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Karen Reimus www.unitedpolicyholders.org

Wildfire Roadmap to Recovery: Meeting #4, January 10, 2008 Rancho Bernardo Community Presbyterian Church Strategies for dealing with underinsurance. Karen Reimus www.unitedpolicyholders.org. Fine print:.

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Karen Reimus www.unitedpolicyholders.org

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  1. Wildfire Roadmap to Recovery: Meeting #4, January 10, 2008Rancho Bernardo Community Presbyterian ChurchStrategies for dealing with underinsurance Karen Reimus www.unitedpolicyholders.org

  2. Fine print: • Information provided in this program is intended for general educational purposes only. It should not be construed as legal advice. • The speakers at today’s program are volunteering their time as educators. • Neither United Policyholders nor the Rancho Bernardo Community Presbyterian Church endorse or warrant the message or services of any volunteer speakers.

  3. Underinsurance: The bottom line • Underinsurance has become such a common problem after large scale disasters that United Policyholders has an entire section of our website devoted to the subject. (“Claim Tips” section, “Underinsurance Help”) • Homeowners use a variety of strategies to cope • You will hear rumors about other people’s outcomes • There is no “one size fits all” path • Pursue all avenues to get the insurance company to cooperate informally • If you have a strong case, use our civil justice system – a cornerstone of our democratic system. • If you do not have a strong case, pursue alternatives • United Policyholders is working hard to help current and future disaster survivors avoid and deal with this problem

  4. Scoping out and adding up your total losses is important…whatever path you choose WHAT: A package of documentation that includes: - A well prepared scope of loss (Dwelling) - Personal Property inventory (Contents) - Receipts for all incurred expenses (All categories of coverage) WHY: 1) You’ll need this for whatever strategies you use (insurance, tax code provisions, loans, etc.) 2) Replacement cost policies pay for the cost to replace what you had. Your insurer doesn’t owe you full replacement unless you prove you have spent or will spend all you’re owed. 3) Your insurer may waive policy requirements and give you flexibility in using your policy benefits but having a scope of loss/cost basis agreed upon up front makes it more likely they will. ** People run into trouble all the time when they try to negotiate building a different house BEFORE there’s an agreement on the amount of money owed for the house they had and lost. HOW: 1) Get ideas and guidance from your Disaster Recovery Handbook 2) Hire a qualified professional to prepare your dwelling scope of loss

  5. Scope of loss basics: WHAT: Defines, describes, details “as it was” dwelling loss HOW: Trades/materials/quantities should be clearly spelled out, format should look professional WHY: The cost to replace your old home, “as it was” is generally what your insurer owes. You need to know what that cost was before you can negotiate to build something different. • A scope of loss is not the same as an estimate • A scope of loss should allow estimates to be prepared and compared “apples to apples” • A scope of loss is the basis for an independent, credible repair/replacement estimate • A professionally prepared scope of loss can cost @ $3,000-$7,000

  6. Paths others have used: • Private Construction Loans • SBA Loan – (DEADLINE past) • Group Rebuild • Building a smaller or cheaper home • Shifting non-dwelling insurance funds to fund dwelling replacement • Manufactured and Modular homes • Casualty loss deductions permitted by the IRS

  7. What are the alternatives to suing to settle a claim dispute? • Mediation, Arbitration, Appraisal are three of the most popular alternatives to insurance litigation. • In MEDIATION, the parties work with a third party to negotiate a resolution of their dispute in an informal, voluntary process. • An ARBITRATION may be binding or non-binding, and is more formal than a mediation. The arbitrator may dictate the result, or simply work with the parties to reach a result. • APPRAISAL is a procedure mentioned in most policies as a way to resolve a dispute over the value of a loss. It is done by a third party, but may not be legally binding.

