Does the Insurer in California Have Any Liability When It Suggests or Recommends a Contractor for the Repair Work?
One great aspect of good conferences is the high quality of the audience. At yesterday’s First Party Claims Conference West, insurance claims expert Sandra Watts was in the audience. She commented that California law places insurance companies on the hook when they suggest or recommend contractors to do repair work.
Merlin Law Group attorney Victor Jacobellis then sent me an Order where he won a case based on the statute noted by Sandra Watts.1 A California judge made the following ruling finding for Victor and our client:
Insurance claims regulations provide that where an insurer suggests or recommends to the insured that a specific contractor repair the covered loss, the insurer is obligated to cause the damaged property to be restored to no less than its condition prior to the loss and repaired in a manner which meets accepted trade standards for good and workmanlike construction at no additional cost to the claimant.’(c) No insurer shall suggest or recommend that the insured have the property repaired by a specific individual or entity unless: ¶ (1) the referral is expressly requested by the claimant; or ¶ (2) the claimant has been informed in writing of the right to select a repair individual or entity and, if the claimant accepts the suggestion or recommendation, the insurer shall cause the damaged property to be restored to no less than its condition prior to the loss and repaired in a manner which meets accepted trade standards for good and workmanlike construction at no additional cost to the claimant other than as stated in the policy or as otherwise allowed by these regulations.’ (10 CCR § 2695.9(c).)
California has many codes and regulations regarding the adjustment of insurance claims which are common sense and prevents the adjustment gamesmanship that occurs in many other states. When making my presentation, I emphasized that all property insurance adjusters must have a thorough understanding of the insurance policy provisions, the relevant state statutes, the state regulations which supplement the statutes, common law cases interpreting the statutes and regulations, and then a review of state Insurance Bulletins. Without such a thorough understanding, property insurance adjusters will inevitably make mistakes regarding the adjustment of property insurance claims.
Keeping an up-to-date understanding of all these, especially with policy forms that are constantly changing, is challenging. Insurance companies have an obligation to ensure that their adjusters are thoroughly trained to know these forms and laws. My impression is that many property insurance adjusters are not receiving the same level of supportive training mandated in the past because the training to know all the forms and laws costs money and time most insurers are trying to reduce.
To all those professional property insurance adjusters who are passionately keeping up with their training and making certain the policyholder customer is receiving the full extent of policy benefits available under the policy and as required by law, I say—Cheers! You play an important role in making the insurance product work the way it should.
Thought For The Day
I hated every minute of training, but I said, ‘Don’t quit. Suffer now and live the rest of your life as a champion.’
—Mohammad Ali
1 Parkes v. Mid-Century Ins. Co., No. SC-20160068 (Cal. – El Dorado Super. Ct. Oct. 11, 2019).
