When the Louisiana House and Senate insurance committees held a joint meeting on Dec. 16, the panel of lawmakers heard complaints relative to the handling of claims after two hurricanes made landfall within six weeks of each other causing devastation in the Lake Charles area last year. During the five and one-half hour meeting, the panel heard from their colleagues who represent the Lake Charles area and from consumer advocates; they also heard testimony from the Department of Insurance, agent association representatives and a spokesman representing insurers.

Some of the complaints track those heard over the years after other catastrophes; some are new. Nonetheless, the brunt of the criticism seemed to land on third-party adjusters, often the first insurance person to interact with a disaster victim, post disaster, when victims are displaced, frustrated and looking for swift compensation from their insurers.

Complaints centered on the turnover in adjusters, with reports of some consumers having seen as many as five adjusters without getting payment on their claims, and some adjusters’ lack of experience and unfamiliarity with Louisiana. Adjusters didn’t get all of the criticism, some fell to engineers for falsifying reports and insurance companies for stiffing their policyholders.

Another enduring complaint has to do with the fact that checks for damage to a home with a mortgage on it are made out to the mortgage company and the insured, and sometimes the mortgage company is reluctant to endorse the check to the insured to pay for damages.

In addition, there were reports of confusion among disaster victims relative to actual cash value versus replacement cost in valuing damage, the hurricane deductible and supplemental claims.

Complaints about companies using technology to handle claims instead of person-to-person visits are relatively new with Hurricane Laura.

As it happens, one of the complainants at the meeting provoked the ire of an agent and an adjuster, both representatives who sit on the House Committee on Insurance. The complainant had indicated agents aren’t friends of their clients and sometimes collude with adjusters.

Along with the complaints, the lawmakers heard some constructive criticism, and several folks who gave testimony offered suggestions for legislators to consider when proposing legislation for the 2021 session.

Lake Charles Republican, Sen. Mark Abraham, led off the meeting with three observations about difficulties facing storm victims. First, there is a “disconnect” when an adjuster says it will cost $50,000 to repair the damage and the contractor puts the number at $90,000. Abraham also told the panel that most hurricane victims do not understand depreciation, leading to confusion, and third, that adjusters are changed on a regular basis, with storm victims going through several adjusters, some of whom are inexperienced.

Abraham is interested in finding a way to make the process more efficient. “We know that some people have their life savings in their home” and “are not going to get it back,” Abraham said.

LDI can’t force a carrier to write a policy

Warren Byrd, deputy commissioner, Office of Property and Casualty, told the panel that the Department of Insurance issues emergency rules in a catastrophe in accordance with the Administrative Procedures Act. He explained that the LDI issued Emergency Rule 45 after Hurricane Laura and five times in earlier catastrophes. The rule extends the proof of loss period and freezes carriers’ ability to cancel policies.

“We can’t force a carrier to write a policy,” Byrd said, but we can order them not to non-renew policies.

Emergency Rule 45 suspends any notice of cancellation, notice of nonrenewal and nonreinstatement. The rule applies to the standard and surplus lines markets. Insurers may issue a notice of cancellation for non-payment of premium during the pendency of the rule, but in no event may the insurer cancel the insurance policy until the expiration of the rule.

Byrd explained how the single hurricane deductible per season/year works and that claimants are initially paid actual cash value (replacement cost minus depreciation) for their losses. Once the repairs are made, the claimant “will get the depreciation back.” He said that most policies have a 14-day limit on additional living expenses. Most of your constituents have a mortgage, he told the panel, so insurance companies will issue a check made out to the storm victim and the mortgage company.

Jeffrey Zewe, deputy commissioner, Office of Consumer Services, handles consumer complaints and market conduct. Zewe told the panel that his office had recovered $6.3 million for consumers, and that there have been 700 consumer complaints stemming from hurricanes, 600 of which were related to Hurricane Laura. He said that 450 complaints have been closed and that 450 non-disaster complaints are pending.

