Do you keep a receipt for every item in your house?

Posted: 08-12-10Category:

Do you keep receipts for every single item you have in your house, and do you keep those thousands of receipts stored in a safety deposit box? That's what one insurer is trying to say that all homeowners must do in order to make a recovery for loss of their contents after a devastating event like Hurricane Ike. Of course, this allows the insurance company to deny over 95% of all contents claims and pocket the premiums they collected for years without ever having to pay any losses. This is the very essence of insurance bad faith and unfair claims settlement practices. The story is reported by Houston Chronicle Reporter Purva Patel.  Here's the Chronicle Story:

Insurer won't pay Ike claim without documentation for lost items

By PURVA PATEL Copyright 2010 Houston Chronicle

Aug. 11, 2010, 10:15PM

After Hurricane Ike swept away the first floor of Donald Box's Bayou Vista home, he and his wife made a list of 376 missing items for their flood insurer, which quickly paid the claim.

A few months later, they compiled another list of things they'd missed or didn't have time to estimate values for the first time around: guns, a drill press and 126 other items. But the insurer wouldn't pay that claim unless the couple could provide receipts to prove they owned the items, Box said.

The new requirement puzzled Box, who has been trying to get payment for nearly two years and filed a related lawsuit last December.

He and others say the requirement could make it more difficult for home-owners to recover insurance proceeds in the future.

"They set their own precedent on what they needed for documentation, and now they want to change it?" Box said. "That would mean you have two standards of doing business."

Michael Brienin, a lawyer for Fidelity National Property and Casualty Insurance Co., which sold and administered the Boxes' policy on behalf of the National Flood Insurance Program, said it always has been standard procedure to ask for receipts.

Brienin said that standard was reinforced in a March memo from the Federal Emergency Management Agency, which oversees the flood program.

The memo, which relays the result of an audit of claims payments, notes that insurers won't be reimbursed for claims with insufficient documentation although an agency spokesman said FEMA doesn't explicitly require receipts.

Breinin said Fidelity paid the Boxers' first claim but questioned the supplement because they continued to make changes to it.

"Fidelity is not afraid of an audit, but it has a duty to document these claims," he said. "That's their responsibility under the program."

'Benefit of the doubt'

Allstate spokesman Joe McCormick said the National Flood Insurance Program typically requires pictures and other supporting documentation, although it tries to expedite the widespread claims after a major disaster like Ike that destroys property and records.

"Apparently NFIP has recommendations but not clear requirements for documentation except when a homeowner is making a second (or third, or fourth) claim," McCormick said in an e-mail. "If we're adjusting an NFIP claim, we generally give the customer the benefit of the doubt (like we do for most claims anyway)."

Other insurers that issue policies under the flood insurance program referred inquiries about their documentation requirements to FEMA.

FEMA spokesman Brad Carroll would not comment directly on the Boxes' case because it is under litigation.

In general, he said in an e-mail, "While policyholders are not expected to keep receipts for every household item and article of clothing, adjusters may require sufficient documentation to support claims for items damaged as a result of a flood."

Under pressure

The agency has been under pressure to improve oversight of the flood program. A 2009 audit by the Government Accountability Office found private insurers handling flood policies didn't always provide complete documentation to FEMA for claims paid during fiscal years 2005 to 2007.

Consumer advocates, however, argue that requiring receipts is not standard procedure.

Insurers and consumer groups advise consumers to keep inventories of their belongings at a safe location away from their homes. Usually, homeowners can provide the inventory and be reimbursed for the destroyed items by the National Flood Insurance Program.

Receipts and pictures

Receipts and pictures can help speed a claim along, especially for bigger-ticket items. But consumer advocates say that if insurers were to start requiring receipts, it could make it more difficult for policyholders to collect on claims, especially in a case such as the Boxes' situation, where pictures and documents were swept away by floodwaters.

"If they do this, and they get away with it, it sets a terrible precedent moving forward," said Alex Winslow, executive director of Texas Watch, an Austin-based consumer group. "Certainly homeowners should take steps to provide whatever documentation they have, but for the company to require receipts of every item is just unreasonable."

The Boxes' attorney offered the insurer a sworn affidavit.

"To me it's just a ludicrous position to take," said the lawyer, Donna DeVaney.

DeVaney is scheduled to depose FEMA claims officials at month's end in connection with the Boxes' lawsuit.

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