Everything Building Envelope Episode 67 - Chip Merlin

Dealing With Your Insurance Company After a Loss

(Released on May 26)
n this episode, Paul Beers, CEO and Managing Member for GCI Consultants, talks with Chip Merlin, Founder and President of Merlin Law Group, about teh representation and advocacy of insurance policyholders who are in disputes

About The Everything Building Envelope Podcast: Everything Building Envelope℠ is a dedicated podcast and video forum for understanding the building envelope. Our podcast series discusses current trends and issues that contractors, developers and building owners have to deal with related to pre and post construction. Our series touches on various topics related to water infiltration, litigation and construction methods related to the building envelope.


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Paul: Welcome, everyone, to our “Everything Building Envelope” podcast. This is Paul Beers, CEO and managing member for GCI Consultants, and I’ll be your host today. I’m really excited to have as our guest, Chip Merlin, the founder and president of Merlin Law Group. Welcome, Chip.

Chip: Hey, Paul, it’s great to be here with you.

Paul: Yeah, we’ve got an interesting topic today, which is all about representation and advocacy of insurance policyholders in disputes with their insurance companies. So before we start, let’s have one little bit of GCI business I want to tell everybody about. It’ll probably be a surprise to everybody that we’re looking to hire new employees, and the position that we have open that we would love to have applicants for is a senior expert consultant who works with our clients to analyze claims related to building envelope and fenestration systems, including identification and assessment of storm damage or construction defects.

So it’s an opportunity to join our firm, GCI Consultants. We’ve been in business for over 35 years. We’re an establishing and growing entrepreneurial organization. The key senior position reporting directly to senior leadership, and it gives the right applicant an opportunity to deliver significant value for GCI’s clients and have a direct impact on the continued growth and expansion of the company. So anybody out there has an interest, please reach out, and we’d love to hear from you. So with that being said, Chip, let’s get into it. This weekend I read your book. You were kind enough to give it to me when I saw you last month. And I really appreciate that. And I have to tell you I really enjoyed it.

Chip: Hey, I appreciate it. I hope it didn’t put you to sleep too many times over the weekend while you were going through it. Not as if reading about insurance or insurance problems is the most exciting thing in the world to read about.

Paul: I have to say it was very readable. I mean, I really did enjoy it. Because everything that you talked about, you told it with a story. And it was, you know, kind of real-life kind of things and super interesting. So maybe it sounds dull, but it wasn’t. I really liked it.

Chip: Hey, I appreciate that. We spent a lot of time working to try to, you know, fit some stories into it. And, certainly, I can’t talk about all stories because of certain client privileges and things, you know, that go along with that. But for those that would allow me to go through and have a discussion with them, it’s, you know, really important. I think that some of my experiences, I thought, came across, and I thought it would be helpful. So I’m glad you said that, Paul.

Paul: I really liked it, but I forgot to say the name of the book. So the book is called “Pay Up!: Preventing a Disaster with Your Own Insurance Company.” And, of course, you know, written by our guest, Chip Merlin, really liked it. Do you want to maybe tell us a little more about kind of what you had going on in the book?

Chip: Well, sure, I’d be curious from your perspective, what you think.

Paul: Well, it resonates with me, because I’ve seen some of this stuff myself with the way, you know, things that go on with insurance companies. And, you know, with my experience on the expert side, I see how they use the same firms over and over again on their side, sometimes owned by insurance industry interests. You know, I don’t think that they fairly assess things. And so you had some stories along those lines and even had stories of…you know, to balance that out a little bit, even an interesting story about fraud on the behalf of…you know, fraud against insurance companies where you have a client that you said, “No, thank you, too.” So you’ve seen and heard a lot more than I have. And I thought it was really, really interesting. And I’m not just saying that. I really did.

Chip: Well, I appreciate, you know, bringing that, and that’s a great topic. You know, if I had to point, you know, if somebody wanted to even learn even more about the particular issues with respect to the pressure that insurance companies will demand, and when I say insurance, I don’t mean all insurance companies, because all of them are not that way. But in some claims departments of many insurance companies, there is a great deal of pressure that’s placed upon the vendors of those insurance companies regarding, you know, forensic engineering, you know, to find almost ways and there seems to be working with the claims departments to tailor their opinions exactly with the policy and come up with, you know, answers and opinions that inevitably seemed to favor payments for less or just no payments.