Zewe explained that State Farm is the company with the largest number of complaints, which could be expected because the number of complaints is expected to be commensurate with a company’s market share. The company with the largest number of complaints per market share is American Reliable, which has one complaint. The statistics for small companies are “out of whack,” he said.

Relative to depreciation being withheld from the initial payment to the consumer, Zewe said, “This is a first party contract.” The insured “has a right to cash the check and still file a supplemental claim.”

Sen. Joseph Bouie Jr., D-New Orleans, wanted to know what leverage the department has to make the insurance company write a check.

Zewe responded that LDI can’t order the company to pay. If the department thinks the company is wrong, LDI can fine the company, order a cease and desist or “exert pressure in the alternative.”

“In the short term, we make a determination if the claim is valid,” Commissioner of Insurance Jim Donelon said. Companies don’t want an adverse finding because that gets reported to a national database. LDI can document and fine companies. Ultimately regulators are not judges and not courts, but LDI has oversight.

Rep. Chad Brown, D-Plaquemine, who chairs the House Insurance Committee and is a former deputy commissioner, wanted to know whether or not the LDI’s Office of Consumer Services has access to the estimating tools the industry uses. Zewe responded that his office does not have access to the estimating tools that insurers use on a daily basis.

Donelon indicated that LDI does not approve those tools. He believes there are factors in the estimating tools for demand surge in the aftermath of an event because the cost of labor and supplies is higher.

According to Donelon, there were 125,000 claims from Laura and 65,000 from Delta. He pointed out that 700 complaints is a small part of that total.

Brown believes some of the problems stem from the industry not staffed to handle multiple catastrophes back to back. Nonetheless, he wants to “look into how surge costs go into estimates.”

Donelon explained that the damage from the 2020 hurricanes is “very different from Katrina as the Katrina damage was from six to 12 feet of water, and this is from a 150 mph wind.”

Turning to his authority to issue emergency rules, Donelon said the governor delegates his authority to issue emergency rules. Donelon plans to have a bill this session to codify that the governor can delegate authority to the commissioner.

Brown proposed a bill during an emergency session last year, but all the industry complained, according to Donelon, and the bill ended up getting one vote, Brown’s.

“Given our grave concerns, how much would your having the authority remedy all of this?” asked Rep. Kathy Edmonston, R-Gonzales.

“Not a bit,” Donelon responded. “All it does is remove the threat.” He explained that hospitals and health insurers challenged his authority previously, but that hasn’t been a problem with the recent emergency rules.

On the topic of public adjusters, Donelon said that Louisiana is the only state in the union that does not allow public adjusters to have contingency contracts.

Donelon also mentioned that some companies have in their contracts a prohibition on assignment of benefits. He said there are companies in Florida made up of public adjusters, contractors and lawyers who knock on doors after any event and ask consumers to “sign up and give us your roof damage claims.”

Donelon explained that Louisiana does not have a law requiring companies to have adjusters in Louisiana, except in the workers’ compensation line of insurance. However, adjusters are licensed after taking a course and passing a test, and then continuing education is required.

In catastrophes, Donelon said, the department authorizes companies to bring in adjusters who are not licensed in Louisiana, but they are required to make an informational filling with the LDI.

He believes their not being licensed is not the problem. “In terms of their bank of knowledge, (being licensed) is not a distinguishing characteristic,” Donelon said.

Even though in some cases insurance carriers rely on technology to handle claims, Rep. Phillip Eric Tarver, R-Lake Charles, said he wants someone to come out and look at his damage.

Abraham inquired about bad faith laws which provide for penalties when a homeowner files a satisfactory proof of loss and the insurer fails to initiate the claims process in the time required by the Insurance Code.

Donelon told Abraham that a 50 percent penalty is possible, but the claimant “has to go to litigation to get that.”

Sen. Louis Bernard, R-Natchitoches, believes there is a responsibility on all sides to be fair. He asked Donelon how often the claims handling process is litigated through attorneys.

Donelon estimated that claims are resolved without litigation 95 percent of the time.

