Things to consider before filing small claims

To say the Northeast has sustained some serious weather related catastrophes in 2011 is an understatement. Irene and the Halloween snowstorm are the most recent events that caused widespread power outages, downed limbs, roof damage and more.

During and after these events, we fielded hundreds of calls from clients with questions about tree removal and food spoilage, two types of loss that are not covered by an unendorsed ISO Homeowners policy. While most of our clients purchase ”extension” or “enhancement” endorsements that often include some coverage for these losses, it’s not necessarily in their best interest to file a claim just for the food spoilage or tree removal.

The purpose of these endorsements is to enhance the coverage at the time of a large loss, not to simply provide $250.00 for food spoilage or $500 for tree removal. The unendorsed ISO Homeowners policy does not include coverage for food spoilage or removal of trees that don’t land on a covered structure. The “extension” or “enhancement” endorsements serve to provide broadened coverage at the time of a larger, more significant loss, such as when a tree falls onto a home causing serious damage, a fire, or something many of us are familiar with, extensive water damage from ice dams.

When we first write a homeowner’s insurance policy for a client, we address the policy deductible by asking ”how much out-of-pocket expense can you afford to pay for smaller losses?”.  If our client says they could pay for all claims below $1,000 then we suggest that be their deductible.  Furthermore, if the client is comfortable paying for claims below $1,000 then why would they want to put in a claim for $250.00 for food spoilage?

Using a homeowners policy to pay for small claims is referred to in the industry as “being used as a maintenance policy”. This activity should be avoided as it may quickly result in the homeowner’s policy getting non-renewed.

I’m sure many reading this will think that I am simply against filing claims. That is not the case. The reasons behind sharing my viewpoint are for the benefit of insurance policyholders.  A homeowner’s policy is an extremely vital component of one’s financial protection portfolio. A homeowner’s policy insures what is to most, their single greatest investment, their home. It’s important that you, as a homeowner, do what you can to secure and maintain sound coverage for your home and personal liability.

When we shop for your coverage we use your good loss history (lack of or limited prior claims) to obtain the best possible coverage at a competitve price. Insurance companies pay claims; however, they are not social service agencies; they are in business to make a profit. They review each and every risk and decide to either accept or decline a risk. Then they make a decision to offer preferred or standard pricing; as well as enhanced or standard coverage, based on the characterstics of the risk. A homeowner who has no claims in 10 years is more attractive and will likely receive better pricing and coverage options than one who has 3 claims in the past 10 years. What’s worse, a homeowner who has 2 or 3 claims in a 5 year period may find themselves being “non-renewed” by their insurance company. When a homeowner is non-renewed, that information must be noted on any application for replacement coverage and most standard insurers will pass on the risk. The homeowner will likely find that their options for insurance are limited to specialty markets, whose coverage will typically be more restrictive and significantly more expensive.

2011 was not an ordinary year weather-wise. It will go down as one of the costliest years ever for weather-related losses. Through November , we experienced 4 catastrophic weather events in Massachusetts alone. Through the end of June, 2011, the insurance industry had incurred 23 billion dollars in direct, weather-related losses. That’s three times the first half year average for the past 10 years. Those numbers do not include the effects of Hurricane Irene or the Halloween snowstorm.

Over the past three to four years, we’ve enjoyed historically low property and auto insurance rates. Unfortunately, we’ve seen the bottom of the pricing bell curve and we’re looking at a period of higher rates and insurance carriers who will be looking to insure the “best of the best” and non-renew  less profitable business.

Those who self-insure smaller losses (use of higher deductibles) and use their homeowner’s insurance only for larger, more serious losses, will be more attractive risks and will likely benefit over time from better pricing and coverage tiers.

A few years ago, one of our clients experienced a total fire loss to their 80+ year old home. When the home was being rebuilt, the client called us to see if his coverage would be non-renewed. We called the underwriter to get a firm answer to this question. The underwriter responded “The insured has been a loyal customer for many years and this is the only claim they’ve ever had. Now they are going to have a brand new home. Why would we non-renew?”

Severity is not looked at in the same light as frequency. Smaller, more frequent losses are “red flags” to underwriters. Underwriters will pay close attention to accounts that experience multiple, small losses and will be ready to non-renew the moment they feel the account is no longer desireable.

Undoubtedly, some will suggest that we’re posting this article because we don’t want our clients to submit claims. That’s not the case. When our clients need their insurance to respond, we want it to pay them the way they expect to be paid; that makes for a satisfied customer. Referrals are the lifeblood of our agency and we only get them from satisfied customers.

We believe that by informing our clients ahead of time about how small claims can impact the cost and availability of their insurance, we are providing better customer service than the agency or company who only explains this after the customer is re-tiered or non-renewed following a loss.

