In Louisiana, we are all too familiar with natural disasters. Every “hurricane season,” we hope the storm causes only minor inconvenience; but history teaches us to prepare for more. When these storms come, home and business owners inevitably make post-disaster insurance claims to repair the damage. While the specific amount owed for property damage is determined by the terms of the policy, the amount received may be affected by when (and if) the damage is repaired.
An insurer will work with you to identify the “actual cash value” or “ACV” of the damaged property when handling your claim. “ACV” is defined as the cost to repair/replace the damage, less depreciation. Jouve v. State Farm Fire and Cas. Co., 2010-1522 (La.App. 4 Cir. 8/17/11), 74 So.3d 220. Many policies provide that an insurer is not obligated to provide you with more than the “ACV” of the damage, unless and until you actually make repairs. Later, you can recover the depreciation amount once you submit proof that the repairs are complete. Courts have enforced such provisions in many cases, regardless of the type of loss.
So, what happens if you never make the repairs? Simply, the insurance company may never owe the depreciation. In Hackman v. EMC Ins. Co., 07-552 (La.App. 5 Cir. 3/25/08), 984 So.2d 139, the plaintiff’s property was damaged by a fire. The insurer paid the ACV of the loss but withheld depreciation pending repairs. The plaintiff never made the repairs and ultimately sold the property. The Court ruled the plaintiff was not entitled to recover the difference.
Similarly, in Jouve v. State Farm Fire & Cas. Co., supra, the plaintiffs’ home was damaged by wind during Hurricane Katrina. Their insurer paid the ACV of the loss. Thereafter, the plaintiffs sold the home “as is” and sought recovery for the depreciation. The court reviewed the policy and found the plaintiffs’ sale of the home without repairs limited their recovery to ACV.
As with any insurance claim, you should always read your policy before losses occur to ensure you understand its terms and conditions. Maybe add this as an unusual step to your hurricane checklist. As these cases show, your ultimate recovery can be affected by what you do, or do not do, following the loss.
Unfortunately, Louisianans (and their property insurers) have endured many natural disasters in the past several years. From the historic flooding in the greater Baton Rouge area in August 2016 to the devastation caused by Hurricane Harvey in August 2017, Gulf Coast residents are all too familiar with significant storms and flooding events. While the rebuilding process will take months or years, this article is designed to provide some basic information on how to document your property claim and apply for and obtain disaster assistance.
- DOCUMENT, DOCUMENT, DOCUMENT – Once able, make sure to document the damages to your home and contents. Whether for a homeowners or flood insurance policy or to obtain government assistance, take plenty of photos and even video of the damage. Make a list of the items in your home that were damaged or destroyed. One way to organize this list is to group items from each room together; approximate the item’s age, where it was purchased, and its value when purchased. If you have receipts, try to salvage them. As you rebuild, and materials and items are thrown out, it will become more difficult to document your claim. Proper documentation will lessen the burden upon your insurer’s claims handlers and adjusters and may speed the processing of your claim. A lack of documentation may require the insurer to investigate longer and result in delay.
- OBTAIN MULTIPLE ESTIMATES – Although the volume of work and distractions which follow a natural disaster make this difficult, try to obtain estimates for the work needed on your home. Pay for the estimate, if necessary. If you have three estimates and the amounts are close, they are more credible. Also, try and get as much detail as possible in each estimate, including specific materials to be used, dimensions, and finishes. Your insurer is looking to determine the true amount of the loss and thorough estimates help to define your claim.
- APPLY FOR ASSISTANCE – Especially if your property is not insured, make sure to immediately apply for government assistance. You can apply for federal assistance at disasterassistance.gov. Oftentimes, the state government will also administer federal and state disaster assistance funds.
Recovering after a disaster may not be a quick or easy process, but spending more time and effort initially may ultimately save you time and allow you to present a claim your insurer will agree to pay.