Asked what the first step a policyholder should take, Donelon said without hesitation, “Call their agent,” or if they bought coverage from a direct writer, call the 800 number. Also, policyholders can file complaints with LDI. “Their agent is valuable, and they (agents) know we investigate complaints.”

Donelon sees getting contractors to do the work as a bigger problem than adjusters after catastrophes.

Some people may say we are in the same place as with Katrina, a member of the panel observed, and then asked Donelon if insureds were better or worse off than those who suffered losses in previous storms.

“Night and day better,” Donelon replied. For one thing this will be 250,000 claims. There were one million claims 15 years ago. Since then the state has implemented building codes and now licenses adjusters and requires training. LDI issues emergency rules and has “learned what works, what doesn’t and what doesn’t chase the market away from our state.”

Rep. John R. Illg, R-River Ridge, said he has a complaint from someone who’s on their fifth adjuster. Some adjusters, he said, are paid a day rate, while others’ pay is incentive based. Illg wanted to know if the legislature could “put something in place” to make the pay for all adjusters incentive based.

“You certainly can pass a law,” Donelon said, but “one unintended consequence is that companies may decide to leave.”

Call your agent if you have a problem

Rep. Mike Huval, R-Breaux Bridge, who is an independent agent and member of the House Insurance Committee, and Jeff Albright, chief executive officer of the Independent Insurance Agents and Brokers of Louisiana, brought the agents’ perspective to the table.

Having been in the insurance business for 42 years, Huval observed that “basically we are facing the same issues we faced in 1992” after Hurricane Andrew. “Some things have changed, and some stayed the same.”

He pointed out one thing that is different: the two percent to five percent hurricane deductible was “not in play then.” Huval explained that back then there was the General Adjustment Bureau (GAB), and “independents would hire them….We had a professional company with hands-on adjusters.”

Huval agreed with Donelon that insureds should call their agent. As an agent, “I took money from a customer and felt I owed them help.”

Albright focused his remarks on the issues identified by Abraham.

The policyholder does not understand the ACV settlement, and that they will get paid some and more when the repairs are made. Nor do they understand the hurricane deductible. “That is a problem we have to wrestle with whether it is a storm claim or not,” he said.

In Albright’s view, the biggest problem is the adjuster issue, specifically the turnover of adjusters. He explained that insurance companies try to control cost and “cannot have a bunch of adjusters waiting around for a hurricane to come along.” So, companies outsource the catastrophe adjusting to independent third-party adjusters. Those third-party adjusters want as much work as they can get, so they sign contracts with as many companies as they can and commit to more adjusting than they have the capacity to do. When a storm hits, they generate new adjusters, who get licensed, but don’t have the experience to deal with the complicated claims in southwest Louisiana.

“There is a churn of adjusters for a variety of reasons,” Albright said. “First, you are asking people to come from far away and camp out in a hotel.” A number of those adjusters wash out.

As new adjusters come in, claims are assigned from one adjuster to another in an attempt to spread the work load, “so you don’t have an adjuster with 200 claims, you have two adjusters with 100 claims.” One of the reasons for the churn is that “insurance companies are trying to manage an overwhelming process with a whole bunch of new people who are not a normal part of their system.”

As Albright explained, the difference in the valuation in claims comes about because of the “inherent conflict between the insurance company, which wants to pay the least amount that they can legitimately pay and the providers of lumber and building materials and contractors doing the work.” There is a surge in pricing. He described the situation as a “wrestling match that is a natural conflict between people who want to maximize the profitability of their endeavors and the insurance company trying to minimize expenses.”

Albright told the panel that he is hearing from agents that most of the claims are being settled “fairly reasonably.” There are “people who are hurting really bad that have a problem with adjusters. As agents we try to bridge that gap.”

In response to a question from Abraham, Albright said that some insurance companies have agreements with contractors. “The problem is after a storm those contractors cannot handle all the claims that an insurance company is going to have. When you have a fire claim, the system works. When you have tens of thousands of claims, the system falls apart.”

