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Insurance Carrier: Travelers Insurance Company Of Hartford, Ct
State: Minnesota

Consumer Complaint:

Our neighbors had a garage fire on Aug. 24th, 2008. AAA insurance hired XXXXX Solutions as the Adjuster. This company has sent us letters stating that in 30 days, 30 days the claim is being reviewed to get our $500 deductible. We are getting no where with AAA or Solutions. I have given these companies the information they say they have tried to get. The parties that had the fire have State Farm insurance. I have called State Farm and they said it doesn't look like we will get the deductible. What upsets us the most is that it wasn't our fire, our house and garage were affected. There were two other houses and garages that were affected by this fire. I have all the documentation of the calls I have made to the various companies. Then our insurance rate increases by $80 because we filed a claim. Our AAA agent spoke to the main office of AAA, and they said they can't help us.


Insurance Expert Answer:

As you have homeowners insurance YOUR insurance company was obligated to pay you for the full fire damage you sustained, less your deductible, here $500. It's called a first party claim, as you are the insured, and your company owes you an obligation to make payment regardless of whether the fire was an "Act of God" or you or anyone else was fault. (This assumes, of course that you did not intentionally cause or aid and abet someone else to cause the fire, that your homeowners policy was validly in effect (the premium was paid, it was not procured by a materially misleading representation to the insurance company, etc.) and was reasonably adequate in amount of coverage and you did not commit fraud in the course of the claim filing (such as by falsely claiming the garage that burned was full of Von Goghs and Rembrandts and Folio editions of Shakespeare).

Thus far it's out the money and you're out the deductible. Your insurance company now automatically gets a "right of subrogation" under your homeowners policy to proceed against anyone who may be responsible for -- that is "at fault" for -- the loss it paid. That's the key -- was the fire caused by the fault of a neighbor, and if so is it worthwhile to pursue the subrogation claim? If the fire was truly an act of God -- such as a lightening strike -- that burned his house and spread to your garage and other neighbors' property, then there would be no fault on the part of the neighbor and he would not be liable for the damage to your house. That's one of the reasons homeowners insurance is so important.

Let's assume the neighbor was fully negligent -- he negligently left the blowtorch aimed at oily rags in a can in the sun by the pile of dry newspapers and firewood. Even though he's unquestionably negligent, if the neighbor has no assets, no insurance and the house is in foreclosure, suing him would be futile -- there would be no assets to collect when the company won a judgment. In many circumstances it is not at all clear that the neighbor was negligent, and sometimes the neighbor clearly is not negligent. For example, investigation may not reveal what caused the fire, or the fault of the neighbor may be very debatable -- the blowtorch was used normally and a spark ignited the fire. It may also reveal an unknown passing car flicked a cigarette out that landed on some newspaper and blew to the woodpile, causing damage to the neighborhood and the neighbor was not at fault at all.

If the fire appears to be the fault of your neighbor, say Mr. Jones, and Mr. Jones has assets and/or insurance, your insurance company normally will make a subrogation claim against Mr. Jones seeking to recover the amount of your damages -- including the amount it paid out and the $500 deductible you absorbed. Your insurance company actually makes the claim with the neighbor's homeowners insurance company (if he's insured). Similarly, if other neighbors' properties were damaged, presumably the neighbors' insurance companies would assert similar subrogation claims.

The adjusters from the various companies get together and resolve it. But if liability is not pretty clear, Mr. Jones insurance company just might say "he's not liable and we will not pay." Then your carrier has to decide whether to sue or arbitrate the issue, and it may just conclude that the cost of arbitration is not worth it, and it then drops the subrogation claim.