I mean, so much so that we’ve heard stories, especially after Superstorm Sandy, where the account representatives of some of the engineering firms were changing the reports of engineers without their permission, you know, to satisfy the demands of their insurance company clients. And so, you know, today we’ve got the American Policyholders Association, and it’s association that Doug Quinn is its executive director heading up, you know, solely, you know, the issue of, and this is crazy, you know, to think about it, but insurance company fraud against, you know, insurance company customers. And in the claims, you know, part of it, you know, this word comes up quite a bit.

And, again, I don’t mean to disparage everybody, it was out, he was an engineer that works for insurance companies, I don’t think that’s the way it is. But for many, now, there is a great deal of pressure to perform, or you get what I write in the book, you know, deselected, all of a sudden, you’re no longer on the list. And it’s not just with respect to, you know, engineers or licenses. It also goes on the pressure with respect to estimators and how much they’ll put down. It goes on for independent adjusters and what they’re willing to do. And it goes even for the insurance company appraisers, and, you know, this behind-the-scenes network is something that I do warn about in the book and what you can do to combat it. So it’s, unfortunately, at least in my opinion, I think it’s a growing, you know, issue in the insurance claim world and one that I’m sad to say is something we have to confront, you know, quite often.

Paul: Yeah, you know, so the blacklist thing really hits home with me, because I get asked on depositions if I’m representing, you know, on behalf of a property holder, “Do you work for insurance companies?” And for me, the answer is yes, because I do a lot of construction defect work. And that’s a different group of insurance companies or at least different folks. And I had that, you know, so that is true. But if the question is, “Do you work directly for any property insurance firms?” The answer is, “No.” And why? Because, quite frankly, I’m blacklisted. And they don’t want to hear what I have to say.

Chip: So that’s interesting. I mean, I didn’t put this in the book. But there was a company that I left doing insurance defense work. And I’d switched over. And I’d called after several years an engineer that I wanted to use for a particular matter, and he said to me, says, “Chip, love you to death, would love to work with you. You know, I know you’re out there working and really doing a great job for policyholders. But my company just is not going to allow me to go do work for you, you know, or we could possibly get blacklisted.” And then he said, “At least honest work. And what I mean by that, if I were to go to work with you, I would have to slant the opinion so bad to hurt your claim and then prove it to them.” You know, and it’s like, “Really, is it that bad?” But, you know, I get it.

And this would have been back in the 1980s. So it’s just that as much as things have changed this sort of there in the background is just that there’s a lot more now because of the discovery that’s gone in with email. You’re able to get some of the underlying, you know, actually proof of all the stuff that used to be just literally word of mouth, you know, type stuff with the threats of people blackballing one another.

Paul: Yeah. So, you know, I was thinking about some things maybe we’d talk about today. One of the questions I was going to ask you, which is on-topic but maybe a little bit steering away, is, you know, you’ve got a wealth of experience. And, you know, you’ve been doing this for quite a while now. And really, you know, one of the leaders in the industry. So how do you think things have changed over… Are things still the same? Are they different now? How things evolved over time with property insurance? You know, they’ve lost the [inaudible 00:08:52].

Chip: Well, you know, I guess everything has changed, you know, quite a bit. And there’s so many different ways that it’s changed. You know, we can start with just the internet. I mean, the way that insurance companies even sell their product, how they sell their product through advertising that goes on the internet, the increase of advertising gimmicks with respect to insurance, and some insurance companies even making, you know, how you see these accidents that seem just impossible. They’re almost funny, you know. Yet is that what insurance is about? You know, and it’s funny until the accident happens to you. And then it’s not so funny anymore. But, you know, insurance companies, Progressive, Geico, a number of them, their marketing studies show that, you know, selling ads to get in front of as many people as possible that resonate with respect to being “funny” and then selling on price seems to be what works for them to gain market share. And so you have a product that is being sold in mass market today. There’s a lot of pressure now on insurance agents who are increasingly being left out of the equation. And I think insurance agents traditionally, you know, had that role of helping the policyholder or consumer to select great products, with great companies, at great prices. And they’re being, kind of, edged out as the insurance companies keep trying to push this to sell their product almost directly through the internet.