Rep. Michael “Gabe” Firment, R-Pollock, an insurance consultant, believes the preferred vendor program is part of the problem. “During normal times, he said, the company uses preferred vendors, so the availability of professional adjusters shrinks when there is no storm.”

The other problem Firment pointed out is that contractors don’t know anything about coverage. Contractors can’t make decisions about whether or not the loss is caused by wind driven rain.

Where the estimate of the cost to repair the damage is concerned, Firment said, the problem is not database/unit pricing. “We are not arguing over the square footage price to paint….The problem is not inadequate pricing; (it is that) there is a difference in scope. The adjuster is not seeing all the damage that the contractor sees.”

Firment said that lack of standardization relative to ACV/RCV is an issue. Different companies have different standards, he said. “We need standardization when it comes to things like depreciating labor in addition to materials. Are we depreciating overhead, profit and sales tax? Doing so makes a big difference on a big claim,” Firment explained.

“Some companies have a rule that after three trades, we apply overhead and profit, and for other companies it doesn’t matter how severe (the loss) is, you have to fight to get overhead and profit. Standardization when it comes to estimating would be helpful,” he said.

Firment said he is hearing complaints about slow pay, and he wonders if the financial incentive is significant enough for the return on investment to intentionally slow payment down.

Albright said he would be surprised if that were the case. His experience is that it takes a long time to come to an agreement as to what the payment is supposed to be. Once they come to an agreement, there are bad faith penalties if they don’t pay within the time frame mandated by statute.

Tarver wanted to know what an agent’s fiduciary responsibility is.

Albright told him, if “I have binding authority and contractual power with a company, I am a legal agent of that insurance company, and my first obligation is to that insurance company.” On the other hand, “The company pays my commission, but if the customer is not my customer, I don’t get any commission.” He said that agents are “very aggressive advocates on behalf of their customers.”

In response to another question from Tarver, Albright explained that there is “no distinction in the coverages based on the magnitude of the storm….It doesn’t matter whether it is a small hurricane, a big hurricane, minimum winds or maximum winds, you are buying the coverage pre-loss, and the policies don’t change coverage based on the magnitude of the loss or speed of the wind.”

In response to a request for agents to participate in discussions to help streamline the process, Albright said that independent agents are “ready, willing and able at any time to sit down” with legislators and the department to work on solutions.

Policyholders get stiffed

Douglas Quinn, executive director of the non-profit American Policyholders Association, was joined at the table by APA board advisor T.J. Ware, an adjuster.

Quinn told the insurance committee members that he went through what others are going through now. His home was “wiped out” in Hurricane Sandy in 2012, and his insurance company paid him 37 cents on the dollar. The insurance carrier brought in a Louisiana-based engineering firm “to create a fraudulent report to say that damage was pre-existing and denied a majority” of the claim.

In the process of fighting that, it became clear to him that the same thing was happening to others. “It was a common theme,” he said. During the struggle, “we were actually able to have the New York Attorney General raid an engineering firm that was forging reports and walk one of their executives out in handcuffs.” The ultimate result of the criminal prosecution is that “144,000 claims were reopened and around $380 million was paid out to consumers who had been cheated.”

Quinn said he is not anti-insurance. “Insurance is a very, very important financial tool. It is a way that the average American can handle a catastrophic loss without being wiped out.”

In his view, “this isn’t really an agent problem. The agents are the guys in your neighborhood who coach Little League and have to look you in the eye at the grocery store. They want to do the right thing for their customers, but there is a disconnect between people who sit at the table with you and make promises about what insurance will do and the claims department and some of the third-parties that they hire.”

Quinn believes the problem is that the claims process is an adverse scenario. There are two parties. One party owes the other party money, and the first party is going to figure out how much is owed and that party has all of the power.

In his estimation, the party without the power is traumatized. They have lost their homes and all of their possessions. They are living somewhere else, as he did after Sandy, “couch surfing from friend to friend….Even smart, educated people are not functioning at full capacity.”

It is APA’s position that “too many consumers do not get a fair shake. We call it the storm after the storm.”


