There’s a long list of things to consider when it comes to deciding whether your fire-damaged home can be repaired, or if it needs to be razed and rebuilt. Your insurer is likely to push hard for the lowest-cost option, but this bare minimum may fall short of what you actually need and what your homeowners policy promises.
Policy vs. Law: Who Wins?
Insurance professionals will tell you that everything you need to know about how a homeowners insurance policy should respond to a loss is in the policy language. They’ll also tell you it often takes a great debate to interpret how the language should apply to the loss. Prepping for the debate begins with carefully reviewing the policy language and all applicable state laws.
One very pertinent law is Valued Policy. Twenty US states have valued policy laws that protect policyholders from having to jump through a bunch of hoops to prove the actual cash value (ACV) of their damages when their home should be declared a total loss. Each state applies its valued policy law differently. Some address residential fire losses only, while others include all perils covered by the homeowners insurance policy.
Wisconsin was the first state to implement a valued policy law, and it addresses all covered perils. Here, the tipping point is when the cost to repair exceeds 51 percent of the home’s insured value. At that point, the law says the homeowner no longer needs to prove the ACV for the home and is due the policy limit for the dwelling.
The valued policy law, and any laws that govern the insurance industry, override any policy language that conflicts with the law. For example, homeowners policies that provide the insurer the right to repair damaged property must surrender that right when the damages meet or exceed the threshold in a valued policy state.
While this description of valued policy law may sound very clear and easy, applying it can be the quintessential uphill battle. Some municipalities do not uphold the law. Others will uphold, but make it very challenging for a policyholder to rely on its protection. This can be frustrating, especially for a policyholder whose damages exceed the tipping point in one estimate, but fall short of it in another.
The key to unlocking the protections of valued policy law is the same key that unlocks the protections in your policy — obsessive thoroughness in presenting your:
- Loss investigation and documentation.
- Scope of loss and construction estimate.
- Policy provisions and applicable law.
- Procedural compliance with all state and municipal requirements.
Scope of Loss
One of the most critical steps in your house fire insurance claim is to ensure you get a thorough scope of loss by a licensed professional of your choosing. You need someone experienced in fire damage who will dig deep into your loss and identify every detail — the full scope — of what was damaged and what it will take to return your home to pre-loss condition.
Time and again, our public adjusters are called into a claim to discover the policyholder certainly is being shorted on their repairs, often shamefully. Take the case of Suzanne W. Her carrier and their network contractor had her convinced her 50-year-old fire-damaged home could be restored for less than half of what it would cost to replace it, despite one end of the house being collapsed into the basement.
These are the cases that fuel our public adjusters’ desire to make policyholders aware that we’re here to help them. Suzanne was well insured and had been a faithful insurance customer for all the years she and her family lived in their home. Then, when she needed her policy to be faithful in return, she was handed a bunch of [words we’d never publish] that put her home, health and investment at risk.
Even a valued policy state cannot protect a policyholder from carriers and/or shill contractors who will collude to bolster their profits, while pretending to take care of their customers. If you think you’re being shorted, either on the scope of your loss or the estimate and plan to cover your damages, there’s no day like today to find a licensed public adjuster to help you.
The Vast Grey Area
There’s really no such thing as a small fire. Even flames contained to one room or level of a home can produce toxic smoke and soot damage throughout. The question always is what needs to be replaced vs. what might be salvaged and restored.
In one recent fire loss, flames traveled from the kitchen, up the wall, through the ceiling and into the rafters, where it reached the closest trusses of the garage roof. The carrier and their network contractor had agreed that scabbing some 2X4s next to the charred trusses and patching the roof was sufficient restoration for the garage. Of course, the homeowners policy promised to cover necessary repairs with materials of like kind and quality that returned the property to pre-loss condition — and that entitled the policyholder to new trusses and a new roof, even if it was ‘just the garage.’
The takeaway here is that the scope, necessary repairs, and value of every house fire loss can be interpreted differently, depending on whose interests the interpretation serves. When it comes to a homeowners insurance claim, the carrier and their representatives (their staff and independent claims adjusters, their network contractors, their property inventory vendors, even their contracted laboratories) all benefit when they reduce claims costs.
So Who Decides?
Policyholders reeling from a house fire can be overrun by the tsunami of decisions that need to be made about their homeowners insurance claims and the construction necessary to restore what is likely their single largest investment. Ultimately, those decisions will be made by whomever demonstrates the greatest will, presents the most compelling proof, and advances the strongest argument supported by the policy, the loss conditions, the law, and any other legitimate expectations of coverage.
In some house fires, the destruction is complete, and arriving at a full settlement requires little fight. In others, the scope is less obvious, but a trained eye and a proper fight can bring the settlement up enough to cover the reconstruction costs. In the most shameful examples, extensive damage is obvious, and the policyholder is shorted anyway, because they don’t know they should fight, or they’re outmatched in the fight. Regardless of the scenario, the only way to ensure the right outcome is to understand what your policy promises and how those promises bear on any plans to repair or rebuild your fire-damaged home.
It is impossible to know which way your insurer will go, but it’s easy to know how your claim should go. Our public adjusters are property claims experts who work exclusively for policyholders just like you. We’ll review and advise you about your damages and policy for free, because we want you to recover fully, whether you need to hire a public adjuster or not.