So there’s been not even on the claims side, but just from the entire, you know, beginning of the insurance claim transaction, you know, people don’t buy the insurance product and even know what it says. They hope they have coverage for it. And so where’s the professional helping them out? And there’s just no way that an insurance policyholder, especially a commercial insurance policyholder, can get anywhere close to being able to figure out all the risks, the types of coverage that they would have, the endorsements that they might need for their particular business or situation in life. And so, you know, we have a product that people, unlike your apples and oranges, that you might pick out at a grocery store, you can’t even look at the insurance policy that you bought, and, you know, so it’s changed that way.

And then the claims handling, I think there’s a lot of differences. I think people want to get paid promptly. They’re able to find out if they’re getting paid properly or not a lot more easier today because of the Internet. And they can compare what’s going on with others that are out there. And it’s unfortunate, though, that the insurance companies themselves at the claims level now can more closely manage and have actually computers, you know, manage, how do I say, the authority of the field adjusters so that they force the field adjusters to, you know, through the use of computers and the internet to really hammer down and not pay what a reasonable amount might be. And by that I mean a reasonable amount, depending on who you hire, it could be $100, it could be $150, for any particular thing, it doesn’t mean it’s exactly $104.75, but something reasonable in there, depending upon the quality of the contractor and how it’s going to be done.

You know, that used to be taken care of, and the field adjuster would have authority to take care of those types of claims. But, increasingly, that’s just not happening. And I think that’s one reason why there seems to be so many more complaints in the field of especially property insurance law right now as insurance companies increasingly try to gain control. And they do have the ability to do so via the internet, and there’s more claims disputes, unfortunately.

Paul: So if we could say, I mean, take an example of a homeowner or a larger type of claim, if one was to, you know, have a loss, say a tornado, and they took it up with their insurance company and got, you know, a fast settlement directly from the insurance company, what do you think the chances are that it would be a fair settlement?

Chip: Probably very little, you know, if it’s a full settlement. And by that, I mean how do you know until you actually get out there and start doing the entirety of the work? And actually the full, you know, replacement? And I say that, I guess, to be quite fair, it depends on the insurance company. If you were to tell me it was Chubb, Amica, Lexington Preferred, chances are those companies because we don’t sue them as much, and they keep getting great ratings, even we have the speeds of USAA, but most of the people really feel like when they get them with USAA, they’ve gotten a fair shake. You know, those types of companies typically have a lot less problems at the claims-paying side, and especially Chubb, and Amica, and Lexington Preferred, you know, than other insurance companies that are more than mass market and are not going to undersell the pricing parts so that they have to be cheap on claims.

So I guess an answer to you depends on who the insurance company is you have. But if it’s not one of the more preferred insurance companies that are really having a way of taking care of you… And let me give you an example. There is a client that we represented in Superstorm Sandy who subsequently had a water loss up in New Jersey, very affluent. And this water loss seeped into the closet and the client, the wife had all these fur coats. And Chubb has an expert in fur coats come out and look at everything, and she knew exactly what she’s looking at. She goes, “No, we could send these out. Most people wouldn’t say anything about it. And you probably wouldn’t even tell, you know, but this fabric will never be back the way it is. The type of water that went through the attic ba, ba, ba, ba, ba all the way, you can clean it, but in the long term, it will be different. An expert will know it’s different. And so I’m going to declare these a total loss.”

And this was of about 170-something thousand dollars’ worth of furs. And I don’t know if every company would act that way. And so at the moment of truth, you have somebody who’s out looking on behalf of the customer for the full payment and being completely honest with them that might cost the insurance company more claims time, you know, than other insurance companies. Now, certainly, that type of reputation gets around, because even I talk about how what great claim service that was, you know, versus other companies are gonna fight you nickel and dime. They don’t have any experts. They’re not about to have that type of expertise, because, with that expertise, they may pay more money.

How often, Paul, you know, do I give speeches and say, “If you want to look at the insurance company adjuster of today for many companies, and even their claims expert, you think of the three monkeys, you know, they don’t want to see anything. They don’t want to hear anything from the policyholder about what’s going on. They certainly aren’t going to tell you all the benefits and ways of looking at a loss that might increase the amount of claims. I know the insurance, you know, attorneys, maybe the insurance claims department, the adjusters that are listening to this podcast or hate to hear that, and they’re going say, “That’s not the way we do it.” Then good, if that’s not the way you do it, that’s the way it is. But you can’t tell me that if you’re in this business, you don’t know of the pressure that’s coming down from some claims management departments. That’s exactly how they want to have many of their losses handled today.