First hand tale of a family saved by Nicole’s Law

In 2005, Governor Mitt Romney signed into law legislation that requires carbon monoxide detectors in all homes with potential sources of carbon monoxide – those with fossil-fuel burning equipment or enclosed parking areas. It is better known as Nicole’s Law, in remembrance of 7-year old Nicole Garofalo, who died on January 28, 2005 after her Plymouth home was filled with deadly amounts of carbon monoxide on January 24. The furnace vents had been blocked by snow during a power outage.

Details of this law can be found on the state’s web site located here.

Carbon monoxide is a colorless, odorless gas that results from incomplete combustion of fossil fuels such gas, propane, oil, wood, coal, and gasoline. Being colorless and odorless makes it impossible to detect without the aid of a detector. Carbon monoxide detectors are available in most hardware stores and larger department stores. It is vital that you install carbon monoxide detectors and maintain fresh batteries in them as well.

This information was well publicized a few years back. Recent events made this something I had to highlight once again.

In November of 2001, my wife and I bought a home that needed an extensive amount of work before we could move in. In addition to needing a new heating system, the electrical service was out of date and in need of upgrading. My electrician replaced all of the electrical service and recommended a “Gen-Tran” (Generator Transfer) switch be installed at the main breaker panel to facilitate a generator hook-up in the event of a power failure. Even though I wasn’t ready to spend the money on a generator, with our reliance on an electric pump for our well water, I thought it was a good idea to at least have the switch installed. I figured I could always buy the generator later on.

Over the next 10 years through several brief power outages caused by snow storms I would often hear my wife say things like “remind me again why we have a Gen-Tran switch and no generator”. Once our children were no longer infants I didn’t see the great urgency to have a generator, as we never lost power for an entire 24 hour period in the last ten years.

Then came Tropical Storm Irene. While I fully expected to lose power, I never thought we’d be in the dark for so long. The storm took out our power early on Sunday afternoon. Sunday night, as my wife and I sat up reading our books by the light of a portable lantern, I could hear the gentle whirring of the generator powering the house across the street. I was jealous.

On Monday morning, I began hearing rumors of power not being restored to our area until the following weekend. I began picturing the poor people of central Massachusetts and Southern New Hampshire during the ice storm of December 2008 and I thought about my wife. My wife likes a good snowstorm as much as anybody, but when it comes to losing power, she’s good for about 2 hours. Her idea of roughing it is sleeping in a hotel that doesn’t have wi-fi. No lie, she has a coffee mug that says “I love not camping”.

I bit the bullet, called my electrician, asking him to hook us up with a new generator. By the time I arrived home from work around 6:30, the truck was in the driveway and they were hooking us up with a new industrial grade 7,500 watt generator that would have made Tim “The Tool-Man” Taylor grunt for an hour. A few minutes later, with the generator running, they threw the Gen-Tran switch and the house came to life. The kitchens and baths lit up. Lights in the bedrooms came on. The refrigerator kicked on and the water was flowing. We were back up and running!

One of the things I wanted to find out about my new generator was how long it would run on a tank of gas. The next day I topped off the gas and let it run all day. When I got home that night, it was a solid 13 hours since I had topped it off in the morning and it was still running. It ran 12 plus hours on a tank. That’s all I needed to know. I topped it off again and then made a move I would later regret.

During the ice storm of 2008, generators were hard to come by. People actually resorted to stealing generators right out of driveways while they were powering their home. With that in mind, I wanted to obscure my generator from sight from the street. On either side of our 2 car-under garage, there are stone retaining walls. I wheeled the generator into the corner of the driveway between the garage door and the retaining wall. In that spot, it could not be seen from the street. I also parked my wife’s SUV and my truck in a fashion that would make it impossible for someone to wheel the generator out of that area. With the generator secure, I went in for the night.

You can probably guess what happened next. At about 1:00 am on Wednesday morning, we awoke to a beeping sound. We kept hearing four short beeps and we couldn’t tell where from. I figured it was a smoke detector that needed batteries changed. Finally I found the source of the noise. It was a carbon monoxide detector that had been neatly stored in a dresser drawer in the guest bedroom down the hall. We purchased the detector when Nicole’s Law went into effect, after all the publicity of the dangers of carbon monoxide. I had left the detector on the top of a bureau in the guest bedroom some years ago with the good intention of permanently installing it on the ceiling in the hall. As things happen in life, I forgot about it. Later, thinking it was an extra smoke detector, my wife put it in a drawer while cleaning the room and that was the last time the detector ever saw daylight.

