Drones Help Insurance Companies Check Damage in Cedar Rapids

Erin Jordan | Claims Journal

Insurance adjusters who descended on Cedar Rapids after the Aug. 10 derecho storm are using drones to check roofs and asking homeowners with less severe damage to take their own photos.

Some of this is due to the COVID-19 pandemic, which has reduced the number of experienced adjusters willing to travel. But the changes also help speed up claims and get repairs done sooner, company representatives said.

“Drones or aerial imaging helps them estimate the claims,” said Scott Hauptman, vice president for claims for Grange Insurance, of Columbus, Ohio, which is working with Integrity Insurance, of Appleton, Wis., to handle at least 500 storm-related claims in Cedar Rapids. “It’s as efficient as possible and helps them (adjusters) safeguard their health.”

Cedar Rapids officials told The Gazette on Wednesday that 140 buildings are too damaged to be occupied. Several hundred more have non-structural or cosmetic damage.

Before buildings can be fixed and people can return to their homes, insurance companies must document the damage and determine how the loss will be covered.

Many insurance companies have sent catastrophic teams to Eastern Iowa. Nationwide Insurance, for example, stationed some at the Home Depot on First Avenue SE in Cedar Rapids.

“Really the biggest thing we’ve found in Cedar Rapids, due to lack of internet and power, is they (homeowners) weren’t sure if they had a claim filed or not,” said Courtney Kannas, property field claims manager for a Nationwide team that covers Iowa, Nebraska and parts of Kansas and Missouri. “If they didn’t have a claim filed, we could do that for them. We also could give them a high-level understanding of their policies.”

Integrity adjusters sent a drone Wednesday afternoon over the Wired Production Group’s building on N Towne Lane in Cedar Rapids to get a better look at a roof that was peeled off and a crumbled back wall.

“This 12,000-square-foot building is a total loss,” said Ron Rausch, Wired Production president and owner. “They (Integrity) brought a structural engineer in here to document that was the case.”

An adjuster also looked at millions of dollars in cameras and other equipment Wired Production uses to stage events for many Eastern Iowa companies, including The Gazette. When the roof was ripped off, rain and water from broken water mains flooded the offices and ruined much of the gear, Rausch said. The firm is setting up operations temporarily in Dubuque until the Cedar Rapids site is rebuilt.

“They were very amenable to letting us start the cleanup process and work with people we want to,” Rausch said of the insurance company.

State Farm, the first insurer to get Federal Aviation Administration approval to operate drones over people, has been using drones to gather information on Cedar Rapids claims, spokeswoman Tammi Estes said.

Nationwide hasn’t been using drones in Cedar Rapids because of the challenges of photographing around fallen trees, Kannas said, but the company is encouraging policy holders with minor damage to photograph the property and submit claims online.

“It gives us a better picture right away as to the extent of the damage they have to their home so we can get them emergency reimbursement or set them up with temporarily housing a little quicker,” she said.

A Washington, D.C., law firm said in a news release that homeowners and businesses hit by the derecho will face challenges in getting adequate reimbursement.

Weisbrod Matteis & Copley, which represents homeowners in lawsuits against insurers, pointed to an Aug. 4 webinar with insurance executives who said many older adjusters were reluctant to go out in the field because of risk of contracting coronavirus.

Some insurance companies also have struggled to get adjusters into states that require quarantines for visitors.

“After battling the insurance industry after Katrina, I fear that Iowans will be left at the mercy of a B team of insurance adjusters,” Jim Hood, a former Mississippi Attorney General who now works for the law firm, said in a statement. “Storm victims will need to quickly document their damages with drones, pictures and lists of damaged items.”

One insurance executive on the webinar said he thought fewer adjusters in the field would increase fraud.

“I do have some concerns we are going to have to do more virtual adjusting,” said Jed Rhoads, president and chief underwriting officer for Markel Global Reinsurance, based in Virginia. “If we’re adjusting claims through satellite imagery or drones or handheld devices, it could lead to new additional types of fraud.”

People could doctor drone or cellphone images or charge a company additional costs to procure the photos.

Integrity Insurance has been allowing virtual adjusting for several years, Hauptman said, and has developed strategies for detecting fraud.

“We have means on the back end to authenticate the pictures to make sure the time and location are appropriate,” he said. “The vast majority of our customers are great people. If there is fraud in an industry, that affects everyone’s rates.”

About the photo: Cleanup continues around the area in Cedar Rapids on Friday, Aug. 21, 2020 following the Aug. 10 derecho, which left hundreds of thousands of Iowans without power and displaced many whose homes were damaged or destroyed in the heavy winds. (Rebecca F. Miller/The Gazette via AP)

Contractors Beware Taking AOB Contracts For Restoration Work: New Policy Forms Restricting AOB Contacts Discussed By Recent Insurance Bulletin

Chip Merlin | Property Insurance Coverage Law Blog | June 24, 2019

Assignment of benefits contracts for property damage claims may be going the way of the dinosaur in Florida. A recent Florida Insurance Bulletin notes that the new statute allows insurance companies to issue policies preventing an assignment of benefits if insurers offer a premium discount.

