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Consumer Advocate Releases Report

Consumer Advocate Releases Report

The Consumer Advocate released his report to the legislature entitled “Claims Dispute Resolution Roundtable and Alternative Dispute Resolution Roundtable.”   The report follows two separate “roundtable” discussions held by the Consumer Advocate, the first regarding claims disputes and the second pertaining to alternative dispute resolution. The report notes the appraisal process has become very costly and fallen out of favor as a way to quickly resolve claims.  The report contained the following recommendations.

  • Education – create better communication between adjusters and contractors through education courses.  The report specifically recommends amending adjuster licensing requirements to require 2 hours of courses in claims handling procedures.
  • Improved communication between insurance company personnel and contractors. Specifically, the report recommends clarifying the law to permit licensed contractors to discuss costs estimates or methods employed for repair without requiring those contractors to obtain an adjusters license.
  • Improved communication between insurer and policyholder. Specific recommendation under this topic included:
    • Require all estimates submitted to an insurer be signed by the homeowner;
    • Require insurers to give field representatives sufficient financial authority to settle claims;
    • Require insurers to notify insureds (within 15 days) they may obtain a free copy of all claim-related documents including adjusters estimates, loss adjustment reports, repair and replacement estimates and bids, appraisals, scopes of loss, property evaluation reports, engineer reports and investigation reports.
  • Require insurers to train their adjusters to provide estimates that account for building code required upgrades and to implement standard claims handling procedures for Ordinance and Law Coverage.
  • The report recommends keeping an appraisal process in place while acknowledging the current process has become too expensive.  As a prerequisite for demanding an appraisal, policyholders would be required to participate in Department of Financial Services sponsored mediation. The consumer advocate then recommends policies going forward contain a “uniform appraisal provision for all residential insurance products, but only after appropriate standards and regulation have been established in law.”  The report contains almost 20 suggestions for creating such standards and regulations.  Among the more important recommendations is the creation of three member umpire appraisal panels, with each party appointing their own umpire and the two umpires picking a third person to resolve disputes.
  • The report recommends the legislature require persons who act as property loss appraisers to pass an examination and to be licensed by the Department of Financial Services.   These appraisers would then be required to comply with the following ethical standards:
    • Shall not charge any fee on a percentage basis or that is contingent on arriving at a particular result.
    • Shall act as an objective estimator of value, repair cost and replacement cost.
    • Shall not appraise property in which the appraiser has a present or future interest without fully disclosing that fact.
    • Shall not advertise or solicit appraisal work through inaccurate, misleading, false or deceptive claims.
  • The report recommends that appraisal umpires also pass a written exam and be licensed by the Department of Financial Services. There would also be ethical standards applicable to appraisal umpires.
  • The report also makes a number of recommendations regarding solicitation of homeowners by persons offering “free” inspections.  It also proposes limits on public adjusters executing contracts with homeowners for services for a supplemental or reopened claim after 2 years have passed since the last claim payment was made.

The report recommends creation of a “standard policy” for all companies to sell. Companies could also offer a preferred policy.