  8. Pre-Mediation/Arbitration “To-Do” List: • Seek a mediator/arbitrator who is experienced in litigating or resolving insurance coverage and bad faith cases • Seek a mediator/arbitrator who is disinterested and reasonably priced. • Insist that the insurance company rep must have sufficient dollar authority to pay what you need • Make sure to exercise your right to get copies of “all claim related documents” in your insurer’s files prior to the mediation/arbitration. (CA. Ins. Code sec. 2071) • Consult with or bring an attorney, especially if the insurance company is bringing one • Keep your expectations low and be ready to walk away without settling. Many disputes settle after the initial mediation/arbitration, so you may only be laying the groundwork for a future settlement • Prepare, Prepare, Prepare • Giving the mediator/arbitrator a written summary of your position in advance of the meeting is always very helpful • Don’t be intimidated – You are a powerful participant in the process

  9. Our heartfelt thanks to: • The Rancho Bernardo Community Presbyterian Church • All our UP Mentors and Sponsors • Tonight’s speakers

  10. Taking Out A Private Construction Loan to Rebuild and Firsthand Overview of the Rebuild Process David R Shalinsky, PhD drshalinsky@aol.com

  11. Considerations for Paying Off Existing Loan • Balance and interest rate on existing loan • variable or fixed rate • loan term/years remaining • In our case, • Variable rate • 21 yrs remaining w/ $290K balance • Equity ≥ $450K • Initial insurance proceeds >$600K

  12. * Shalinsky Family Growing anxiety 2/2005 2nd Floor framed March – November Hoping & Praying: Ground Breaking 9/18/04 Foundation Poured 12/2003 Site cleared 11/2004 1st Floor framed * 6/14/04 Blessing Land 12/2004 Leave of Absence 8/14/05 Home! 10/26/03 Firestorm Nov - May Dealing with change, change, change… Paid off old home loan Choosing architect/builders Designing home/ HOAs, Permit process Securing new loan Secured construction loan Choosing paints, decorations, furniture, decisions, decisions! {Planning your move – Ordering Furniture, 3 – 4 month lag} Don’t forget the landscaping - 6 mo!

  13. Construction Loan • Special incentives/discounts/sensitivity • Decided to shorten loan term • 15 year term • fixed rate historic lows (4.87%, Spring 2004) • Some leverage for Rebuild situation • ultimately waived extension of fees when rebuild lasted longer than 2 yrs • Be aware of the term: Clock is ticking when loan closes (15 yrs from COE) • Got a nice surprise here!

  14. Taking out an SBA Loan Chick Osgood  cosgood@san.rr.com

  15. My SBA Loan Experience • Strategy - Consistent, true message • Don’t depend upon it

  16. My SBA Loan Experience - continued • Told “Don’t  pay off your mortgage” • Have to establish that you are under insured • But, SBA wants to be sure you have spent insurance.  (catch 22) • Owner-Builder complicates situation (my situation). • Be prepared to wait.  Keep log of calls. • Could be phone “on hold” for long time • Have to be qualified for loan

  17. Participating in a Group Rebuild Program Jim Kuhlken  jkuhlken@rickengineering.com

  18. From the Ground Up:Utilizing contents money to rebuild Julie Robinson  djrobinson4@san.rr.com

  19. Whatever it takes…my experience • My strategy First build the house and then worry about filling it later… • Prioritizing funding • Maximize contents and insurance dollars • College daze all over…

  20. Whatever it takes…my experience continued • Contents money is yours today! Work to get a full check paid. • I was not required to provide ANY receipts for content replacement – they didn’t care… • Built my extensive list over 6 months (available to share if you’d like, your kitchen probably looked a lot like mine…) • Target the bottom line to exceed limits for full payment

  21. Building your Contents List – not easy, but often necessary… • Mentally visit each area of house • Be careful not to underestimate qty, cost • Recommend outlining each item • Remember it’s REPLACEMENT cost, not what you paid at the time… • Estimate depreciation to calculate bottom line • Submit as partial (since I still recall what I forgot to include…)

  22. It’s your money… • Provide even a partial list ASAP to get your money ASAP. • Once limits are met, don’t care how you spend it…

  23. Using the CDI Mediation Program Lisa Yates lyates@san.rr.com

  24. CDI Mediation Program Leone Tiffany Chief of Consumer Services Division, California Department of Insurance tiffanyl@insurance.ca.gov

  25. Break Out Sessions • Open to 9:30 pm: Firm Stop time • Upstairs: • State Farm : Dormer West • Farmers : Skylight West • Allstate : Upper Courtside East • Sanctuary

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