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A Box of Chocolates?
Know What to Expect with Condominium Association Losses
By Deborah Moroy and Dennis Martin

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Hurricane season. While these two words evoke apprehension in the hearts of some, there are those who look forward to this time of year with unusual excitement and anticipation. For insurance adjusters, this time of year always gets the old gears rolling.

No matter how many years a field adjuster has been handling losses, no two claims are ever the same. From water-damaged homes to hurricane-damaged oil refineries, there is a myriad of losses in between and beyond that an adjuster might handle on a daily basis. Tom Hanks’ line in the movie Forrest Gump may well be the insurance adjuster’s mantra: "Adjusting claims is like a box of chocolates. You never know what you’re gunna get."

This is especially true when it comes to handling condominium association losses. But there are some guidelines and red flags to look for when handling such losses. Whether you are a newbie or a veteran in the insurance adjusting playing field, consider the following strategies to keep surprises to a minimum.

Time Is of the Essence

Upon receiving the new loss, make immediate contact with the insured to schedule an initial inspection. Due to the large and complex nature of condominium losses, public adjusters will usually be involved. Beware that public adjusters often attempt to keep you from inspecting a property to delay the process until their estimate is complete. This common tactic will put you up against a very tight deadline, which they can use against you to press a quick settlement. Therefore, it is imperative to be familiar with individual state claim deadlines, such as Florida’s New Emergency Order. This order was passed in May 2007 and requires all residential claims — including condominium associations and unit-owner claims — to be handled within 90 days.

Staff and independent adjusters normally can inspect a property even against the public adjuster’s wishes if 48-hours written notice is given. In the eyes of the law, the insured has submitted a claim and it is our duty to inspect the property in a prompt manner. Public adjusters are under the obligation to cooperate, and there are various case laws in many states giving adjusters this right.

The initial first contact should be followed up in writing so that the condo property manager of the association can forward your letter to the unit owners and the association board. You also should consider including in this letter a copy of the state statute that outlines which building elements are covered under the master policy and which items would fall under the unit owner’s responsibility. This will greatly reduce the number of complaints and calls you receive from unit owners. The property manager should make sure that a copy of the statutes is posted in one of the common areas for all unit owners to review.

Meeting the statute deadline is not the only pressing issue when it comes to proper adjustment procedures. Delayed course of action on the part of the insured, the public adjuster, and staff/independent adjuster can spell disaster for the property. If prompt inspection and mitigation are not performed quickly, the insured property can rapidly deteriorate, and what may have started off as a small water loss can turn into a major reconstruction project costing the insured thousands, if not their entire investment. Be prompt and do what you would want your adjuster to do for you if you were in the same situation. Your insured and carrier will appreciate it in the end.

Additionally, make sure that all unit owners are notified of the scheduled inspection so that their units are accessible (the management company should handle this for you). Most association by-laws allow them to enter the property for this purpose, which brings us to another important issue.

Read the Fine Print

Nothing lowers an adjuster’s credibility faster than being found clueless about an insured’s policy, bylaws, and relevant state statutes. Once an inspection to the property has been secured, prepare beforehand by obtaining and reviewing these documents.

Imagine diligently scoping several complexes, taking photographs, and noting damages only to find out later that those same complexes were not a part of the policy involved. The expression, “Time is money,” couldn’t be found truer anywhere else than in the adjuster’s book. The time spent inspecting the wrong buildings or units is an adjuster’s loss. Most insurance adjusting companies will not pay adjusters for the time they wasted because of simple and avoidable mistakes.

Obtain a copy of the insured’s full policy either through the agent, the carrier, or the insured. Statutes can be found on each state’s respective Department of Insurance web site. The condominium association should have a copy of the bylaws available for your review. These bylaws disclose important information pertinent to settling the claim, such as the association’s obligations to the property, insurance coverage and limitations, deductibles, and total insured values. Unfortunately, many complexes now are carrying five percent of total-insured-value deductibles, which could mean thousands of dollars due on the part of the insured. However, many condominium associations are not aware of this fact and are currently sitting with no reserves to pay the deductible. Contractors are not going to start restoration work if they cannot receive assurances that their total bill will be paid by someone in the future.