His personal experience is that the storm was the easy part. Fighting the insurer, not so much. It took him seven years to get home. Hurricane Sandy occurred in October 2012, and he moved home August 2019. “And I am not unique,” he said.

Quinn acknowledges that some consumers commit fraud. There are studies, he said, that say one out of four consumers is okay with padding insurance claims. “Someone who wouldn’t return a library book late has no problem letting the mechanic do a little extra work on the car because the insurance company is paying the bill.”

Unlike Albright, Quinn sees companies intentionally stretching out the claims process. “Stretching out 100,000 claims does impact companies’ bottom lines,” Quinn said. He calls it the delay, deny, defend process.

He complained about the lack of quality control when a company that usually has 10 adjusters in Lake Charles on any given day, now has to find 500 to handle cat losses. He sees insurers hiring engineers more often and earlier in cases “to speak to causation.” Quinn said he has seen the engineer on the ground write a report, submit it to his firm, and an engineer who has never seen the house will review that report and make changes.

To avoid being the object of fraud, Quinn recommends consumers videotape inspections because he has seen a lot of difference between what the engineer says in  observations and the conclusion that says there is no damage.

He has heard that it is customary in Louisiana for insurance companies to provide their insureds with copies of their insurance policies after a loss and show them the loss reports; whereas, after Sandy, his carrier would not let him see the engineer’s report alleging that it was proprietary information. Carriers are being less forthcoming with copies of reports. In California, it is mandatory that carriers show the consumer their case file and engineers’ reports, which he believes would be a good idea for Louisiana legislators to consider.

Another issue is virtual inspections. Quinn said that one very large carrier is pushing virtual inspections and having the homeowner do the inspection. He believes that is a problem because there are many things wrong that are not visible to the naked eye. He believes that is a use of technology that is abusive.

He contends there is a law firm in Louisiana that is interviewing storm victims under oath and asking them to produce five years of phone records and five years of banking records. If consumers, who have lost all of their files, fail to do so, consumers are told they are being uncooperative and the claim is going to be denied.

A common thing he has seen in Florida, but not yet in Louisiana, is insurance adjusters recommending repairs that are not building code compliant. If they balk, the adjuster will say, “No one enforces that anyway.”

Catastrophe victims who may have a house worth $80,000 and have $10,000 worth of damage, which is “the world to those people,” cannot find representation. “It is not worth it for a public adjuster or attorney to pick up their case.” It doesn’t just happen to poor people, Quinn said, “I have also been in California and seen people with million dollar homes who have that same shocked look on their faces.”

Another problem: There is no deadline in Louisiana for an appraisal. A carrier can “put a case into appraisal” and stretch out the claim indefinitely, Quinn said.

He believes there should be “balanced prosecution.” For instance, there are signs all over Lake Charles telling people if they see contractor fraud, call this number. “I don’t see anything about what to do if you see insurance company fraud.” He recommends letting people know who they can call.

Quinn would like to see control exerted over insurance company vendors and tracking. “Those 200 adjusters that got fired, did they become librarians or just go to work for another insurance company as an adjuster? When they come back (to adjust claims) will they be wearing a blue shirt instead of a red shirt?

“The people who have committed fraud and behaved unethically are in violation of ethics codes and their professional license and have lost the right to have a family’s financial well-being in their hands. They need to be removed from the market.”

Two of the players from Louisiana that were caught up in the scandal from Sandy, a law firm and an engineering firm, are still in business, still taking cases in Lake Charles right now, Quinn said. “That’s what I call a moral hazard. We have not removed the bad actors from the marketplace.”

“I am an adjuster and have been in Lake Charles since Laura,” said Ware, who is an adjuster. “It is the most devastating thing I have been in since I was in Iraq.”

In response to a question from Rep. Mary DuBuisson, R-Slidell, Quinn said there should be an incentive or it should be mandatory to turn cases over for prosecution when fraud is found in civil lawsuits. Generally what happens is as soon as fraud is found in a civil lawsuit, the case is settled, and all agree to nondisclosure; whereas, in divorce court, if someone is hiding money or committing fraud, it is mandatory for the judge to turn that over for prosecution.