Paul: So my mother had a water loss. It was less than $10,000. And it had two different adjusters, I mean, engineers came in to look at it before they denied it. It’s, like, ridiculous. It wasn’t Chubb.

Chip: So I just want to follow up. I mean, at the Windstorm Conference, I gave a speech with Bill Bracken and Steve Badger about how engineers are supposed to go about, you know, peer-reviewing to make certain that their expert opinions are accurate. I don’t mean written for a client, I mean, accurate. And there’s a way to go about making certain that one adjuster’s opinions aren’t written up that are in the proper peer review and how they’re looked at. And it was a very good discussion, very philosophical. Steve Badger said, “Absolutely. If people are writing the opinions with a biased mind, whether it’s for the policyholder or the insurance company, it’s wrong and could be fraudulent.” And I thought that Bill Bracken went through the various ethical ways that you do a proper peer review, including keeping all the prior drafts.

And I’ll give State Farm a shout-out. One time, I took a deposition of somebody with State Farm at the high level. And they even indicated that, you know, theoretically, we should be giving our customers the original opinion, and why we had to change it to a different opinion, and be transparent about it, and not try to hide the reason, you know, that there was a change or something like that as if, oh, my God, you know, they can’t accept it. But, you know, if we’re honest about it because, you know, that’s really what it comes down with peer reviews and why people might change opinions, give honest opinions, and then offer the customer the opportunity to respond with, “Oh, maybe you didn’t catch this, you didn’t see these facts and things like that.” And I think if you have that type of open mind, where you’re trying to get to, you know, the right and reasonable, you know, opinion, you really are looking out for the customer. Even if it’s not what the customer hears, at least, you know, they’ve been given the proper treatment in the claims process. And that all starts with the honesty, it really does.

Paul: That’s half the battle just to get a fair shake, isn’t it?

Chip: I can’t tell you how much I’ve been starting to use that word a lot more just give people a fair shake on it. How do I say this, though? That’s difficult to do when it’s already started out, you know, months, if not years in advance. And if the entire way insurance companies look at things is to not overpay, you can only go in one direction. And so that’s also some of my criticism, like, with the claim review process that most of the insurance companies have, they’re so into this concept of leakage, which is not overpaying on claims and finding ways not to pay more on a particular claim. And if they do, you know, you get these leakage scores that go against the field adjuster.

And when they’re grouped up against the field adjuster’s manager, so in many companies, you get six to eight field adjusters, and whoever their particular manager is, it’s a pockmark against him on these quote leakage scores that come out, you know. When I go and I ask, “Well, what about the gold star for somebody telling, you know, a policyholder that they’re entitled to more money because they missed something and weren’t aware of stuff like that? Do you have anything like that?” “No, of course, there is no program like that. The gold stars are given out to people, you know, that have the least leakage, you know, scores.”

And, again, it’s always kind of one-sided looking for, you know, lower ways to pay, and it doesn’t go for all the companies. But, you know, that’s typical of what claims managing is today. And it’s the way that most of the large consultants that insurance companies hire to give recommendations to the claims department go about teaching them how to do this, because it’s the most…frankly, the most profitable way to do this. As I say, it doesn’t take a rocket scientist to figure out it’s a lot more profitable to take somebody’s premium dollar and not fully pay the claim, you know, than to do otherwise.

Paul: Can you just talk a little bit more about this, what a leakage score is?

Chip: Sure. So this is a term that I first saw in some internal documents from USAA a long time ago where McKinsey and Company have been retained by USAA to look at their claims process. And leakages are now a term of art used across the industry. And it’s not secret or anything, because they’ve even written about it in the many articles that it talks about these are claims payments that the insurance company does not believe have should have been paid. And so, you know, when they go through the various, you know, steps of a claim process, they look to see what can change so that they don’t make a payment that they think is for “too much.”

And so how do they, you know, prevent that? Well, did somebody check the amount that they were paying, you know, against an Xactimate estimate might be one example versus a local roofing contractor’s estimate? So you never accept a local roofing contractor’s estimate, almost like no matter what, versus what’s in the Xactimate line item. There’s nothing in there, go back and check the Xactimate estimate to see if it’s accurate. You know, and after like hurricanes, tornadoes, and anything like that, Xactimate estimates are wildly and notoriously wrong because they don’t reflect the increased amount of demand until sometimes weeks and sometimes months later. And so it’s always behind, you know, the curve with respect to what the actual pricing is that goes on. That’s one way, you know, just to show that people are getting underpaid and get very upsetting. It could be that as simple as, “Hey, this house over here, you know, that is having certain materials and things like that should get paid for that. But, oh, you know, this other guy, he lives in a gated community and just to get through, you know, every morning, there’s like a two-hour wait as every vendor has to get checked off even to work on there.”