The bulletin outlines what insurers must do:

Section 2 of the Act creates Section 627.7153, Florida Statutes, which provides standards for policies that restrict the assignment of benefits in whole or in part under a property insurance policy. The new language provides that an insurer may restrict assignments of benefits under a property insurance policy in whole or in part only if it meets all of the following requirements:

• The insurer must also contemporaneously offer to the insured or applicant a policy that does not restrict assignment;

• The restricted policy must be offered at a lower cost than an unrestricted policy;

• The policy restricting assignment in whole must be offered at a lower cost than a policy restricting assignment in part; and

• The restricted policy must include, on the face of the policy or the declarations page, a statutorily required disclosure.

Insurers wishing to make available a policy that restricts in whole or in part an insured’s right to execute an assignment agreement must file such forms or endorsements and rates with the OIR for approval. The OIR will make every effort to approve these new policy forms and rates as soon as practicable. Rate filings made for these restricted policies must provide actuarial support for the difference in rate between an unrestricted policy and a policy that restricts assignment in whole or in part.

So, this is my take on the truth of this new law and what is going to happen:

  1. The truth is that this legislation passed because of the scapegoat publicity of a few lawyers and law firms filing thousands of lawsuits. Their actions and greed changed the regulatory and political landscape.
  2. Good, reputable contractors will be harmed by the law.
  3. Insurers will gain more leverage to pay less than adequate amounts to properly and legally complete quality restoration work.
  4. Bad contractors and bad lawyers gaming the insurance claim process are hurt very badly by the new law.
  5. Policyholders may find fewer scamming contractors and lawyers doing shoddy work and taking their rights but will also be faced with personally fighting for the quality of the construction they deserve with insurance companies caught in a competitive downward spiral, paying for as little as possible.
  6. Some of the AOB lawyers creating this mess will still find ways to market for cases and game the system with obvious loopholes in the statute’s written language. The insurance lobbyists have made an annuity with this legislation and will still be making money fixing what they failed to properly write into law in the last legislative session.

The resources of the Florida Office of Insurance Regulation are not infinite. While all this AOB flurry of discord and legislative activity has been going on, insurers have been busy rewriting Florida property insurance policies to reduce what have been otherwise nationally standard insurance benefits. Citizens Property Insurance Company is the leading bad actor in this regard.

Since the citizens of Florida should not be harmed by supporting leaders within the Citizens Property Insurance Company that they have paid for and created, it is time to start looking for a lot more transparency about the behind the scenes lobbying efforts and wrongful actions being made by this entity. It is also time to demand that the leaders running Citizens stop harming the policyholders and citizens they are supposed to serve. The Florida Office of Insurance Regulation needs to be more of a watchdog for consumers rather than a lapdog for insurers when it comes to accepting new policy forms limiting and restricting coverage.

Derek “The Dodger” Chaiken Does Drone Analysis of Property Damage Claims

Chip Merlin | Property Insurance Coverage Law Blog | June 8, 2019

Derek Chaiken is in the Merlin Law Group Los Angeles office. He is a Los Angeles Dodger fan and a student of drone usage during the property insurance claim process. Drones are no longer science fiction, but a fairly common part of modern property insurance claims adjustment. With stronger cameras and other advanced technical measuring devises, drone usage is an efficient tool all property insurance adjusters should use during the adjustment process.

I was visiting Derek in Los Angeles yesterday going over a new Malibu fire claim dispute. The insurance company hired a “consulting” firm to determine the amount of reconstruction cost of a totally destroyed custom home. The dollar amount of the total loss was determined to be less than 50% of the policy limit, which is simply unbelievable for those of us familiar with the extraordinary construction costs following the Malibu wildfires.

I was also thinking how helpful drone video of the remnants could be used to show the remaining portions of the building, the area of damage, the topography of the anticipated construction site and how the entire devastated neighborhood looked following the fire. Of course, these consultants had none of this completed and relied upon eye level photos and a satellite photograph of the loss site.

Derek and insurance defense attorney James Michael Shaw of Butler Weihmuller Katz Craig, recently gave a presentation at an America Bar Association event about drone usage and they noted the following:

Safety and economic considerations continue to drive drone usage in claim adjusting. Drones have become valuable resources to insurance companies when assessing catastrophic disasters, including floods or earthquakes, where access to areas can be restricted by civil authorities and/or is too dangerous for adjusters to enter. Drones usage should also theoretically lead to shorter claim adjustment times and improved customer services.