It’s a contractual relationship

Kevin Cunningham, representing the American Property Casualty Insurance Association (APCIA) pushed back on the statement that there is an adversarial relationship between insurance companies and their policyholders and said that it is a contractual relationship and that the contract is enforceable in every state.

Since insurers write the contract, Cunningham said, if there are any ambiguities, the contract is always interpreted against insurance companies. One reason the contract is so large is that if anything is not clearly stated in the contract, “it’s going to come back on us.”

As bad as it is for individuals when they have friction with their insurers, the entirety of the situation needs to be put in perspective, Cunningham said. “We have had about 190,000 insurance claims filed as a result of these hurricanes. As the department mentioned, they have had 700 complaints filed, 450 of which already have been addressed. The 700 represents less than one-half of one percent of the claims that are out there. I am not trying to make light of the fact that when you have a problem it is 100 percent your problem, but as it relates to the industry practices, I would argue that an overwhelming majority of claims have been handled or are in the process of being handled to the satisfaction of the individual.”

Cunningham also argued that the 700 complaints are probably the result of the fact that the process is slow. “It is not a result of the process, especially when you consider all of these claims were filed in a short period of time.”

According to Cunningham, there will always be a lag between what an adjuster values and what the contractor charges, because the cost of materials continues to go up and the scarcity of labor continues to be there. The ability of contractors to get to the damaged property is problematic, he said, and all of that is overlaid with a number of other issues, such as problems with communication when people can’t get to the internet and cellular service is down.

“This is not the norm,” Cunningham said. “This is not how insurance is meant to operate, with a massive amount of claims all at once. It is a dynamic situation.”

He is skeptical that insurers are not paying. “Insurers recognize that they don’t attract premium dollars if they are considered to be bad insurers. I don’t think there is a particular interest by insurers to not do right by the contract they signed with their consumer. It does not make sense from a business perspective to do that. They (insurance companies) agree to be held to the obligations they signed in the insurance contract.”

Cunningham pointed out that the regulatory scheme provides a number of penalties and a number of other regulatory actions that can be taken against insurers if they don’t operate in accordance with the terms of the contract. “Those are significant,” he said.

In Bulletin 2020-7, Commissioner of Insurance Jim Donelon recently reminded insurers that there is a significant bad faith exposure if companies do not pay claims timely, Cunningham pointed out. “Insurers take that very seriously. Any insurer who has to pay a bad faith claim understands very quickly how much it will cost.” It is the damages, plus 50 percent, plus another 100 percent in certain circumstances, as well as attorney’s fees.

“There are a number of hammers out there that will insure that insurers operate within the contract they have signed,” Cunningham said.

Regarding adjusters, Cunningham said that Albright and Huval hit the nail on the head. “There is a massive number of people who have to come to adjust claims. Some are great, and some aren’t so great. It is a constant flow of trying to get the right adjuster in to make sure we get to the claimant in a timely manner and that the claim is adjusted fairly. If we don’t, we have problems with the department, and no reputable insurer wants to have problems with the department” because it “affects them, not just in this state, but in every other state where they operate.”

Relative to complaints about technology used in adjusting claims, Cunningham said, “Insurers are always trying to balance the cost, which is a cost borne by policyholders. So if there is a better, cheaper way to adjust a claim and do it fairly, they (insurers) are going to try to find it. Drones sometimes help, and sometimes they don’t. Technology with the phone sometimes helps, and sometimes it doesn’t.”

According to Cunningham, insurers are trying to lower the cost of claims and the cost to adjust those claims. “I would hope you do not find fault with cost savings,” which at the end of the day could inure to the benefit of policyholders. Some things may work and/or may not, but insurers are continually trying to improve that process, he said.

Tarver was unwilling to accept that communication is difficult because of technology being down as a result of the storm. He believes there is motivation for companies not to pay what he thinks he should get.

Cunningham does not believe companies are not paying claims as a delay tactic, but that companies do not want to pay what they do not contractually owe.

