The Old Roof, the Inflated Tarp Bill, and Appraisal
Hail damages a 20-year-old asphalt shingle roof. The policy pays actual cash value for the roof until replacement, then recoverable depreciation; it has a $5,000 deductible and a $250,000 dwelling limit. The insurer's adjuster inspects and pays $7,000: roof replacement cost value is $24,000, depreciation is $12,000, and the $5,000 deductible is applied. The public adjuster says the roof must be replaced and submits a $28,500 estimate that includes $3,500 of overhead and profit. The adjuster also submits a $1,800 emergency tarp invoice from a company owned by his cousin; the tarp was actually installed by the insured's neighbor for $300. The insurer accepts roof coverage but invokes appraisal on the amount of loss. The public adjuster demands appraisal on "coverage" for overhead and profit and threatens a bad faith claim. The mortgage company is named on the policy.
1. Explain how the ACV payment and recoverable depreciation should work on this roof claim.
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The policy pays actual cash value first. Replacement cost value is $24,000; depreciation is $12,000; ACV is $12,000. Subtracting the $5,000 deductible gives the $7,000 payment the insurer made. The withheld depreciation of $12,000 is recoverable only after the insured actually repairs or replaces the roof, within the policy's time limit, and incurs the cost. The insured does not have to replace before receiving the ACV payment, but the insurer may hold the depreciation until completion and may require receipts or a certificate of completion. If the insured uses cheaper materials or does not replace, the depreciation is not recoverable. The adjuster should verify that the $24,000 RCV is accurate for like kind and quality and that the depreciation figure is not arbitrary. The mortgage company's interest must also be protected in the payment.
2. What is the proper scope of appraisal, and can the public adjuster force appraisal of the "coverage" dispute over overhead and profit?
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Appraisal determines the amount of loss when the insurer and insured disagree on value. It does not decide coverage. Overhead and profit is part of the amount of loss if a general contractor is reasonably necessary and the estimate does not already include it; an appraisal panel can consider it if the insurer accepts that the roof is covered but disputes the amount. But if the insurer disputes whether overhead and profit is owed at all as a matter of policy interpretation, that is a coverage question for the policy language or a court, not for appraisal. The public adjuster cannot force appraisal of a pure coverage dispute. Here the insurer has accepted roof coverage, so appraisal may properly address RCV, depreciation, and O&P as valuation items. The adjuster should frame the appraisal demand around the amount of loss and reserve the coverage argument.
3. How should the adjuster handle the $1,800 tarp invoice and the mortgage company's interest?
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The $1,800 invoice cannot be submitted. The tarp was installed by the neighbor for $300, and the cousin's company did not perform the work. Submitting the inflated invoice is insurance fraud and violates the public adjuster's duty of honesty. The adjuster should withdraw it, submit the actual $300 cost with the neighbor's invoice or a signed statement, and document the correction. The adjuster also should not have a financial interest in a vendor used on the claim. As for the mortgage company, the policy's mortgage clause gives the lender a right to receive loss payment up to its interest. The insurer may issue a joint check or include the mortgagee, and the public adjuster cannot endorse the insured's check without specific written authorization. The adjuster should obtain the mortgagee's information, coordinate the payment, and avoid delaying the undisputed ACV payment.