Insurance claim denied
I have a rental property in Orange county, California. We had a water leak and damaged the property. The plumber reported that "Burst copper pipe connecting to tub was the determined problem. Tech found leak on 1/2 copper pipe that’s feeding the upstairs tub." However, Insurance denied my legitimate claims saying burst pipe is not covered.
Is anyone here, had similar experience and got coverage by insurance. Any help and guidance is appreciated.
Any recommendation on hiring an attorney for this case? if so, any recommendation for attorney.
Thank you in advance.
I've totally been there, and done that! The first question to ask is "what is actual damages to the unit? Like, would it cost you $1,500 to fix it with a handyman, or are you talking $15,000? It makes a big difference... We challenged the insurance company and went to mediation, but the adjustor just stuck to his guns and said, "Nope, previous damage" - even though the walls were wet. Like we would let an active leak just go for months or years or something?!!!
We went to a lawyer that specializes in insurance repair denials and he advised that if we pursued a settlement we would not want to repair the damage until the lawsuit was settled. (as soon as you remove the damage you can't go back and point at the problem... you fixed it. It hurts your case ). He followed up with the fact it would likely take 12-24 months to settle the case.
The expectation of leaving a unit damaged for a tenant, or worse yet unoccupied for any length of time quickly 'shut us down' on pursuing compensation. We felt cutting our losses of probably $1,500 would be better than our gains from the insurance company a year later if we had to leave the unit empty. To fix it right it probably would have been $4,000 - $5,000. But to slide by and patch it up was about $1,500. So that was the route we went.
Our claim was denied as previous 'long term damage' (which was total bull****) but what do you do when it is 'he said / she said'? Worse yet, because they sent their people out to evaluate, (and there was a cost to that evaluation) they charged us as having a claim - even though they denied it, so it impacted us the next time our other policies renewed. That was Bull**** on top of the original Bull****! Just like with car accidents they fall off after 3 years.
Live an learn!
Good luck!
Randy
@ Alan
Thanks for sharing your experience. The damage is significant, repair cost us nearly $20K plus restoration is about $12K and a free month rent for a tenant.
So does your policy state you have coverage for burst copper pipes, or does it say burst copper pipes are omitted from coverage, or is it totally silent on burst copper pipes?
Have you read the policy and do you understand the insurance terminology in it? (or is that what you want a lawyer to do?)
Who is your insurer?
@Vipul Shah contact an attorney. Insurance is a scam
@Vipul Shah unless total loss, insurance is such a scam.
Looks like you need a new insurance provider.. I dont think I have seen a policy where it would exclude pipe bursts. I would really dive deep into your policy, maybe contact your broker, he could possibly help. Getting an attorney is going to be costly. As the saying goes, will you be throwing away good money for bad money?
Quote from @Randall Alan:
I've totally been there, and done that! The first question to ask is "what is actual damages to the unit? Like, would it cost you $1,500 to fix it with a handyman, or are you talking $15,000? It makes a big difference... We challenged the insurance company and went to mediation, but the adjustor just stuck to his guns and said, "Nope, previous damage" - even though the walls were wet. Like we would let an active leak just go for months or years or something?!!!
We went to a lawyer that specializes in insurance repair denials and he advised that if we pursued a settlement we would not want to repair the damage until the lawsuit was settled. (as soon as you remove the damage you can't go back and point at the problem... you fixed it. It hurts your case ). He followed up with the fact it would likely take 12-24 months to settle the case.
The expectation of leaving a unit damaged for a tenant, or worse yet unoccupied for any length of time quickly 'shut us down' on pursuing compensation. We felt cutting our losses of probably $1,500 would be better than our gains from the insurance company a year later if we had to leave the unit empty. To fix it right it probably would have been $4,000 - $5,000. But to slide by and patch it up was about $1,500. So that was the route we went.
