Clause in home policies can help resolve disputes

NEW YORK (AP) ? Homeowners across the country are trying to rebuild after a devastating series of tornados, storms and fires. And as they file insurance claims, undoubtedly some will hit a few bumps.

The key to resolving a dispute with your insurance company over repairs on your damaged home may be spelled out in your policy.

Most homeowners’ policies contain a clause that calls for some kind of alternative dispute resolution, which if invoked can bring a neutral third party into the discussion to help resolve disagreements.

It’s a clause homeowners should be aware of and understand. Total claims related to natural catastrophes alone for homeowners and businesses are nearing $20 billion this year ? and that’s with more than two months left in hurricane season and hot, dry conditions prime for wildfires persisting in Western states.

Whatever the extent of the destruction, you may find that the price tag put on the damage by your insurance company’s is different than the repair estimates you’ve obtained from contractors.

Resolving the difference may simply require a phone call to bring the insurance adjuster back for a second look or a conversation with your contractor. Even after major disasters like Hurricanes Katrina and Rita, most claims are resolved between homeowners and insurers.

“There’s no question that the overwhelming number of claims are handled in a smooth fashion,” said James Donelon, the Louisiana commissioner of insurance.

Still, that’s not always the case. There were about 1 million claims filed in Louisiana after those two storms in 2005, Donelon said, and tens of thousands were disputed. The state set up a mandatory mediation process to help homeowners and insurers work out the differences. This led to the successful resolution of about 75 percent of those cases.

The Louisiana process was modeled after one set up the prior year in Florida after that state was hit by four hurricanes in succession. Donelon called his state’s program “an overwhelming success.”

After Hurricane Irene hit North Carolina, the state activated its disaster mediation program on Sept. 2. State law gives homeowners the right to a conference with an independent mediator to work out disputed claims after declared disasters.

Even if the damage to your home wasn’t the result of a big storm or wildfire that led to a disaster declaration, you may be able to use a similar process.

At least 24 states have statutes that refer to a formal arbitration or mediation process for homeowners insurance. Many states, including New York, require that policies include a provision for an appraisal process. This allows the homeowner and the insurer to choose neutral appraisers, who evaluate the loss, and an umpire who settles any disagreement about the value.

If your state doesn’t mandate such a provision, it may still be in your policy. That’s because most companies include some kind of alternative dispute resolution in policies, even in states where it’s not required, said Chris Hackett, director of personal lines for the Property Casualty Insurers Association of America. The reason is that such a process is likely far less expensive and faster than relying on the court system.

Another option is to call a public adjuster, who may be able to resolve disputes before they reach the mediation step.

A public adjuster is a licensed professional who is trained in insurance and can interpret a homeowner’s policy. “Anybody who’s picked up an insurance policy knows that it’s a language all its own,” said Greg Raab, a Utica, N.Y.-based licensed public adjuster with Adjusters International.

Public adjusters will explain what the policy covers and independently assess the damage. Then they’ll work with the insurance company to reach an agreement.

“Usually the process and the negotiations between public adjusters and insurance company adjusters are much more cooperative than they are adversarial,” Raab said. “Usually, compromise can happen.”

In his experience, Raab said the differences between the two sides are not that great. “Normally, something is damaged or it’s not damaged,” he said. “I’ve never walked into a situation where I’ve seen a dispute that I didn’t think could be solved.”

But he is seeing the appraisal clause invoked more often. “When there’s big differences and big gaps, appraisal is an excellent choice,” he said.

And if appraisal or mediation doesn’t solve the dispute, the next step is hiring an attorney and fighting the insurance company in court.