Well, if it’s taking the vendor two hours to get through in the morning time, you know, the labor costs are gonna go up higher. And this especially, you know, happens after hurricanes major disasters or even it could just happen in any type of regular loss that might happen to any local contractor. Knowing that will have that adjusted into whatever price he’s going to have so that he knows that he cannot have his workers sitting out there for an extra two hours a day or whatever it might be. And that’s got to be reflected in price, otherwise the contractor loses money, and, theoretically, you know, the insurance company should be paying. That’s just one of a lot of little you know, examples. It could be, you know, “Hey, did you take the full amount of depreciation based upon the age of a particular material, you know, versus, well, what was really the condition of the material?” And by taking greater amounts of depreciation, we pay less on it. Don’t pay any replacement cost if you have a replacement cost policy that has actual cash value paid first to replacement comes until you get the actual invoice and receipt, you know, back for it. Whereas, many companies will, you know, “Hey, we’ll pay replacement costs right up front.”

Amica and Chubb have a policy, Lexi Preferred, they pay replacement costs in the full amount right up front, you know, to some policyholders. So there’s a lot of different ways insurance companies in preventing what’s known as “leakage,” you know, in the claims vernacular go about. And they literally have scorecards on each of these, you know, various things checking out on each claim how well an adjuster might have done. And then they have, you know, people that are known as leakage experts to do metrics about how much could have been paid versus what was actually paid to say what your leakage score is, how much money you might have cost the company. And they look at that, how much you cost the company and detract it from our profits as a result of your own neglect or whatever and claims payment by paying too much.

Now, you know, if you were to ask me, the way they should do it is grade, “Hey, you underpaid,” you know, and I’ve never seen any pockmark, any, you know, negative score, you know, given against an adjuster for…you know, or any type of score getting positive, “Hey, you caught something. We would have cheated our customer, you know, you know on that. So really good, great catch.” It’s always one way. It’s almost like they make the person seem like a pariah if they pay a little bit too much to a customer on any given amount. So it’s something that’s now into claims management. It’s ingrained in it, and rather than making certain that the customer is not, you know, shortchanged, which, heaven forbid, what’s worse for the customer, you know?

Paul: Well, there’s nothing [crosstalk 00:25:38].

Chip: Right, right, the customer’s viewpoint, you know, heaven forbid, don’t underpay me what I’m owed. Okay. And I would think, you know, almost everybody in any type of businesses, you know, underpromise, overdeliver, try to promise and actually deliver what your clients are looking for in almost every other field but insurance where they actually manage to make certain that they’re not, you know, overdelivering. The whole thing is on underperforming on the claims payment with many of the companies being managed that way.

Paul: That doesn’t sound like a fair shake, does it?

Chip: Let’s see, it’s rigged up front already. The whole management scheme for the vast majority of insurance companies is first set up on that philosophy of above all avoid claims leakage.

Paul: So let’s say that, you know, somebody suffers a loss, you talked a little bit about the complexity of insurance policies. I know I tried to read my homeowner’s… I live in South Florida. I tried to read my homeowner’s policy, and, you know, bad idea. I’m not an attorney or an insurance expert or anything like that. And I had a heck of a time trying to figure out what it actually is. And I don’t think I ever did figure out what exactly it said. So with all that complexity, you have a loss, you’ve got an industry, you know, where, you know, some companies may treat you fairly, others may not. What should you do?

Chip: Well, I think, you know, obviously, first try to find a great insurance agent who’s going to be selling you the insurance, because that agent will also be there at claims time and hopefully put you there with a great company. You know, the next thing you should do after that, the larger the loss, the more you should be considering do you need professional help. Does that mean typically hiring a public adjuster and sometimes even have to go to an attorney? But I often recommend people hiring public insurance adjusters to help out. You want to make certain whoever that you’re hiring to do the work, you know, is knowledgeable. While they don’t suppose to adjust the claim process, they can understand what the insurance claim process is all about and help by, you know, being there that they will talk with the insurance adjuster, explain the pricing, explain the methodology if that’s what the insurance adjuster’s asking for.