“I just want you to live up to your obligation to come and see me and see what I am living in,” Tarver said.

With the situation existing in which contractors and materials are scarce, Rep. Lawrence “Larry” Frieman, R-Abita Springs, wanted to know how insurance companies deal with putting together estimates and deciding what they will pay for damages.

The friction most people are feeling, Cunningham surmised, is trying to catch up with what the cost is. “The supplemental process is usually how they catch up,” he said.

Sen. Michael “Big Mike” Fesi, R-Houma, who has been in construction for almost 40 years, talked about a job his company had bid in the Lake Charles area prior to the hurricanes. “On an $800,000 job, I ended up spending $150,000 on per diems, because there was no place to stay. We are talking about extra cost….We had to build bathrooms. We had to build living quarters.” The extra cost was necessary to get the job done on time. “Drive times are higher because people have to stay 40 miles away. All the costs add up,” Fesi said.

There’s no clear answer

“There is no clear cut answer for some things, especially the pricing after the storm,” said Lou Fey, whose background is in claims. A past president of the Professional Insurance Agents of Louisiana, Fey represented the association at the table.

The estimating program requires updating periodically, Fey told the panel. Requiring updates “may be something you want to look at legislatively,” he said.

By and large Fey believes carriers are trying to do the right thing. “There are bad actors out there,” he said, specifically mentioning adjusters and contractors. There also are “some insureds that want more than they are entitled to under the policy.” Insurance companies want proof that the claimant actually replaced the roof and what the repair cost was before they will make up the cost differential because “people are not required to take the money they are paid on a claim and fix their house.”

Fey believes that most adjusters are being very liberal so “they can get the claim paid and move on to the next one. Nonetheless, some adjusters are tight,” he said. According to Fey, there is a spectrum from the adjuster who gives away money to the one that “nickels and dimes” the claim.

“What we had this year is a generational event; 12 hurricanes hit the U.S., and five hit Louisiana,” Fey said. “Adjusters are spread so thin.”

Regarding the late payment situation, Fey said that once the adjuster submits the estimate, “the clock starts ticking,” and the company has to pay the undisputed amount. “So there is some amount that is owed at that point. Even if there is a dispute, companies should be cutting checks.” If there is a dispute after the check is cut, the policyholder has two years to file a lawsuit on a property claim.

Fey is a fan of the appraisal process and explained that the policy outlines the appraisal process. Either party may make a demand for an appraisal, he said. Each party hires an appraiser. If the two appraisers cannot agree, they hire a neutral umpire. If they cannot agree on an umpire, they go to court, and the court will assign an umpire. An agreement by any two of the three is binding. His experience is that the umpires are usually “pretty liberal, and they usually favor the insureds.”

He recommends the appraisal process. “They will have to pay the appraiser, which isn’t cheap, but it is a lot cheaper than giving 10 percent of your claim to the public adjuster or paying a third of your recovery to an attorney.”

Regarding roofs, Fey said a lot of the problem is that people want a whole new roof when only one or two slopes are damaged and need to be replaced.

“If you want to look at legislation,” he told the panel, “you may want to look at what constitutes a damaged slope that has to be replaced.” Do companies have to replace the whole roof or just that slope if it doesn’t match?

According to Fey, most of the problems enumerated by the American Policyholders Association are covered by Louisiana’s bad faith statutes.

Concerning the amount of time a policyholder has to file a supplemental claim, Fey said, “You have to check the policy.” The HO-3 policy does say policyholders have to inform the company of their intent to file a supplemental claim, but all they need to do is write a letter.

Legislate the process

Erin Davison, executive director of Big Brothers Big Sisters of Southwest Louisiana, puts most of the blame on third-party adjusters for the working poor families that she serves who have received no money for the damage to their homes nearly four months after Hurricane Laura.

There are people in north Lake Charles “who are living in tents who have insurance on their dwellings. We are already in the penalty phase for families who have not seen a dime,” Davison said. Some of the families she works with are already on their fourth adjuster, she said.

