Our question is that we have to pay subcontractors for labor and with the supply chain issues, some of the repairs cannot be completed until fall or later of this year. Unfortunately, we are unable to complete the home since the insurance company says they will only consider recoverable depreciation once the entirety of the project is complete. We will have been liened by many contractors if this happens. The insurance company has stated that our recoverable depreciation is very high. We cannot afford to complete the work out of pocket. Our insurance policy states that shortages or supply chain issues will be factored. The adjuster does not consider this. What can we do? We have spoken to the State's Insurance Commissioner's Office, which has no regulatory authority over Lloyds of London, but does over Crawford. Please advise. Thank you. C

 

[army judge]

What can we do?

You appear to have exhausted all your easy remedies.

It might behoove you to seek REAL legal advice from three or four WA state licensed attorneys.

There is very little, if anything, you can gain from seeking the counsel of strangers.

 

[adjusterjack]

Our insurance policy states that shortages or supply chain issues will be factored.

I believe that I have obtained a sample of the NFIP policy written by Lloyds.

The Replacement Loss Cost Settlement provision says nothing about shortages and supply chain issues.

If this provision doesn't match the Loss Settlement provision of your policy, please feel free to scan the Loss Settlement provision of your policy and upload it for me to take a look at.

I'm assuming a single family dwelling. It you own a manufactured home there is a provision for that which I can also quote.

2. Replacement Cost Loss Settlement The following loss settlement conditions apply to a single-family dwelling described in V.1.a. above:

a. We will pay to repair or replace the damaged dwelling after application of the deductible and without deduction for depreciation, but not more than the least of the following amounts:

(1) The building limit of liability shown on your Declarations Page;

(2) The replacement cost of that part of the dwelling damaged, with materials of like kind and quality, and for like use; or

(3) The necessary amount actually spent to repair or replace the damaged part of the dwelling for like use.

b. If the dwelling is rebuilt at a new location, the cost described above is limited to the cost that would have been incurred if the dwelling had been rebuilt at its former location.

c. When the full cost of repair or replacement is more than $1,000 or more than 5 percent of the whole amount of insurance that applies to the dwelling, we will not be liable for any loss under V.2.a. above or V.4.a.(2) below unless and until actual repair or replacement is completed.

d. You may disregard the replacement cost conditions above and make claim under this policy for loss to dwellings on an actual cash value basis. You may then make claim for any additional liability according to V.2.a., b., and c. above, provided you notify us of your intent to do so within 180 days after the date of loss.

e. If the community in which your dwelling is located has been converted from the Emergency Program to the Regular Program during the current policy term, then we will consider the maximum amount of available NFIP insurance to be the amount that was available at the beginning of the current policy term

 

[Caroline430]

Thank you for any information. I am looking for the document. It was early on and only a couple of pages. The field adjuster that came to our home said that the company once over the RCV could cut a couple of checks to pay subcontractors after a specialty or a couple specialties were completed above the RCV. Example.. at RCV level.. then plumbing is completed, then trim package. His boss says no the entire thing needs to be completed. I guess the question is, and lets use plumbing and the trim package as an example. What if the plumber and then the finish carpenter have completed all they can do and each supply a bill and those bills in the aggregate are now over the RCV? Is that actual repair or replacement completed? I believe they are.. per discipline... he says the entire project. Does that makeany sense?

.....unless and until actual repair or replacement is completed.

 

[adjusterjack]

What you say makes sense and it's the way I did it when I was an employee claim rep for an insurance company. We were given a lot of flexibility even if we got to waive some of the policy provisions, provided we could justify it and still come within our obligation to pay the claim.

However, when an insurance company hires an adjusting company to evaluate and pay claims, that insurance company calls the shots and the adjuster obeys.

The policy says what it says and neither the company or the adjuster can be faulted for following it to the letter.

Completed is completed. Courts don't read what isn't there. They rule on what is there. If the insurance company wanted to allow payments after each trade was completed, the policy would have been written that way.

Again, I haven't read yours yet so I'm only basing my comments on the sample I have.

 

[Caroline430]

What you say makes sense and it's the way I did it when I was an employee claim rep for an insurance company. We were given a lot of flexibility even if we got to waive some of the policy provisions, provided we could justify it and still come within our obligation to pay the claim.

However, when an insurance company hires an adjusting company to evaluate and pay claims, that insurance company calls the shots and the adjuster obeys.

The policy says what it says and neither the company or the adjuster can be faulted for following it to the letter.

Completed is completed. Courts don't read what isn't there. They rule on what is there. If the insurance company wanted to allow payments after each trade was completed, the policy would have been written that way.

Again, I haven't read yours yet so I'm only basing my comments on the sample I have.

Thank you. That is what I was afraid of. It is not, however what the field adjuster told us. I suppose, we should have never attempted to general the project ourselves. We thought we could save a bit and maybe even make a little for the headaches, but unless we were a licensed contractor that doesn't seem like an option either.

