PROPERTY LOSS CLAIMS IN SEATTLE & STATE OF WASHINGTON
---------BUILDING LOSSES: COMMERCIAL BUILDINGS

HOW WELL DO YOU KNOW YOUR BUILDING? ARE YOU SURE?

WILL YOUR INSURER PAY FOR DAMAGE LIKE THIS? ARE YOU SURE?

Contacting your Broker

If your building suffers a serious loss such as from severe water damage or fireo, your first instinct might be to contact your insurance broker. But, is that the right thing to do? Your broker will forward the claim to the insurer, but he will not act as your agent to argue your claim, or to act as your legal representative. If he is an authorized independent agent of the insurer, he will not want to antagonize or bite the hand that feeds him.

Coverage will depend on the language of the policy and the nature of the damage. If your broker hasn’t seen the damage, or read the policy, he is in no position to be your advocate. In fact, one misstatement and your claim may die upon submission. For example, if you or your broker makes a statement that the damage is due to a construction defect, that alone may condemn your claim to the “reject” pile. If you tell the broker you have a dangerous condition, what would your tenants say if they learned that?

Investigating the Damage

Preserving the Evidence: If you discover damage to the building, your first step is to preserve evidence of the loss. That means you should:

• Take steps to mitigate the damage
• Photograph the conditions, carefully identifying the area of the building, the location of the damage, and preserving the evidence within the photos
• Save any physical damage that has separated from the building
• Assess the potential damage to tenants
• Evaluate your legal and ethical obligation to inform tenants or customers

Hiring an Expert: Before the damage has been contaminated or lost, you should hire an expert to review the evidence, the photos, the physical samples and remaining damage. The expert can explore for areas of dangerous conditions, and assist in assessing the risks to both people and property. The expert can assist in preparing and then submitting a claim.

Submitting an Insurance Claim: Insurers Prefer a One-Way Door

Assuming you have good photos and a good story to tell, do you submit an insurance claim? Are there any other factors you should consider?

The first thing to know is that insurers are not your friends. You are not “in good hands” when you are in their hands. Insurers are in business to take in your premiums, but pay out as little as possible. They want the cash flow to flow in one direction only, their own.

When you submit a claim directly, you start out with a huge disadvantage. You may be great at managing properties, you are no match for the sophistication of insurance adjusters and policy managers. Let’s say you submit a claim for water damage, such as shown in this picture.

Will your insurer cover this? If the insurer finds evidence of construction or design defect, your claim will almost certainly be rejected because such defects are excluded from coverage.

Well before you submit the claim, you should have a clear understanding of the nature of the damage, the cause, and the language of the insurance policy that might apply to the claim. Finally, you have to know how the courts have interpreted those clauses in the policy.

Potential Types of Covered Losses:

What is “collapse”? What is a “flood”? What is a “pollutant or discharge”? These are all words that courts have considered in property damage cases in the past few years. Even within a state, different courts have ruled differently on what those words mean. Your insurer will try to persuade you that “collapse” means the building must have fallen down. We might argue it means that a stud within the wall is no longer performing. In any case, you have to know what your policy says, and how that policy has been interpreted, BEFORE you submit your claim.

Commercial versus Residential Buildings

What if you have a medical building, with doctors, dentists and laboratories? If you have either a fire or a flood, what do you tell the tenants? Do you tell them to file their own claims? Do you notify your own insurer? If you don’t, you run the risk that your insurer will later deny coverage because you didn’t notify it immediately. On the other hand, if you file a claim, you may get a notice of cancellation, or increase of premiums.

Mold and decay

Is there mold in the building? If you have or suspect mold, you may need to notify the tenants immediately because some people may have allergies to molds.

What if you are forced to evacuate an area of the building? Do you have business interruption insurance? How do you quantify that? We would recommend hiring an expert in the type of tenancies you have, and try to put together a cash flow projection, showing your probable lost income during and after the repair period.

SUMMARY

There is no question that insurance companies – including homeowners insurers and those companies that insure developers and builders – have gotten much tougher in recent years. Policies provide far more exclusions than coverage. Adjusters test their customer’s resolve by dragging out and then denying claims, often without complete investigations of the loss at issue. And all of this costs your clients money and creates substantial stress and risk for them.

Statutes of Limitation: You have six years on a written contract to file a lawsuit, but you may have only one year to file a claim against an insurer. Perhaps you should do both, but which one first? Who would handle the lawsuit? Who should submit the claim? Does it look better if you try to negotiate yourself?

Levy • von Beck & Associates

We are construction defect and property damage lawyers. We have represented condominium associations, commercial building owners, apartment building owners, and dozens of homeowners, each of whom suffered some kind of property damage. We have simultaneously submitted the insurance claims and filed suits against builders for construction defects. Doing so requires a thorough understanding of the building’s history, its construction, repairs, losses, and insurance coverage. Ignorance of any one of these could sabotage one or both of the claims.

Our firm has no ties to the insurance industry. Rather, we focus on representing building owners by submitting their claims to insurers, while also exploring every other possible avenue of recovery. We act as the owner’s recovery coordinator, whether that involves suing a builder, a repair contractor, or your insurer.

We can help you help you protect your assets and your tenants. And we handle many matters on contingent fee or mixed-contingent fee, so that your client’s out-of-pocket costs will be minimal unless and until we recover money for them.