Thread: What issues are insurance Show stoppers?

Bob,
You are saying let the client find out the hard way. School of hard knocks.
I do not think it is about doing anything for the Insurance industry. Its about giving a heads up on a potential problem, cancellation or rejection of a policy on a property.

Kristi,
For many the perception of the insurance industry revolves around the fact that it is sales driven. The agents are salesmen pushing a product. It is not about the value of the product, but about the ability of the salesman to make a sale of the product. The company producing the product is only concerned about bottom line profit and not about the quality of the product. Many companies will want to drop a policy if there is a claim. Concept of , " buy it but don't use it". Insurance agencies that have to many claims filed stand a great chance to be shut off from writing policies. Also, so many companies will expend vast amount of energy in an attempt to find a way of not having to perform. Can your say "CLAIM REJECTED"?

PB piping is no problem with insurance companies, if you don't belive me just ask my buyers agent/ listing agent from yesterday.

Kinda like when I told the buyer the air from the air from 25 year old AC unit was warmer than the inside temp.
Realtor said it wasn't a problem because the unit was running, and she swore she felt cold air..

Brown tubes on the wood against the ground in the crawl, nope that could not be on this home, she NEVER had an inspector see them in that Mbl Home Park.

I got the feeling my business card she asked for, before I started the inspection, so she could refer me in the future is in the trash can.

PB piping is a concern with some companies, though it may not make something uninsurable.

I guess I can understand why some people have a negative idea of insurance companies; undoubtedly there are those that don't treat their policyholders well. But I've heard a lot of people say really good things about their insurer (one company in particular), and personally I have no complaints with mine. It's true that they need to sell their service; they're in competition with all the others out there - that is no reason to malign the industry, or we might as well think badly about any company (or person) that advertises, HIs included.

In the end it's the generalization I have problems with. There are bad insurance companies and agents out there, but I like to believe there are also good ones. Too bad it's hard for the average homeowner to know which is which before something goes wrong.

Originally Posted by Bob Sisson

I have been hearing for years that certain issues/components are "uninsurable" and their mere presence in a home will prevent the buyer from obtaining Homeowners insurance.

I have made a few phone calls and found that many of the things I thought would be issues are ignored, and others are bigger issues than I thought.

I am asking for CONFIRMED topics that prevent getting a homeowners Policy. Not something you have HEARD about, but something that you either have the letter/email about or you have PERSONALLY spoken with the insurance underwriter about that prevented coverage.

Examples

Knob & Tube wiring is almost an universal show stopper
No one cares about polybutylene
Some won't write aluminum wiring
one won't write anything less than 100A service

I have these in writing or have personally spoken to the insurance carriers about these. If you have CONFIRMED show stopper issues, please reply back with as much detail as you feel appropriate. I will compile a list and distribute it back out.

Here in Florida, you will almost certainly not get insurance with Knob and Tube, There is only one or two that will insure a home with an FPE panel and a few companies will not accept Zinzco. There are only a couple of companies that will insure aluminum wiring and many will not insure a home unless it has at least a 150 amp service.

Most insurers will only cover the roof if it is less than 15 years and will balk if it has obvious repairs. Many will send their own inspector around after the home is covered and if he sees any curling of the shingles, they will cancel the coverage.

As to the plumbing, you might get coverage with Polybutylene but you will not get a good price. (At least one will not accept PEX.) Most do not want galvanized water lines and some will not cover cast iron DWV.

Some will cover the home if it does not have heat but most will not if they use portable heaters. I have not yet encountered one that required A/C.

This is from experience doing 4 point inspections. Some of the information has come from insurance agents and some from feedback from my customers.

Originally Posted by bob smit

Sounds to me like you HI's are helping the loathsome Insurance Industry by spreading fear as though they are the AHJ.
If the existing home in question is in good repair and all was code the time of installations, then there is no need to make mention of anything else.

Let the damnmed Insurance Industry do their own dirty work.
I love it when I am consulted by a new owner that has an issue with an Insurance Co..
If the issue of concern is in good repair and meets code for the time of installation, I report that just. Furthermore, I write a certificate of approval and state that the issue 'does not' need to be repaired/replaced.
That usually shut the greedy mouths of the Ins. Co.

Bob,I have to agree with you,let them do there own work,they charge way more than we do,and give back very little,always looking for ways not to pay.

