FIRE! Navigate insurance/tenants/management/contractors?

Question

So, I bought a duplex 2000 miles away and it has been a cash-cow up until about August. I'm was a genius!!! Well, not so fast. 2020 once again reared it's ugly head and brought me back down to earth. One of the tenants got candles (violation of lease) to close to the drapes... long story short; I have a vacant duplex that has been gutted by fire.

The good: 1. Nobody injured 2. I have insurance 3. It has been winterized 4. It's been boarded up and secured 5. I can float this financially for an extended period.

The bad: 1. Renters weren't paying rent (good?) 2. Tenants renters insurance lapsed. 3. I am unfamiliar with the best way to proceed.

I immediately called my insurance company and they sent an adjuster out, but now I'm swimming in uncharted waters and the waves are getting BIG! I had the premise secured and boarded up. The Fire Department has been contacted for a report, but they haven't replied yet due to Christmas. I've tried to locate the tenants to get them to claim their possessions or relinquish interest in them, but have not been able to get a hold of them. Also, I've talked to a couple of contractors and public adjusters, but have not signed anything.

My management company has been good up to now and are helpful, but not to experienced in the area of dealing with how to proceed after a fire. I'm looking for someone who might have a road map or checklist.

The questions I have are:

1.) Should I use a public adjuster?

2.) What obligation do I have to the tenants that I can't get a hold of? How long do I need to secure their belongings?

3.) Should I have contractors go in now or after the adjuster is done with the report?

4.) What are pitfalls to avoid?

5.) If I take the insurance check and sell the shell, how does this effect my taxes?

6.) Please tell me the pain goes away!!!!

John Mocker · Answer

Ron,

Sorry you have this happening but it sounds like you have things going in the right direction.

Your first source for a lot of this info should be your Agent. They should be able to answer 2 & 3 after speaking to the Insurance company. If local to the claim, they can also be a source of recommendations to contractors.

The answer to #1 is complicated. The answer you will hear depends on who you speak to. The adjusters claim to get more $$ paid out in the claim. Whether or not that will be true in your case would depend on the company, documentation you get them, etc. The real question may be, can you effectively manage this claim from 2000 miles away. If not, that may be the definite value of a public adjuster. Remember, the normal compensation for the Adjuster is a percentage of your claim. That amount may be negotiable. Also be sure to get references to check their knowlege & effectiveness.

For #5, from an insurance standpoint only, remember that if you do not rebuild your payment may be less. If your policy had "Replacement Cost Coverage" for the building the full payment will not be made until you have rebuilt. Normally, there is an initial payment based on the Actual Cash Value (Replacement minus Depreciation) of the loss (full or partial). After the repairs or rebuild is done you will receive the remaining balance.

If you have not had a Fire & Water Damage Mitigation contractor (I recommend Belfor based on the work they have done for my clients) I would have one look at the property to see if there are any immediate needs (remove water damaged sheet rock, remove smoke damaged items, etc.) and communicate it with the Insurance Company. The companies are used to working with these contactors.

Your policy should cover the loss of rental income. Remember, the renters may not have been paying but they were getting billed. That is different than if there was no rents being charged (ie vacant situation).

FIRE! Navigate insurance/tenants/management/contractors?

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