Paying Out-of-Pocket on Winter Storm Damages? Don't Give Up

The ice from last month's winter storm has long melted but the insurance headaches are still unraveling.

Many North Texans are realizing things they thought were covered in their policy, actually aren't. It has left some bracing for thousands of dollars in unexpected out-of-pocket expenses.

John Grubbs of McKinney said he's learning that the hard way.

He just retrofitted a dream pool for his family a few months ago. They spent 35,000 on it, working to get it ready to go for the grandkids this summer.

But the winter storm had other plans.

Despite preparing his pipes and pool as much as he could, he said days without power severely damaged his pool equipment.

John Grubbs

“We thought that we had done everything that was required to weather the storm,” he said. “When they advised that they were going to be rolling outages, we never had that,” Grubbs said. “Power was off for 10 hours, then back on for a couple of hours, and then off again for 16 hours.”

He thought he was covered but a closer look at his insurance policy showed it covered other parts of the pool but not the damaged equipment.

"There was no way my wife and I could’ve prepared our pool for that,” he said.

He was bracing to pay at least $6,000 out of pocket, money they weren't expecting to spend while budgeting around social security and retirement.

Luckily, after a lot of honest communication with his insurance agent, Grubbs’ insurance company was able to offer more coverage than previously thought.

“I should’ve been done better due diligence to ascertain the knowledge that this isn’t going to be covered. But once again, I would have prepared for it if they told me my power was going to be turned off for so long,” he said.

The experience has prompted Grubbs and many others to have some important conversations with their insurance agent to learn what’s in their policy and how to change it to meet their needs.

“How much is it an extra 20 bucks a month to get this covered? I would’ve much rather spent $240 a year of additional coverage versus spending $6,000,” he said.

Reassess your policy

Attorney Steven Badger, who represents insurance companies through disaster litigation, offered some insight on the insurance policy frustrations people might be experiencing right now.

“That’s just the unfortunate reality is that insurance policies don’t cover everything. They only cover certain risks and certain damages,” he said. “In that situation where there’s no dispute, it’s just not coverage, the homeowner is going to have to go out of pocket for those costs.”

More expensive policies do provide more coverage. Some provide coverage for burst pipes and result of damage while others do not. Just as Grubbs did, Badger said it's important to sort that out with your agent before the next natural disaster.

“Whenever we have an event like this that was really not expected in Texas, it is an opportunity for people to evaluate coverage. They should talk to their insurance agent and ask them, next time this happens, what can I do to ensure I’m covered?" Badger said. "We need to make sure that we are talking to our agent and the insurance companies to ensure that we have coverage that is responsive to the events that we’re going to have, if you want to pay for the coverage. Remember, you can buy a cheap policy that covers a little or you can buy an expensive policy that covers a lot."

Damage dispute

The other situation homeowners face is when they have a dispute with their insurance company as to what is actually damaged or the scope of damage.

"You agree that it’s covered but there’s just a disagreement as to the scope of repair and what the cost is to repair the damages," Badger said. “In that situation, which happens a lot on insurance claims, the homeowner has a number of different things they can do."

The first option is to demand an appraisal. Almost every insurance policy in Texas has something called the appraisal process.

"It’s a process that allows people to work with their insurance companies to try to resolve a claim quickly without the need for litigation," Badger said. "So they should look at their policy, read it and talk to the insurance company about the appraisal process as a way to resolve the matter."

Otherwise, a homeowner can hire a public adjuster, who work for the insured in negotiating with the insurance company to try to resolve a claim.

“Public adjusters are typically going to take a 10% commission and based upon the amount of recovery, you’re going to have to pay that out-of-pocket. Most of the time, it cannot come out of the insurance proceeds but if you need help that is certainly an avenue," Badger said.

If you cannot resolve your claim with the insurance company, there’s always a litigation route, but it would involve paying for a lawyer.

"As an insurance company lawyer, I always hope that people will give the insurance company a chance to do the right thing, work cooperatively with the insurance company, and try to resolve the claim amicably. And use these other tools as a last resort," Badger said. “Because in my experience, the vast majority of claims do get resolved amicably if people are being reasonable and try to work cooperatively and resolve the claim.“

High deductibles

If the repair costs are fair but it's your deductible that is higher than you expected, Texas allows consumers to finance their deductible through certain companies like Fund My Deductible to pay it over a period of time.

While going through the claims process, experts warn there are moments where people can be taken advantage of.

“If you do find yourself in a dispute with your insurance company, one thing you don’t want to do is turn the claim over to your contractor to handle. Contractors are not allowed to negotiate insurance claims in Texas. They’ll tell you, 'I’m an insurance claim specialist let me handle it.' That is not proper in Texas," Badger explained. "It’s called unauthorized practice of public adjusting and the unauthorized practice of law. Contractors cannot negotiate insurance claims. Licensed public adjusters can and lawyers can, but contractors cannot."

Also, don't fall victim to a contractor who says they’re going to help you get your money from the insurance company.

“We had a situation in past storms where contractors have taken people's insurance checks and taken off," Badger said. "I’ve represented a class action of 113 homeowners who were ripped off over $500,000 in insurance proceeds by a local contractor because he promised to handle their claims. And he disappeared. And that’s a real consumer protection issue in Texas so don’t fall victim to that."

If all else fails, FEMA and city or state grants are available to cover uninsured losses.

Click here for more information about the application and inspection process for FEMA.