In the 6 months I've been doing insurance work, I have heard complaints maybe 2 or 3 times. I know many people who have gotten claims settled rapidly and with no problems, myself included. They collectively have had to pay out a heck of a lot of money in recent years because of the high storm activity. Plus they have insurance fraud to be wary of.

Perhaps you should think twice about maligning a whole industry. It's usually the negative stories one hears, but there are plenty of positive ones out there.

And Harry, what do you mean "they charge more than we do"? They're totally separate fields.

Companies won't cover houses with less than 150 Amp service??

Why would insurers have different policies for coverage in different states (besides some obvious things, like seismic/fire/flood risks)?

The top folks in the insurance industry take the cake along with many other corporations. Whether the company does excedingly well or very poor due to their bad mnanagement and greed they pay themselves fortunes. Bankrupsy? No problem. Just vote yourself in a huge parachute and you have nothing to worry about in life along woth the next few generatiuons behind you.


As for the insured. File a couple claims after 30 years (not near totaling the fortune you already paid out) and they drop you twice as fast as they picked you up 30 years ago.


Gotta love it.

It's interesting how many people on this site claim to be only looking out for the interest of their client, but then in the next breath refuse to inform their clients about the potential risks of uninsureability to their clients. If it's not your job, then who's is it? Their real estate agent? As if they would know.

We're the front line of defense for our clients. We're the ones not only versed in code, but CPSC findings, manufacturer's installation instructions, and class action lawsuit decisions. We're expected to know what the FHA and VA appraisers are going to call out even before the appraisal is ordered.

These insurance inspections are very new in my area, but we're only going to see more and more as the insurance companies try to manage their risk. We need to educate ourselves as to what they're denying coverage on so we can better serve our clients.

Underground fuel storage tanks seem to rattle cages also. H.I.s are not and should not be insurance consultants. Unnecessary liability there. That said; there is a difference between what is discussed w/ your client and what is in your report.

Originally Posted by Garry Blankenship

H.I.s are not and should not be insurance consultants. Unnecessary liability there.

So what is the difference?

We are not insurance consultants.
We are not HVAC technicians.
We are not energy auditors.
We are not electricians.
We are not architects.
We are not code enforcement officials.
The list of what we are not goes on and on.

Sure, inspectors can hide behind the association standards if they want to continue to be mediocre inspectors. But if you know something and don't divulge it to your clients whether is be a problem foundation or the liabilities of aluminum branch wiring we would be doing a great disservice to them and possibly hold some liability.

Think of it this way...which would make the home inspector more liable?

• Telling the client they have an underground storage tank and they should speak with their insurance agent regarding coverage.
• Telling the client they have an underground storage tank.

You've already stated here that you know some insurance carriers have a problem covering these tanks. So why on earth would you not put it in your report?

That's interesting that the insurance inspections are new around here. I had suspected that they'd grown more common across the country in recent years, but wasn't really sure.

I suspect the insurance industry's treatment of the consumer varies from state to state because the regulation does. MN limits reasons for policy cancellation to a few situations:

(from the MN statutes)

Subd. 3a.Cancellation.
(1) There shall be printed in the policy or an endorsement attached to the policy a printed form in the following words:
When this policy has been issued to cover buildings used for residential purposes other than a hotel or motel and has been in effect for at least 60 days, or if it has been renewed, this policy shall not be canceled, except for one or more of the following reasons which shall be stated in the notice of cancellation:
(a) Nonpayment of premium;
(b) Misrepresentation or fraud made by or with the knowledge of the insured in obtaining the policy or in pursuing a claim thereunder;
(c) An act or omission of the insured which materially increases the risk originally accepted;
(d) Physical changes in the insured property which are not corrected or restored within a reasonable time after they occur and which result in the property becoming uninsurable; or
(e) Nonpayment of dues to an association or organization, other than an insurance association or organization, where payment of dues is a prerequisite to obtaining or continuing the insurance.

I'm also pretty sure that rates can't increase as a result of a claim due to natural causes (hail, high wind, etc.).

Most of the risks that insurance companies are concerned about are controllable by the insured. They overlap with the kind of things HIs report normally. I suppose one reason it's not standard practice for HIs to report insurance risks is because there's no standard in the way they are treated across insurance companies (or even within companies, as some things are only counted as risks in some states).

Still, there are generalizations one can make, and being aware of them can save a HO $1000s.

[quote=Ken Rowe;194203]So what is the difference?