Thinking the detector needed new batteries, I promptly changed the batteries and left the detector out in the hallway, just in case it was actually sensing CO. About 20 minutes later, just as I was about to doze off again, the detector chirped out again. This time we knew it was for real. We quickly got up, opened the windows in the house, woke the kids and got them outside. Thinking that the CO must be coming from the generator, I moved it as far from the house as the cable would allow. Next, I called the Fire Department to ask if I need to do anything else. Of course they told us to leave the house and said they’d be right down.

The last thing I wanted to do was create a spectacle in the neighborhood at 1:30 in the morning, but it was too late now. They came. They ALL came. I believe there were about 4 fire trucks, a police cruiser, an SUV and an ambulance. Fortunately, they didn’t uses sirens, but they lit the place up like Gillette Stadium on a Monday Night Football Game.

No less than six firemen entered the house with gas masks on and carbon monoxide detectors. Meanwhile, they took all of us into the ambulance to be checked for Carbon Monoxide in our blood. Both my wife and my 5 year old son showed elevated levels of CO. When the firemen came out of the house, they said they had high readings throughout the house and a very high amount in the area outside the garage doors between the stone retaining walls. They then told me that it was a good thing we had a detector in the house, and it was a good thing we called them. Had we ignored the alarm, none of us would have made it through the night.

The fireman said that the stone retaining walls, in coordination with the garage doors, actually trapped the poisonous gas and prevented any breeze from dissipating it. With that gas trapped up against the side of the house, any breeze we did have worked to suck the gas into the house through the smallest opening under the garage door and through a window air conditioner on the next floor up.

Looking back, it’s easy to see that placing the generator so close to the home was a huge mistake. Furthermore, there was no need to run the generator through the night. The only reason to run it was for the food in the fridge. Had I thought better, I would have used my large cooler and packed all the perishables in the cooler with ice. There was no need to power the fridge and freezer 24/7, but you know what they say about hindsight.

In then end, it’s accurate to say that in the wee hours of Wednesday morning, August 31st, the lives of an entire family were saved by Nicole’s Law. I thank the Fire and EMS personnel who responded that night and I thank the family of Nicole Garofalo and Governor Mitt Romney for pushing for and enacting such an important law. I’m only sorry that Nicole’s life could not have been saved by such a simple device as a carbon monoxide detector.

If you haven’t installed carbon monoxide detectors I strongly urge you to do so.

-Christopher W.Fitts

Vice President

Fitts Insurance Agency, Inc.

Do you read your insurance policy?

Do you read your insurance policy? While we suggest to our customers that they read their policy, fact is most people don’t. When competing for a prospective new customer we answer questions and compare and contrast different policies, however it’s nearly impossible to address every detail of the policy within the short window of opportunity we have with our prospect. An insurance policy is about as entertaing a read as the back of a shampoo bottle, so it’s not surprising that very few people read them. If you’re dead set against reading the policy, we suggest that you at least review the exclusions. Elminated surprises. It’s far better to have exclusion related questions addressed now than at the time of a loss.

One state has gone so far as to legislate law requiring that an insured is charged with the knowledge of the terms of the policy upon which he/she relies on for protection. – See Atlas Roofing Mfg. Co. vs. Robinson & Julienne, Inc. (Miss. 1973) – Under Mississippi Law, the “knowledge of an insurance policy is imputed to an insured regardless of whether they read the policy” Oaks vs. Sellers (Miss 2007).

Interested in On-Line Insurance Quotes? Be carefull!

The internet is loaded with various web sites where you can request free insurance quotes. Almost any time you use a search engine to look for anything you’re likely to see an advertisement or a sponsored link from a company offering the lowest rate for car insurance, life insurance, home insurance, etc. Unfortunately filling out one of these on-line quote forms may result in nothing more than a big headache for you.

Before you start inputing all of your personal information into some website claiming to find you the lowest priced auto insurance, do some homeowork on the site itself. Find out what they do with your information. Who do they sell it to and what lists will you be added to.

These quote sites aren’t the only sites out there gathering information to sell to others. The last time you made an on-line purchase were you prompted to complete a survey to save an additional 10%? On-line surveys are another popular means of collecting private data to be sold to solicitors or other businesses trying to sell you. On-line surveys also require careful decision making before you proceed. Once again, try to find out what is done with your information. If you don’t you can expect your phone to start ringing and your inbox to fill up with spam.

If you’re genuinely interested in an insurance quote request it from an independent insurance agent like Fitts Insurance. Most agencies now have on-line quote request forms. When you submit your request through our websiteyou can rest assured that your information won’t be sold to someone else and you can expect to get a competitive quote for your insurance as well.

Looking for insurance quotes? Give us a try!

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