And as a matter of fact, many people forget that insurance adjuster is supposed to be doing a full investigation if there’s any doubt about the bill and the amount that’s being paid for. And they should be asking the contractor who is an expert in fixing things up or it might be, you know, a material person or a fur expert, like I gave an example on contents. And the insurance company should be doing this right away and promptly. You know, if things aren’t going right, and I mean you’re not really happy with the type of service you’re getting, it doesn’t feel right, I always tell people, you know, and the larger the amount, especially if it starts to get…and it depends on who you are. You know, if you have a home that’s a $200,000 home and you have a $50,000 loss, that is really significant. You know, some people have a $50,000 deductible.

If you have any questions at all, I typically suggest to contact a public adjuster or an attorney who’s experienced, and you can check their credentials. And, again, credentials mean a lot in this world. In this day of internet advertising, there’s a lot of pretenders, you know, that are out there versus contenders. And what do I mean by that? Anybody can claim to be an expert on the internet. And often then go back and say, “How do you determine really who’s not?” Well, look at their credentials, how long they’ve been doing this, you know, what’s the passion? What are their clients? Follow up. What do their past clients have to say about them? Are they somebody that’s respected in their industry, that are really passionately involved in doing whatever they do?

You need a brain surgery. Would you just go pick out a brain surgeon based upon what brain surgeons might say on the internet? Or would you go look for the person that might be the leader in the field, you know, the expert that has the credentials, others want to learn the techniques of brain surgery from? And so I always tell people to go out and look for the best that you can hire at that time and don’t look back. I think, you know, that type money’s usually very well spent. And often those individuals will give advice about what they need to do with respect to handling claim and often say, “You might not even need my services. This is all you need to do on it,” or, “Geez, you know, you really do badly need my services.” So, I kind of laid that out in the book, you know. And it’s both for contractors, for attorneys, for public adjusters, who to look for, even your insurance agent. What’s the type of person you’re looking for? And, certainly, you want to hire the best. And I give some, you know, some tips and suggestions how they can find those individuals.

Paul: One of the chapters in your book is called When the Insurance Adjuster Is You. And, you give, you know, kind of a hit-home example of the elderly couple that had a fire loss and the insurance company had them out picking through the rubble, trying to take an inventory of what they lost, which is, you know, bad idea for a lot of reasons.

Chip: Well, and not only that. So, that term, what happens there, I almost call breakage, and people go, “What do you mean breakage, Chip?” Well, that’s a retail term. And that’s when the insurance company also almost demands for you to go do all this. And they’re not going to do any of it themselves. So often, you’ll find insurance companies that go for the residential claims. They’ll go out and have an expert contractor, estimator, could even have an engineer look at it. And they come up, “And here’s the estimate of what we think it’s going to cost and stuff like that.” Well, you know, when you have the contents loss, who’s looking at the contents? So the same insurance company, they’ll do only half the work. They’ll look at the real property and do all these people.

And then they’ll hand pieces of paper to the policyholder and say, “Fill all this stuff out.” And you figure out what the cost is, the year, and all this kind of stuff. And rather than work with them, and the insurance uses its own expertise to go through that. Well, you know, after you’re on about the 39th page, you know, with 50 items on each page written down that you’re filling out, and that’s where some of these claims go and ask people that come in and say, “You did all this yourself?” And they go, “Yeah, it took months to do, but the insurance company asked me to do this.” You know, I just shake my head, because people don’t understand what the concept of the actual cash value means.

They don’t really understand that, you know, when I start going through, I’ll say, “Did you include the price of going out and getting it? And the sales tax and all these other things?” You know, if you buy something this way, you got to put it all together? What about that cost? Because what you lost, it was already put together. Now, you got to go redo it again. And there’s all these items that sometimes add up another 20%, just a soft cost offered on contents that are completely left out. Not to mention, “Hey, after filling out 5 pages,” and I know it’s gonna cost you another 35 before I get done, “screw this. Hey, Mr. Adjuster, why don’t you just pay me 50% of what everything is owed, and we’ll just call it a day? So I don’t have to do all this work.”

And that’s what’s going on in some of the California wildfires out there. “You know, it’s fine, no problem. You don’t have to do all this stuff. We’ll pay you 50%. Don’t worry about the paperwork at all that we asked you to do.” And that’s how insurance companies win on the residential contents claims not even talked about often. And that’s where come public adjusters who have, you know, content experts on stuff that can go through this and can help out if the insurance company is not going to do it. You’d be crazy to try to do it yourself.