Our claim was denied as previous 'long term damage' (which was total bull****) but what do you do when it is 'he said / she said'? Worse yet, because they sent their people out to evaluate, (and there was a cost to that evaluation) they charged us as having a claim - even though they denied it, so it impacted us the next time our other policies renewed. That was Bull**** on top of the original Bull****! Just like with car accidents they fall off after 3 years.
Live an learn!
Good luck!
Randy
Be careful. Insurance claims don't "fall off" after 3 years. Each insurance company has their own timeframe for how long they'll consider prior claims in calculating your premium, but it's typically more like 7 years.
Like Bud already said, insurance is a "scam." Well, not literally, but there's no point in filing a claim unless it's for massive amounts or a total loss. And remember -- even just calling to report an incident can result in a "claim," even if it's not active, never investigated, or never paid out. Basically, just don't call your insurance company unless it's a last resort. They're NOT your friends.
Sincerely, a prior insurance professional.
State Farm.
#1 Market Trends & Data Contributor
#1 Market Trends & Data Contributor
Quote from @Vipul Shah:
I have a rental property in Orange county, California. We had a water leak and damaged the property. The plumber reported that "Burst copper pipe connecting to tub was the determined problem. Tech found leak on 1/2 copper pipe that’s feeding the upstairs tub." However, Insurance denied my legitimate claims saying burst pipe is not covered.
Is anyone here, had similar experience and got coverage by insurance. Any help and guidance is appreciated.
Any recommendation on hiring an attorney for this case? if so, any recommendation for attorney.
Thank you in advance.
You should be covered.
I have the same case, got $20k :)
Nationwide, what's yours ?
use public adjuster to fight for you.
@Vipul Shah Sorry to hear about your situation but I don’t have advice for your specific situation.
However, I’ll share that my philosophy is to maximize deductibles to $10k+. The savings in annual premiums over a 5-10yr period often exceeds any payout you would get for a hazard incident, especially on a NPV basis. This may be something you consider going forward.
@Vipul Shah had an attorney speak at our contractor continuing Ed class, and he said State Farm the absolute worst for paying out claims
@Allan C. Great advice! Too offer people try to use insurance almost as a maintenance plan and don’t really understand it’s purpose. (Not saying that is what the OP is doing at all!) And as others mentioned, claims and even inquiries about making a claim are reported to a central monitoring agency called LexusNexus to which all insurers have access. Insurance is a complex business based on detailed actuarial analysis and claims history is a strong indicator of future claims. Most people do not understand much about it and think ‘I paid $x over the years so I should be able to get $x back’. For example, the amount of money they can retain is set by law.
#1 Market Trends & Data Contributor
Quote from @Mark S.:
@Allan C. Great advice! Too offer people try to use insurance almost as a maintenance plan and don’t really understand it’s purpose. (Not saying that is what the OP is doing at all!) And as others mentioned, claims and even inquiries about making a claim are reported to a central monitoring agency called LexusNexus to which all insurers have access. Insurance is a complex business based on detailed actuarial analysis and claims history is a strong indicator of future claims. Most people do not understand much about it and think ‘I paid $x over the years so I should be able to get $x back’. For example, the amount of money they can retain is set by law.
I don't really buy this. Why ? I have a case where I have to hire a public adjuster and they have a lot of stories to tell about the insurance company. Insurance is complex, yes but it's their problem/business. If a pipe bursts, water damage as a result they should cover it. That's why in CA there are regulation against insurance company that likes to reject the claim, maybe because we're in CA all my case is accepted? dont think so, but when we hire public adjuster, their behavior changes.
@Carlos Ptriawan I’m not saying that situations like yours don’t occur. I’ve actually had to deal with one like that myself recently. My point was more of a general one about how many people misunderstand the role insurance should play in managing their finances and risk exposure, as well as the impression that it is a ‘scam’. For example, if it was a scam, why would lenders require it?
I’m sure there will be more comments on this but I am signing off. Everyone has a right to their opinion, of course.
@Mark S. I’m aligned with your thinking. The very fact that insurance companies are in existence tells you that they often make more money than they dole out. It’s not just a NPV play for them, but also probability of occurrence. And obviously they have many sophisticated formulas that set premiums to make them profitable.
