The Adjuster Games: Adjustment strategies that are used by homeowners’ insurance companies to justify lowball settlements.

J.P. Gonzalez-Sirgo
Founder of J.P. Gonzalez-Sirgo, P.A.

When you file a claim for property damage to your home or business caused by a covered peril, the insurance company will engage in the adjustment process to determine the value of your claim.  What many people do not understand is that insurance companies often engage in adjustment techniques that are intended to minimize the cost to the insurer.  Because of my background as an adjuster prior to becoming an insurance claims attorney, I am familiar with adjusting techniques often utilized by insurance companies to minimize repair costs and limit the financial exposure of the insurance company.  A few examples of such strategies are provided below.

Using a Handyman

When your home is damaged by a hurricane, fire or other covered peril, the damage will often entail repair work involving multiple trade disciplines.  If your damage is caused by a hot water heater that burst because of a product defect, repairs may necessitate work by a plumber, electrician, painter and other types of construction trade professionals.  When you work with a general contractor, sub-contractors are hired with specialized skills associated with each type of trade work. 

While this is the approach best designed to yield high quality repairs, a general contractor will add charges for his or her overhead and profit for hiring and supervising the sub-contractors.  These costs charged by the general contractor can increase the cost of repairs by twenty to thirty percent.  Because a handyman is a generalist who does not have these additional costs, insurance companies like to use these jack-of-all-trade workmen who are not regulated or licensed.

The quality of repairs is likely to suffer when you use someone without a license who does not specialize in a particular construction discipline.  While the insurance company benefits if a handyman is used because of lower repair costs, you do not benefit when a potentially unskilled amateur repairs the damage to your home or business.

Cash Out Approach

This is the most common adjusting technique that is initially used to encourage an insured to accept a lowball settlement.  The adjuster will walk through the house and minimize the extent of the damages.  Once the adjuster has conducted this inspection, he will calculate the cost of suggested repairs and ask something like “does that sound fair”.  The adjuster will then offer to cut a check on the spot.  This adjustment approach is based on the fact that the insurance company knows that most policyholders are ill-equipped to evaluate the cost of the damage to their home.  This adjusting technique exploits the homeowner’s ignorance along with the financial desperation of the homeowner who might already have spent the check.  Many homeowners do not use the check because they defer the repairs until they undertake a more extensive home repair or remodeling project.  The homeowner does not discover how inadequate the settlement was until the larger project is undertaken.  Even when the homeowners use the check to immediately to have the repairs performed, the insurance company might claim that the contractor is gouging the homeowner.

Limiting the Scope of Damages

This approach involves narrowing the range of damage that is included in the cost of repair.  A severe storm might cause a water stain on your ceiling for example.  The adjuster might estimate the cost of repair based on replacing shingles that blew off the roof in the wind and painting the ceiling.  If you have popcorn type texturing, the adjuster might even seem magnanimous by not only agreeing to add texture to the areas that were stained but to do the whole ceiling so the repair is not obvious.  While it might appear that the adjuster is being generous, the scope or work does not include other damage that should be repaired.  If the leak is severe enough that the roof is stained, the drywall generally will have suffered sufficient damage that it needs to be replaced.  There also may be mold, mildew or spore issues that are not detected or repaired because the drywall was not removed so the sub-space behind the drywall could be inspected properly.

Estimates Based on “Comps”:  The insurance adjuster typically will offer less than the full value of the claim.  The property owner might indicate that the adjuster’s estimate for repairs is not sufficient to actually do the work.  The adjuster will offer to send a contractor out to provide an estimate for the cost of repairs.  The person who does the inspection is really a handyman who agrees to provide the insured with an estimate for the cost of repair that is equal to or lower than that originally provided by the adjuster.  Because it appears that the adjuster’s estimate of the cost of repair was accurate, this strategy essentially is designed to induce the homeowner to accept a cash out settlement.  If the homeowner elects to perform the work, there is an implicit agreement that the insurer will provide a supplemental payment or agree to make it up to the handyman on the next job.

The bottom line is that you should never agree to settle such a claim before you hire a licensed contractor to provide an estimate, so you can evaluate the offer by the insurance company.  If your contractor estimates the cost of repair to be significantly higher than the insurance company’s adjuster, you will know not to settle for the lowball offer.  If the insurance company refuses to handle your claim fairly, you should consider speaking to an experienced Miami property damage lawyer.  My law firm represents policyholders in claims disputes in Miami and throughout Florida.  The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations.  No Recovery, No Lawyer Fees.  Call 305-461-1095 or Toll Free 1-866-71-CLAIM.

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