The problem is the third-party claims adjusters she said. “We did not have this problem after Hurricane Rita. The adjuster I worked with in Hurricane Rita when I had $30,000 damage to my house was an employee of the insurance company. Now they all are third-party claims adjusters. My desk adjuster is in Atlanta. My field adjuster is in Houston. …Half of the time (the adjusters) don’t even know where we are on the map.”

Davison said she heard a “clear message today” that policyholders should call their carrier, their adjuster and the insurance department, and if all else fails litigate.

Her suggestion for the legislators is to send a “mass text” to “every cell phone number” giving the contact number for the insurance commissioner’s office, presumably so hurricane victims can complain.

In addition, she advocates for “process legislation to help (people) navigate when the next storm comes.”

Your agent is(not) your friend

Bruce Copeland, who works for the Cantrell Law Group in New Orleans, told the panel that the agent is not a family friend. “When a disaster happens, what I have ran (sic) into mostly; the adjuster (says), ‘Hey Buddy, look I am offering 10 grand. Can you get your friend to accept it?’ That is what happens. The adjuster is calling your agent, knowing that you are that family friend for 20 years, to get you to take that money, saying he is offering you a great deal. No. No. He is not. He is getting him to accept whatever it is you are offering.”

After Copeland talked to the lawmakers about problems with the preferred vendor system, the issue with engineers and their reports, recoverable depreciation versus useful life, agents selling too much contents coverage, damage omitted from the adjuster’s estimate, the field adjuster versus the desk adjuster, Copeland was asked by Huval to repeat what he had said about the agent-adjuster relationship.

Copeland replied, “The agent is usually a family friend. That is the person that usually is the first line of defense, so usually what happens in my experience is the adjuster will call the agent when he is battling with the homeowner, and they can’t agree on a number….Usually I have been in the middle of scenarios where that agent has actually called my client and said ‘the adjuster is offering you a great number. If you will just accept that number, we can close this thing and move on.’ But the contractor’s bid is 20, 30, 40, 50 thousand more than what the adjuster offered, and my concern when agents put themselves in the middle. That is not what they do. They are sales people selling policies. They don’t have a background in construction….They don’t have a background in refinishing furniture. They don’t have a background in calculating mileage and useful life.

“So just stay out of it, because when there is a disaster this large people lose, and everybody loses, and I think agents would do themselves a service by staying out of the middle,” Copeland said.

Huval wanted to know if Copeland was saying that an agent does not represent his customers.

Copeland countered that in his experience agents represent their families. “They have checks coming every two weeks, or every month. They gotta eat. That is how they get commissions from the carrier. They are representing their family. Am I correct, or am I not?”

Huval was skeptical. “I don’t believe that is what you said in the beginning,” he said.

Firment told Copeland that he (Firment) thought Copeland had made some good points, especially about depreciation. “I think that is a problem.”

Firment offered that he does not believe companies are giving “these guys” (adjusters who take a three-week course to get licensed) authority to make coverage decisions. “I can tell you this, after 22 years, every single claim I handle, the last thing I tell the insured after I go over scope, after I mention potential coverage issues, is I am an independent appraiser. I have no authority. The carrier is going to make all the decisions about what’s covered and what is not, and ultimately, they are going to make the payment decisions. I just find it hard to believe that carriers, no matter how experienced they (adjusters) are, give them the authority to make coverage decisions.”

Copeland responded that he does not know “if they are giving it to them.”

Firment told Copeland that he (Copeland) did “mention that adjusters and agents collude to set pricing (on a claim). That is more or less what you said.”

Copeland responded, “No.”

Firment said that he never personally contacted an agent to help set the price on a claim, or to argue on his own behalf with one of their clients. “I don’t know any adjuster that has ever done that. If I call an agent, it is for a phone number or as a courtesy to tell them I am having a problem here.”

Huval said he has “gone many times to the field with an adjuster, and I have never done it to reduce a claim or deny a claim, and I have been doing it 42 years. We are not here for let’s make a deal. I can assure you of that.”