The difference is referencing insurability. All the items you mention should be reported. What should not be reported is how "insurable" you think something is. That is an opinion, unnecessary, not required and it ain't none of our business; literally and figuratively. Anything is insurable, if you're willing to pay enough money.

A personal rant, but I loath the insurance industry. It's parasitic and omnipresent / in everybodys pocket. The primary product is fear. Fear of death, suits, loosing your resources, not having enough resources for your loved ones, etc. "Health Care" insurance has nothing to do with health care. It insures your money, not your health. It is a legalized protection racket.

Originally Posted by Garry Blankenship

Underground fuel storage tanks seem to rattle cages also.

Originally Posted by Garry Blankenship

What should not be reported is how "insurable" you think something is. That is an opinion, unnecessary, not required and it ain't none of our business; literally and figuratively.

So you know in your area there is an insurability issue with underground storage tanks. Yet you won't tell your client about it because it's none of your business.

I can't wrap my head around this thought process.

I'm not saying any of us should "report on how insurable you think something is". I'm saying if you have knowledge of a particular issue then you should tell your client to check with their insurance agent. The agent would address the insurability, not the home inspector.

[quote=Ken Rowe;194236]So you know in your area there is an insurability issue with underground storage tanks. Yet you won't tell your client about it because it's none of your business.

Affirmative. The UST would definitely be in the report, but neither you or I know how insurable the situation is. As I also said what goes in your report is different from what is shared w/ your client. Would you say in text / in your report that something is uninsurable ? If you do, you will become uninsurable.

Originally Posted by bob smit

If the issue of concern is in good repair and meets code for the time of installation, I report that just. Furthermore, I write a certificate of approval and state that the issue 'does not' need to be repaired/replaced.

Hi Bob,

What do you mean you write a certificate of approval? Does not need to be repaired/replaced?

Maybe I am taking something out of context, but I am looking at it from a liability point of view and whether you are a code official, just for my clarification and understanding.

Thanks.

Originally Posted by Raymond Wand

Hi Bob,

What do you mean you write a certificate of approval? Does not need to be repaired/replaced?

Maybe I am taking something out of context, but I am looking at it from a liability point of view and whether you are a code official, just for my clarification and understanding.

Thanks.

Bob is the AHJ in his area ... if there is an insurance company asking for something to be corrected/replaced for which there is no need for it to be corrected/replaced (i.e., it meets code), then Bob, as the AHJ, writes a letter stating that it meets code and does not require correction. Bob has that power.

Of course, though ... ... the insurance company has the prerogative to ignore that 'certification' and say that if you want *us* to insure your house *you will have* that corrected/replaced.

I believe the insurance company would be putting themselves in a tough spot to defend that stance if they were challenged in a legal action, but the insurance company could probably out-lawyer the plaintiff if the plaintiff were 'just a home owner', but not if the plaintiff was the 'State Attorney General' asking the insurance company to show cause for their stance, especially if the State Attorney General was there on behalf of the Insurance Commissioner's Office.

Originally Posted by Garry Blankenship

Anything is insurable, if you're willing to pay enough money.

Not true. Insurance is a regulated industry in all 50 states, and just because you're willing to pay $500,000 to insure your home doesn't mean you can. When the State Insurance Commissioner got wind of that, s/he'd had the insurance company's hide, as well as their license to do business in that state.

Bob is the AHJ in his area ... if there is an insurance company asking for something to be corrected/replaced for which there is no need for it to be corrected/replaced (i.e., it meets code), then Bob, as the AHJ, writes a letter stating that it meets code and does not require correction. Bob has that power.

But the risks considered by insurance companies don't always have to do with code. Take EIFS, for example, or something as simple as a downspout draining near the foundation, or peeling paint...even a vacant lot next door, vandalism in the neighborhood, fire station more than 5 miles away...there are many many things that insurers may deem a hazard. They have a right to determine what they consider risks (within reason). But there are some things that the majority of companies don't like. They may not make a property uninsurable, but still increase the premiums.

I can't see how advising a client to check with their insurer about something could possibly result in a lawsuit; it's not much different from suggesting a SE be brought in to check on something.

Garry, I think you're missing Ken's point. You don't have to say whether something is insurable or not - of course that's not for an HI to decide. But it's different to tell a client they might want to check with their insurance company concerning a problem that is often considered a risk.

