I may have been in the insurance industry for 40 years, but…when it comes to Florida’s mediation statute, I’ve been a lay person. I had no idea how useful and easy (and free) state sponsored mediation could be. That’s until December 2010 when, late one holiday evening, our cozy fireplace popped a small flaming ember onto the rug immediately in front of the hearth.
In the seconds it took to find the TV remote and pause our movie, locate the appropriate fireside tool and flick the menacing cinder back from whence it came, a silver-dollar sized hole was seared into our high-end, deep pile carpet.
Anticipating our annual Christmas party my wife and I covered the scorch with a small foot stool. Later, I would patch it, hide it or, maybe, just ignore it.
My wife did not agree. Despite its small size, she was not content with a black spot in the middle of our main living space.
And so this instructive story begins.
I called my insurance agent and soon my insurance company dispatched a local claim representative accompanied by a local carpet expert to examine the damage. The carrier’s expert said…”It’s for sure this carpet can’t be patched. It’ll never match. You’ll have to replace the whole thing.”
My wife was giddy.
Small samples of the carpet cut from the back of our coat closet were sent to a laboratory in Indiana which confirmed the price per square foot. Unfortunately the insurer was only going to pay for the carpet in the room where the damage occurred and not in the two adjoining rooms.
I received a check for $2,200 ($3,200 minus a deductible of $1,000). It was a precise and accurate computation based on the value of the carpet and the square footage in the room where the damage occurred.
That did not satisfy my wife, an interior decorator who was no longer giddy.
So we got two estimates on our own that included carpet replacement in the two adjoining rooms. Both estimates exceeded $7,000. The lowest was $7200. I told the adjuster I needed $7,200 otherwise I would have two different colored carpets and an angry wife. I explained it’s an open concept with a great room and two adjoining rooms that flow into it, all of which can be seen from the front door. I said, the value of the home will suffer if the carpet doesn’t match.
At this point I should say that I had been very careful not to let the company know who I was. I didn’t want preferential treatment. I just wanted what I had paid for and what the contract said I was entitled to.
The adjuster said, “Sir, we have a line-of-sight rule”. I said, “Show me where it says that in the policy.” He said. “Sir, we don’t cover cosmetic damage”. I said, “Show me where it says that in the policy.”
Finally, I referenced Florida’s “Pair and Sets” statute with language that’s been used to require replacement of undamaged carpet in adjoining rooms. (See NOTE #1 below)
Also helpful was that, along with all the other policyholders of this carrier, I received an unrelated notice that when/if my policy renews it would be amended to limit coverage for “cosmetic damages” to $10,000.
I called the adjuster. Obviously cosmetic damages were covered, I explained, “why would you ever apply a limit to something if it isn’t even covered?” He was getting irritated.
Finally, totally frustrated, he told me that if I wanted any more money, I would have to seek state sponsored mediation, which I immediately did with just a phone call to the toll-free number provided in the envelope that transmitted the $2,200 claim check, which I never cashed. (See Note #2 below)
It’s been eight years since this happened but, my recollection is that the day before mediation the carrier’s attorney called and offered a higher settlement. “In grey area’s such as this” she said, “we see no need for the expense and hassle of mediation if we can reach an acceptable payment number with you.”
Ultimately, they agreed to give me $6,000 minus the $1,000 deductible for a total of $5000. If I had hired a public adjuster, it would’ve cost me up to 20% of $6200 ($7,200 minus $1000 deductible) a maximum yield of only $4800 minus the PA’s 20%. So I saved $200 by making one phone call.
While this case might be too small for most attorneys, it would have been better to hire one rather than a public adjuster as attorney fees are usually paid by the insurer.
Here’s the ironic conclusion.
I was lazy, and though I intended to, I didn’t replace the carpet. We just covered it with a small area rug and pledged to fix it someday. Someday never came, but…one day a carpet repair man came to the house and I showed him the scorch in the living room and explained how an expert from the insurance company said it couldn’t be repaired.
He exclaimed, “I can fix it and no one will ever know it’s there! I do it all the time.”
“How much?” I asked incredulously. “I wouldn’t charge anything for a job that easy”, he said. Then, he went to the closet, cut a small piece of carpet from the back corner, patched it over the scorch and within ten minutes… Voila’ (pronounced; wah-lah), it was repaired.
Eight years later, I still have the same carpet and neither me nor my wife, “eagle-eye”, can even find the patch job.
I did not send the $5,000 back to the insurance company. (see Note #3 below).
And, that’s my mediation story!
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NOTE #1: fs 626.9744 states that when a loss requires replacement of items and the replaced items do not match in quality, color, or size, the insurer shall make reasonable repairs or replacement of items in adjoining areas. So, for example, this could require replacement of a peppershaker when only the saltshaker was destroyed in a fire. It can also be abused by some vendors such as repainting an entire room, even though there was no need and when only one wall was discolored by a water leak. In a windstorm or hail example, it can require an insurer to replace an entire roof when it is only partly damaged and comparable roof tiles are not available. In some situations this has resulted in a full roof replacement when fake hail damage was created on only a small portion of the roof. See Fs. 626.9744 here.
The possible applications of this statute are infinite but the limitations are few. A federal trial court order in Ocean View Towers Ass’n, Inc. v. QBE Ins. Corp., 11-60447-CIV, 2011 WL 6754063, *9 (S.D. Fla. Dec. 22, 2011), ruled the statute only applies to Florida homeowners’ property insurance policies, not commercial policies. Additionally, the statute also states that an insurer must only make “reasonable” repairs on undamaged property.
NOTE #2: Insurance companies must both pay the costs for mediation and inform every claimant of the option via a brochure written and approved by the Office of Insurance Regulation. See fs 627.7015.
NOTE #3: Some may think that I should’ve sent the money back to the insurance company and that not doing so is dishonest. Hello! This was a fortuitous event for sure, but…it was not fraudulent or even dishonest, not even close. If I’d sent the money back it probably would not have been accepted and by the time the carpet was patched I was already with another insurer. Besides, it was the insurer’s expert that declared the scorch to be unrepairable and I thought that was the final word. All I did was dispute the amount of the payment and ultimately the insurer agreed with me and didn’t require the carpet to be replaced, which it could’ve done. I have just recently used the money as a down payment for a wood floor and a screen on the fireplace.
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