If you’re in the camp that home warranty offerings are a waste, then hazard insurance coverage is one step further on that line of logic. However, hazard insurance is still very useful for covering catastrophic events - just don’t plan on it for the nickel and dime occurrences.
Avoid State Farm at all costs. I had a burst copper pipe with Germania and they went above and beyond. Total damage was 33k they gave me when it was all said and done.
How have people's experience with with companies like travelers, liberty mutual, foremost, and Safeco?
#1 Insurance Contributor
- Insurance Agent
- Norwalk, CT
Vipul,
The coverage, under most property policies, for this type of situation hinges on "Sudden & Accidental" vs. long term leak. That is the first thing to determine. Second thing to know is that the damage to the pipe itself is not covered. The ensuing damage (soaked sheet rock, damaged paint, etc.) is what is covered. Look up your policy and review the coverage. Check the covered perils (Water damage specifically) and what exclusions are on the policy.
Get a claim denial in writing. If the reasons for the denial are incorrect, respond in writing. You are building your case either for the State Insurance dept or court.
Was just about to use State Farm for an investment property gatherings I am scooping up. Good to know, may reconsider. I think paying the premium for the better is the peace of mind I need.
Quote from @John Morgan:Avoid, but they went above & beyond?
Avoid State Farm at all costs. I had a burst copper pipe with Germania and they went above and beyond. Total damage was 33k they gave me when it was all said and done.
@Vipul Shah
Sorry this is happening to you. I made a post about insurance a few days ago and this is exactly why I want as little insurance as possible. It seems like it’s such a hassle and fight for anything that I’d rather just pay for liability.
This is just my 0.02 from my experience...
State Farm is awesome! They are big, professional, and stand behind their coverage the way you purchased it. I have had some major damages and they have always come thought. Super efficient and super fast.
Nationwide is Awesome! These guys might even be a step above state farm. AND have had the pipe burst you described above. Cost them about $60K. They covered the moisture mitigation immediately. Covered relocation of tenants. Covered all repairs. Covered loss of rents at market rates. I currently lost a few shingles in a wind storm and they decided to pay for a new roof!?!? I was expecting a lot less.
Farmers is not so good. I have dealt with them in the past, and they sound like the OP.
Mercury is even worse. The sound like the OP.
Not a big fan of Safeco. They will likely act like the OP. Safeco is a cheap alternative for basic coverage.
Your biggest issue is the adjuster. Did you go direct to Insurance or go through your agent? I have found that direct through the mothership has had best results.
Our newest problem as investors is that most of the big companies no longer insure investment properties in CA as of several months ago. So your choices are limited.
#1 Market Trends & Data Contributor
Quote from @Sam Yin:
This is just my 0.02 from my experience...
State Farm is awesome! They are big, professional, and stand behind their coverage the way you purchased it. I have had some major damages and they have always come thought. Super efficient and super fast.
Nationwide is Awesome! These guys might even be a step above state farm. AND have had the pipe burst you described above. Cost them about $60K. They covered the moisture mitigation immediately. Covered relocation of tenants. Covered all repairs. Covered loss of rents at market rates. I currently lost a few shingles in a wind storm and they decided to pay for a new roof!?!? I was expecting a lot less.
Farmers is not so good. I have dealt with them in the past, and they sound like the OP.
Mercury is even worse. The sound like the OP.
Not a big fan of Safeco. They will likely act like the OP. Safeco is a cheap alternative for basic coverage.
Your biggest issue is the adjuster. Did you go direct to Insurance or go through your agent? I have found that direct through the mothership has had best results.
Our newest problem as investors is that most of the big companies no longer insure investment properties in CA as of several months ago. So your choices are limited.
YES, it comes with experience.
This is very good summary.
The battle is with individual adjuster thats why you may want to hire public adjuster, it's worth it from my experience esp if claim is larger than 30k.