And I remember the example of the elderly couple, because the insurance companies didn’t tell them, “Oh, yeah, when you go back into your burnt down fireplace, you’ve got all these carcinogenic materials out there, all these dangerous things and everything else in the world. They made a little old lady sit for months going through her fire debris without mentioning how dangerous it was and what she really needed to do to protect herself from it. So, you know, and it’s not as if the insurance company’s ignorant on it, because they teach their own adjusters, you know, how to be careful about it, because they have OSHA regulations. Anyway, that was a great example from the book, Paul, and I appreciate you reminding me about it.

Paul: Yeah, well, like I said, I mean, that’s what made the book…in my mind, what I really liked about it made it real was you put these stories and what each of these, you know, probably boring theories when you make it real by telling the story. So when larger losses, the kind of stuff that my firm works on, and, obviously, your firm does a lot of that type of work too, the adjuster comes in, puts the loss together, files, isn’t my thing but I hear this word all the time, the proof of loss, insurance company sends their experts out. And you have, you know, say, the insurance company says it’s worth $300,000, and the public adjuster says it’s worth $8 million. What needs to happen at that point?

Chip: Most families should be hiring…if they have a public adjuster, and it’s that far apart, and the public adjuster can’t, you know bridge that gap, typically, that’s when people start going to attorneys and ask advice about what should happen. And your particular field, like, most people just don’t even think about it. To do the job, like what your firm does, and don’t get me wrong, there is many engineering firms that will go out there and take a look at the building envelope, and I mean the entire, and that term also includes the windows and the glazing and things like that, but to do a full and thorough investigation could cost hundreds of thousands of dollars, you know, for the insurance company.

And if they were to do it in such a way that not only were they gonna spend the hundreds of thousands of dollars, but also underpaying millions of dollars, because now, “Holy cow, the customer is who really does have these damages that are out there. We just spent hundreds of thousands of dollars just to prove we’ve got to pay millions.” Now, how many insurance companies do you think are lining up to go do that? Not too many. Okay. And so what happens is you have huge what are called chunks or portions of a claim that could and should have been brought as damage that for many policyholders never are brought. And don’t kid yourself, if you hire a public adjuster who is not knowledgeable about it or doesn’t have the funds to pay for the experts, that public adjuster might not even go out there and do the investigation because they don’t have the money to pay for experts.

It can be very expensive to look at some of these subtle but very large component issues of complex claims that happen to major buildings, commercial buildings, you know, particularly condominiums, office buildings, you know, you name it, skyscrapers. You know, the impact that the major storms or it could be the impact that smoke or heat might have on these buildings really need sophisticated type of analysis in order to find the full amount of damage. And it’s certainly not in the insurance company’s best economic interest to send, you know, sophisticated engineers out there looking for the damage because the more they find, the more they’re gonna have to pay.

And as a result of that, we often find, you know, claims that come walk into our door after we redo it that it’s not just a small increase, but sometimes, you talk about the $8 million when sometimes public adjusters are taking a swag at it, thinking it’s $8 million and maybe it’s 4 million, but it also could be $24 million. And I’ve had some even very good public adjusters have engineers go out there and do preliminary analysis, but not really dig in enough completely. And when given the full, like, don’t spend more than $25,000. But if they were to spend $150,000 worth of engineering costs and spend the hours necessarily look at it, wow, a loss that might be $2 million or $3 million can end up being 12. And we’ve had that happen before. And it takes a while for that to soak into the insurance company’s claims management.

Paul: So you need…this will sound self-serving, but it’s not, you need people that know what they’re doing. And, I mean, you need people that are truly experts in their field. So you need people that are experts in the field and that really know what they’re looking at. And if you’ve got an elevator problem, you obviously don’t want me looking at it, the window expert, you want to get a guy who really knows what’s going on with the elevators, and, you know, roofs, it’s basically exterior contents, things like that, right?