 

[adjusterjack]

I have found it quite lucrative to be my own GC. I have saved the 20% to 25% overhead and profit that GCs charge over what they pay to the trades. You just have to be able to pay the trades when they are done, regardless of when the insurance pays. I've had to front the money on several occasions.

 

[Caroline430]

So if we had our general contractors license we could have been the general or even been a subcontractor and fronted a couple of the trades and then been reimbursed by insurance? I understand that the mortgage company will only allow those that are licensed, bonded and insured to do the work. I never thought of the insurance side of things. For example painting... if we had had our license could we have done the painting at the same cost of our painters bid and been paid for the work? Granted we don't have any specialty experience, so a no there, but we could have at least done the basic things? We asked the insurance person and he said that as the homeowner we could not general the project because of an "indemnification" clause. (I believe that is the term he used). He said that as the homeowner we are not allowed to profit from the disaster, and that we do not have any overhead.

 

[adjusterjack]

So if we had our general contractors license we could have been the general or even been a subcontractor and fronted a couple of the trades and then been reimbursed by insurance?

You don't need a license to be your own general contractor for work on your own home.

As a homeowner you can hire whoever you want to do the work, pay when done, and submit the invoices to the insurance company.

If you spend less than the RCV you get less of the recoverable depreciation.

I understand that the mortgage company will only allow those that are licensed, bonded and insured to do the work.

True, but you can hire the trades that are licensed, bonded and insured.

We asked the insurance person and he said that as the homeowner we could not general the project because of an "indemnification" clause. (I believe that is the term he used). He said that as the homeowner we are not allowed to profit from the disaster, and that we do not have any overhead.

What he meant was, you could not get paid the overhead and profit because you don't incur that expense. And he's right about that. Eliminating overhead and profit works if you get the repairs done for less than the ACV. That's when you get to keep some money.

Example: I had a roof claim 7 years ago. Adjuster's estimate about $12000. ACV $9300. I got a check for $8800 (after my $500 deductible). I bought all the materials (avoids the markup) and hired a roofer. I spent $6000. Pocketed $2800. Claim closed.

I have had many hundreds of my insured's ask me what happens if they spend less on repairs than I paid them. I told them they keep it. Once I send the check, I close the claim and it's up to them how they use the money to repair the house. Of course, when I had to include a mortgage company on the check they would have to deal with the mortgage company, but that wasn't my concern.

By the way, getting a license for yourself would not be practical. You would have to meet the licensing qualifications (training, experience, and education - not easy), pay license fees, buy a license bond, and I don't know what else.

 

[Caroline430]

Here is something I didn't think of and somewhat off topic, but I have a girlfriend who is a GC, is licensed, bonded, insured and all of that. She at onetime said that if I wanted to do the work she could claim me as a 1099 and pay me a wage or fee for a particular project. Although I am still trying to figure out how to get the house finished after reaching the ACV. Is that something that could be done? Painting and most of the trim are done, but there are a few things that don't require a specialty contractor that I might be able to do to off set some of the RCV costs that won't be paid until everything is complete. If that made any sense? Thanks.

 

[Zigner]

Here is something I didn't think of and somewhat off topic, but I have a girlfriend who is a GC, is licensed, bonded, insured and all of that. She at onetime said that if I wanted to do the work she could claim me as a 1099 and pay me a wage or fee for a particular project. Although I am still trying to figure out how to get the house finished after reaching the ACV. Is that something that could be done? Painting and most of the trim are done, but there are a few things that don't require a specialty contractor that I might be able to do to off set some of the RCV costs that won't be paid until everything is complete. If that made any sense? Thanks.

Nobody here is going to advise you that it's a good idea to commit insurance fraud.

 

[Caroline430]

Nobody here is going to advise you that it's a good idea to commit insurance fraud.

Fraud? I thought a registered and licensed contractor could be used. Why would it matter if they were a friend? Also, nobody is talking about anything unethical, just needing to finish our home.

 

[adjusterjack]

I thought a registered and licensed contractor could be used.

A registered and licensed contractor can be used if that registered and licensed contractor does the work and gives you a PAID INVOICE that you can submit to the insurance company.

If that registered and licensed contractor wants to hire you as a W-2 employee that's fine, but you would be illegally misclassified if the registered and licensed contractor treats you as an independent contractor because you won't be one and your friend would be violating IRS laws, workers comp laws, and unemployment compensation laws. Your friend was a fool to even suggest it.

Also, nobody is talking about anything unethical, just needing to finish our home.

You finish your home by having your contractors complete the work, you pay them, and you submit the receipts to the insurance company.

Trying to finagle anything else could result in claim denial and policy rescission.

If you have to take out a short-term loan or use credit cards, so be it.

 

[Caroline430]

That is what we are trying to do. We are looking into a 6 month loan right now. Just was wondering if there were other options, guess will keep looking at the loan.