For over 15 years, I’ve represented homeowners in front of large insurance companies. I spend my days assisting my clients in the preparation, presentation, negotiation, and adjustment of their insurance claims. Today, I’m sharing an experience I had while handling a water damage claim in West Hills:
How did you first become involved with this claim?
This case was interesting because I’d helped the homeowner on a previous claim over the same house. He’d been living in the home for a few years, and the upstairs plumbing had caused water damage previously. We were able to collect a fair settlement from his insurance provider before, so the owner called me when he ran into trouble with the claim. He had a suspicion that this claim was going to be difficult, since the property had sustained similar damage in the past.
What caused the water damage in question?
In both situations, the damage was caused by broken pipes. Over the course of the claim, we discovered that there were some flaws with the second floor plumbing system that was causing unnecessary strain on the pipes. That pressure, combined with lower quality plumbing materials was a recipe for trouble!
How did the insurance company handle the second claim?
We came to an agreement with the insurance company regarding the replacement value of the claim in roughly 4 weeks. At that point, the homeowner received a check for the actual cash value of his lost property. The insurance company withheld the recoverable depreciation amount, which was roughly $6000-$7000.
What is recoverable depreciation?
Recoverable depreciation is essentially money that can only be collected if the cost of the repairs exceeds the replacement value of the damaged property. (That terminology can get pretty confusing, so we have a glossary on our website to help with the legal terms from insurance policies). In this case, the homeowner completed the repairs and then requested a check for his recoverable depreciation. That’s where things got difficult.
Why was it so difficult to get the money back?
This was a special case, because the homeowner had bad blood with the contractor. Their working relationship ended poorly, and as a result of that impasse, the contractor never gave him receipts and signed copies of the work order for the job.
When the owner asked for his recoverable depreciation, the corporate adjusters requested receipts/contracts/cancelled checks/credit card statements and pictures of the repaired property. Now, the insurance company was well within rights to ask for those materials before releasing the depreciation. They’re entitled to the proof that you paid as much as you claim to have paid for repairs. In this case, the problem was that we could prove the job had been done with pictures, but we had to think outside the box to provide evidence of the specific cost of the repairs.
How did you find proof of the homeowners expenses?
This homeowner was paying the contractor in cash for his labor. We had our client get us the bank records of withdrawing money from his account, which showed that every Friday he withdrew cash to pay the contractor. Next, we collected all the credit card statements that his contractor had used to purchase the materials.
When working with contractors, some homeowners will give them authorization to use personal credit cards to purchase supplies. That means that the homeowner would get the airline miles or rewards points from the purchase. However, many contractors offer discounts for clients who pay cash. In this case, the homeowner had given his credit card to the contractor to purchase materials, but he was also paying cash for the labor in order to secure the discount.
Did the homeowner eventually receive a settlement?
After collecting card statements for the building materials and the bank statement for labor costs, we took it to the insurance company to show the homeowner had paid far more than the replacement value for his repairs. Fortunately, the insurance adjuster agreed that this was sufficient documentation to retrieve the full amount of recoverable depreciation.
While this case was tricky, I’m very pleased that I was able to assist the homeowner with another claim. I hope that this story will help other families avoid similar difficulties. I strongly recommended that homeowners pay for repairs or upgrades to their home with credit cards and checks. Those payments can be tracked for insurance purposes, and you may have more options available to dispute false charges. If you choose to pay with cash, remember to request a detailed and itemized receipt before completing payment.