The recent tornados in Tennessee caused extensive damage throughout Middle Tennessee. Since March 3, 2020, adjusters have flooded Davidson, Dickson, Putnam, Smith and Wilson Counties, as policyholders start filing claims for their losses. There is no doubt that there will be much work to do to help families and businesses get up and running again, but there are certain rights afforded to Tennessee policyholders that out-of-state adjusters won’t know – and that can create some additional obstacles when it comes to filing claims.

McWherter Scott & Bobbitt thought it might be beneficial to review a few of the more common hurdles we face in storm damage claims, so that policyholders don’t face undue burdens as we help them pick up the pieces.

  1. The “substantial factor” test for causation. If there are two perils that contribute to a loss, but only one of those perils is covered in the policy, the “substantial factor” test will usually apply and the entirety of the loss is covered if the “covered” peril was a substantial factor in the cause of the damage.
  2. Matching materials and consequential damage. In Tennessee, insureds are entitled to replacement materials that have a “reasonably uniform appearance,” unless their policies specifically state that matching is not insured. If the policyholder’s property cannot be matched, then it must be replaced. The same rule also applies “when a loss requires repair or replacement of an item or part, any consequential physical damage incurred in making such repair or replacement not otherwise excluded by the policy, shall be included in the loss.” In such a case, insureds are only responsible for paying applicable deductibles and the “cost for betterment.”
  3. Improper estimates for labor depreciation. Estimating software, like Xactimate, can be adjusted to depreciate materials and labor, and for years, companies did just that. But in 2017, the Tennessee Supreme Court ruled that labor may not be depreciated (unless the policy specifically allows for it) when calculating the insurer’s ACV payment obligations. The policyholder in that case – Lammert v. Auto-Owners (Mutual) Ins. Co. – was represented by in part by Brandon McWherter.
  4. ACV must include O&P. Software like Xactimate might also depreciate Overhead & Profit. In Tennessee, however, a general contractor’s Overhead & Profit must be included in the actual cash value payment if the work is of the type for which the services of a general contractor are reasonably expected This rule applies even if the insured forgoes repairs, or handles the repair work him or herself.

The next several months are going to be challenging enough. Tennessee policyholders need to be aware what types of obstacles they could face. McWherter Scott & Bobbitt is ready to help you rebuild. Please call 615.354.1144 or visit our contact page to learn how. We maintain offices throughout Tennessee for your convenience.

Read More