Chip: Yeah. Hey, Paul, my experience is that the best experts get to learn more and more about less and less. And so that, you know, somebody who might be a mechanical engineer, he might then start, oh, he’s really an expert just on elevators. And he becomes a really big expert on just elevators versus everything in mechanical engineering. Somebody might be an expert just on the building, you know, envelope with just the roof systems, some on just glass and, honestly, sometimes on special types of glass, you know, and glazing and how to go about, you know, doing certain things. At least in my field, I’ve been trying to find those individuals, knowing who they are. Hiring those types of people means everything to our client. And we always have to search the qualifications to see these and then, you know, work with those individuals, because, typically, a lot of times they’re very high demand. And as well as to make certain that their reports are going to be, you know, up to the standard so they’ll be even admissible at court. You can imagine that insurance companies when experts are giving opinions that are gonna be very costly to the insurance company.

There are clever insurance defense attorneys who are going to look at every single line, you know, check to make certain every T is crossed, and every I is dotted, because they try to keep those people from ever having the credibility and the ability even to testify in front of a jury. There’s battles that go on about that. And at least in our law firm right now, we spend a great deal of our time, you know, making certain to the best we can that our expert witnesses are not excluded from being able to testify into the federal or state rules of evidence, which seem to be getting more and more strict about these things. At the same time, we’re finding that the insurance company engineers or we’re attacking them, you know, for not saying a bias that seems to be similar, the same between many of the insurance company vendors today.

Paul: Yes, it’s complex, to say the least. So, Chip, this has really been interesting. And as I said, I really wish we could have talked a little more about everything in the book. And I encourage our listeners to cop a copy, it’s called “Pay Up!: Preventing a Disaster with Your Own Insurance Company.” Anything you want to close with?

Chip: Well, sure. First of all, I want to thank you for the ability to come out here. I hope we’ve educated some people. I hope that maybe we can encourage some insurance companies and the executives to have a change of heart about the way they go about doing their claims. And I would encourage anybody in the industry who’s involved in claims handling to at least consider purchasing, you know, the book. It’s not a really big price. And you can go to amazon.com or Barnes & Noble. And you can pick up the hard copy or a Kindle edition. And it’s even got…if you want to listen, then somebody will read it to you with an audiobook edition. So we made it easy for anybody to go ahead and listen to it. And I think it’s got some very practical ideas for everybody in the insurance industry. And I really do appreciate the fact that you read through it, and some of your very kind comments about the book, Paul, really appreciate that.

Paul: Yeah, well, it was really entertaining. And I want to put a plugin for audible. You just brought up to make it read it to you. What a great way if you’ve got a three or four-hour car drive to make the drive go by quicker, is to get the audible version and play it through your phone right into your car. I really have enjoyed that. So anyway, so, Chip, how can our audience contact you or your firm if they want more information about, you know, issues with insurance and [crosstalk 00:41:59]?

Chip: Well, yeah, hey, that’s a great question. If you’re an insurance professional, like an adjuster, and you have some questions about insurance, you can literally go to Google, put “Chip Merlin Blog.” We write about property insurance every single day. It’s what we do. We’ve written this blog for 16 years now. And you can even search all kinds of terms on there. You can obviously look me up, Chip Merlin, on, and you can get my information. You can even call me on my… People, they’re surprised I give out my cell number. But most people never abuse it. Rarely do I get a 2:00 in the morning telephone call or something like that. But my cell number is 813-695-8733.

We have about 60 attorneys in our law firm and offices all over the United States and in Puerto Rico with attorneys actually there in those offices. These aren’t just make-believe offices that people put there. No, we have actual attorneys that limit their practice to representation of policyholders within insurance claim disputes. The main office in Tampa is 813-229-1000. But, you know, on the internet, I would encourage people to look up our firm, the qualifications we’ve got. They can always look me up. And the easiest way for them to say…people text me or call me on my cell phone, again, 813-695-8733. And if you want to call again, our main number is 813-229-1000. But, again, we have offices from San Francisco out to Puerto Rico, from Phoenix and Los Angeles all the way up to Red Bank, New Jersey, and up in Chicago. We just have offices all over with actual attorneys practicing and doing this for a living. So I appreciate, Paul, your opportunity for me to tell that to our audience. And if people ever have a need, give us a phone call. We’re here to help and educate people.

Paul: Super, and thanks again so much for coming on.

Chip: Paul, thank you very much for having me as your guest today.

Paul: You got it. So I would like to thank everyone for listening to our podcast today, and I invite you to take a further look at GCI Consultants services on our website at www.gciconsultants.com. You can also reach us at 877-740-9990 to discuss any of your building envelope needs. Thanks once again. I look forward to talking with you next time on our “Everything Building Envelope” podcast. So long.


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