The bylaws also may contain subrogation clauses, which determine what should be included in the adjuster’s estimate. Knowing which buildings to include on the estimate will save a tremendous amount of data entry, not to mention several reams of paper.

Additionally, other insurance coverage that may be applicable to the property, such as flood, should be confirmed. The agent and the association president should be aware of the coverages purchased by the condominium association.

Thoroughly reviewing the insured’s policy, state statutes, and bylaws before inspecting a property might seem like a tedious and time-consuming investment in the beginning, but it will pay huge dividends in the end.

Condo Best Practices

One of the first things to check off on the site inspection list is to make certain the property is structurally safe. Questions to ask include, Has the insured done all they can to mitigate further damage to the property? Is the roof water tight? Is there evidence of mold growth?

If there is wet carpet or drywall, this must be taken care of immediately in order to keep it from contaminating the adjacent units or the units below. Worse, wet sheetrock tends to collapse, and if one unit owner complains of a dangerous situation, the police and city building officials will immediately move into the complex and completely shut it down. This will force all unit owners out of the complex — whether their units are damaged or not. Should complete evacuation become mandatory, it is advisable to leave the property and let police and city personnel handle the situation. This will probably take at least 24 hours, after which you can follow up with the insured and schedule another appointment.

If all is as it should be at the property and the complex is structurally safe to walk through, move forward with the inspection, preferably with a representative of the condominium for accountability purposes. It is not uncommon for insurance adjusters to find themselves in awkward situations in which they are accused of stealing items from properties. Also, having someone else present can help you spot damages that you may have otherwise overlooked.

Be consistent and thorough in your inspection notes and photos. Due to the enormity of the inspection project, adjusters will most likely be working in teams with other adjusters and scopers . A team concept needs to be employed to handle these large losses to completion. It takes a certain amount of time and planning to assess the exterior common elements and all of the interior damages to meet state-statute mandated deadlines. A preliminary meeting with all adjusters and scopers is crucial in making sure that there is a common thread to damage assessment in the inspection process. A suggestion would be to assign the exterior items to one adjuster or team while another adjuster or team inspects the interiors.

Condominium complexes tend to generate a lot of media coverage. Television crews will show up on the premises and try to engage you in a personal interview while you are working in the loss. Be careful not to fall into this situation without prior preparation. Be familiar with the media guidelines of your carrier; most carriers do not allow adjusters to talk to the press. They prefer you to forward media requests to their media department.

Also be cautious about attending board meetings where unit owners will be present. These can quickly spiral out of control. It is more advantageous for all parties involved if adjusters only meet with the board of directors to answer questions. Adjusters can explain the insurance policy, state statutes, building code upgrade issues, and other pertinent matters with the board of directors in a professional manner, and then let the board deal with their unit owners directly. The board of directors also can present the loss settlement to the unit owners individually. Very little is accomplished in a large meeting by having more than 100 unit owners screaming at adjusters as to why this, that, and the other are not covered in their policies.

Communication Is Crucial

Maintaining open and straightforward lines of communication is essential in moving the adjustment process towards a fair resolution for all parties concerned.

Adjusters must patiently guide the condominium association at every step of the process. This may be the first time they have had to deal with a catastrophic loss to their complex, and they may be unaware of the responsibilities they are obligated to perform during the process. The condominium association’s attorney should be closely consulted to make sure proper financial safeguards are set up. While adjusters cannot assume responsibility for any of these items, it is their duty to make them aware of situations that are not being handled properly and notify the attorney accordingly if appropriate steps are not being taken in accordance with the insurance policy.

Remember that reading the fine print, making sure safety comes first, keeping lines of communication open, and using good, sound adjusting practices are key. And, of course, being prompt. That way, you know exactly what you’re going to get.

Deborah Moroy, AIC, IIA, is president of Dimechimes Corp., a nationwide claim staffing and recruiting company for independent adjusting firms and insurance carriers. She may be reached at 850-502-4261, Dkmoroy@dimechimes.com.

Dennis Martin, CPCU, RPA, EGA, is senior vice president of William Kramer and Associates, an independent loss-adjustment firm. He may be reached at dmartin@wkramerassociates.com.

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