Originally Posted by Kristi Silber

But the risks considered by insurance companies don't always have to do with code.

Which is why I said:

Originally Posted by Jerry Peck

Of course, though ... ... the insurance company has the prerogative to ignore that 'certification' and say that if you want *us* to insure your house *you will have* that corrected/replaced.

Take EIFS, for example, or something as simple as a downspout draining near the foundation, or peeling paint...even a vacant lot next door, vandalism in the neighborhood, fire station more than 5 miles away...there are many many things that insurers may deem a hazard. They have a right to determine what they consider risks (within reason). But there are some things that the majority of companies don't like. They may not make a property uninsurable, but still increase the premiums.

And for how many of those do you think an AHJ would write a code compliant letter?

I doubt many AHJ would write a letter stating that something was code compliant unless it was something simple and clear cut ... something the AHJ could *easily* document was "code compliant".

I doubt any AHJ would provide such a letter for EIFS or any other system which they could not themselves verify that it was, indeed, "code complaint".

[quote=Garry Blankenship;194240]

Originally Posted by Ken Rowe

So you know in your area there is an insurability issue with underground storage tanks. Yet you won't tell your client about it because it's none of your business.

Affirmative. The UST would definitely be in the report, but neither you or I know how insurable the situation is. As I also said what goes in your report is different from what is shared w/ your client. Would you say in text / in your report that something is uninsurable ? If you do, you will become uninsurable.

Nope, I wouldn't say that something is uninsurable. Just like I would never say something isn't code compliant.

If you see an open electrical junction do you say it's not "code compliant"? No, you say it's an electrical hazard and should be addressed by a qualified electrician.

If you see something you know is an insurability issue you wouldn't say it's uninsurable. You should say they should check with their insurance agent regarding insurability.

Jerry, I meant that code doesn't apply to a lot of the risks ICs (for short!) are concerned about - they simply aren't addressed. They have nothing to do with code, which is why an AHJ wouldn't write anything about them. That was my point.

A personal rant, but I loath the insurance industry. It's parasitic and omnipresent / in everybodys pocket. The primary product is fear. Fear of death, suits, loosing your resources, not having enough resources for your loved ones, etc. "Health Care" insurance has nothing to do with health care. It insures your money, not your health. It is a legalized protection racket.

Actually, it's probably best if Garry doesn't discuss insurance with his clients! Garry, you're new here, so you probably don't know this, but I'm indirectly employed by the insurance industry. My job is to gather data for them about the homes they insure.

Actually, it's probably best if Garry doesn't discuss insurance with his clients! Garry, you're new here, so you probably don't know this, but I'm indirectly employed by the insurance industry. My job is to gather data for them about the homes they insure.[/quote]

I hope it's not necessary to apologize, but I do, if anyone was or is personally offended. My view of the insurance industry is generic in nature and ultimately we all, ( myself included ), end up in that food chain - - - willingly or not.

BTW; yes, the O.P. is an amazingly beautiful place. Hope to see you there one day.

No, no apology necessary! I only mentioned it because we've been discussing a topic that I have some experience with, and it gives me a slightly different perspective. I have no particular allegiance to the insurance industry, but I also don't view it as qualitatively different from other industries in a free market economy. Insurance companies are like many others, competing for consumers, minimizing risks, paying their CEOs top dollar, trying to make money. Some are more ethical and serve their clients better than others. And I'm sure some states regulate the industry better than others.

It's nothing like a legalized protection racket because the industry has no ability to protect anyone from disease or disaster.

I bet if an earthquake came and totaled your house you'd be happy you had insurance. Last May a tornado came through and wiped out a huge swath of one of the poorest neighborhoods in Minneapolis. Companies must have collectively paid out many millions for that storm alone. You can still tell which homes were underinsured, and this has been a problem elsewhere, too. As I understand it, that is one reason some of them have begun to shell out more money for people like me to make better property assessments.

Hi Kristi - Just to give you the 'head's up'...earthquakes (property damage resulting from such) are not necessarily covered by a standard homeowner's policy in CA. Seperate earthquake coverage is required at a substantially higher premium. Standard policies may cover broken furniture, household items and the like but not structure repair/replacement.

That's interesting, Ian. I suppose it makes sense from an insurer's point of view. I was actually just looking for some kind of catastrophic event that might hit Monroe, WA, though - where Garry is. (You know how we insurance people like to capitalize on fear! )