All property adjusters who want to better document the loss should be using drones as a normal part of their adjustment practice. Aerial views provide another aspect of the loss. The video cameras can quickly show the loss site and the entire neighboring area of damage. There is no downside of drone usage to policyholders whom all adjusters are duty bound to promptly determine the full measure of loss. Drones plus other longstanding adjustment practices simply make for a more efficient and thorough evaluation of loss.

The Butler firm has gone so far as to write an entire book on the topic of drone use in property insurance adjusting: Butler on Drones (Third Edition): A Practical Guide for InsurersHere is the link to obtain a copy.

No Coverage for Defects in Subcontrator’s Own Work

Tred R. Eyerly | Insurance Law Hawaii | February 11, 2019

    Damage to the concrete floor installed by the insured subcontractor was not property damage and thus not covered under the insured’s CGL policy. Kalman Floor Co. v. Old Republic Gen. Ins. Corp., 2019 U.S. Dist. LEXIS 3319 (D. Colo Jan. 8, 2019). 

    In 2007, Kalman Floor Co. was subcontracted to construct over 158,000 square feet of concrete flooring for a cold storage facility. The concrete floor was completed in late 2008. In late 2009, the contractor notified Kalman that pockmarks, or “pop-outs,” were visible on the concrete flooring. The only damage to tangible property in the facility caused by the pop-outs was the concrete flooring itself.

    On January 31, 2009, Old Republic issued a general liability policy to Kalman for one year. The policy excluded for damage to “your work,” defined as “work or operations performed by you or on your behalf.” Old Republic denied coverage for damage to the concrete floor. Kalman sued, seeking a declaration that the exclusions did not bar coverage. 

    Under Tenth Circuit law, as established in Greystone Const, Inc. v. Nat’l Fire & Marine Ins. Co., 661 F.3d 1272 (10th Cir. 2011), the term “occurrence” in a CGL policy encompassed unforeseeable damage to non-defective property arising from faulty workmanship. The policy was intended to protect the insured business from claims by third parties concerning personal injury or property damage resulting from accidents. In discovery, Kalman admitted the pop-outs in the concrete floor “did not physically injure or damage any tangible property other than the floor system it installed.” Thus, under the terms of the policy, property damage did not occur. 

    Consequently, Old Republic’s motion for summary judgment was granted and the case dismissed with prejudice.

Idaho Denied or Delayed Property Damage Claims

Jonathan Bukowski | Property Insurance Coverage Law Blog | October 16, 2018

During the recent Summer 2018 RMAPIA Conference, Larry Bache and I had an opportunity to discuss regulations and remedies available to first party policyholders within the RMAPIA states. Continuing that discussion, this post will review the legal remedies available to Idaho policyholders enduring the frustration of a delayed or denied insurance claim. Fortunately, Idaho provides several remedies to assist policyholders in their efforts to recover insurance benefits due and owing under an insurance policy.

The typical scenario often involves the submission of an insurance claim following a destructive hail or wind storm. Despite gladly accepting premiums for the property, suddenly the insurance carrier refuses to provide benefits for repair of damaged property, forcing its insured to choose between accepting the denial or filing legal action for breach of the insurance contract. Idaho requires that a policyholder file its action for breach of contract within five years of the date of loss,1 and unlike several surrounding jurisdictions such as Wyoming and Colorado, Idaho does not allow an insurance carrier to shorten the five-year statute of limitation period.2

Idaho also provides the ability for policyholders to recover attorney fees in a lawsuit where a proof of loss is submitted and an insurer fails to pay the claim within thirty days.3 This is an important remedy where too often a policyholder cannot afford to the repair of the property, let alone the payment of attorney fees and costs to recover benefits due and owing under the policy.

While Idaho provides its policyholders with a potential recourse related to an insurance carrier’s mishandling of the claim, a policyholder must overcome several hurdles to prevail, including:

  • demonstration that the insurance carrier intentionally and unreasonably denied payment;
  • demonstration that the claim was not fairly debatable;
  • demonstration that the denial was not the result of a good faith mistake; AND
  • demonstration that the harm was not fully compensable by contract damages.

Finally, Idaho allows a policyholder to bring a claim for punitive damages where an insurance carrier has acted egregiously in the handling of the claim. While the claim cannot be made in the initial lawsuit, it can be asserted in a pretrial motion to amend where the policyholder can establish a reasonable likelihood of proving facts at trial sufficient to support an award of punitive damages.4 A policyholder must demonstrate by clear and convincing evidence, oppressive, fraudulent, wanton, malicious, or outrageous conduct of the insurance carrier in the handling of the claim.

If your Idaho property damage claim has been improperly denied or unreasonably delayed, consider speaking to an attorney experienced in handling property insurance claims to discuss the details of your claim and options available under the law.
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1 I.C. § 5–216.
2 I.C. § 29-110.
3 I.C. § 41-1839.
4 I.C. § 6–1604(2).