Pre-existing Damage

Abused or Justly Enforced?

By Rick Tutwiler / Published October 2024

Over the years the insurance industry has steadily tightened its grip on policyholders. What started with exclusions for issues like mold after Hurricane Andrew has now expanded into broad and restrictive measures. Insurers impose stringent limits on claims related to roof age, windows, and doors and employ scientific experts to date water damage. These tactics, combined with anti-concurrent causation clauses, high deductibles, and wind-driven rain endorsements, have made filing claims more complex and often lead to denied coverage. This is also compounded by increasingly complex pre-existing damage exclusions.

Pre-Existing Damage: A Closer Look

     Even before a claim is filed, insurers carry out an ongoing series of evaluations and assessments, including appraisals and cost reports to determine the replacement cost value (RCV) and actual cash value (ACV) of their insured properties. They also conduct risk assessments, prepare location statements, and develop schedules of values. These tasks are essential to ensure they meet underwriting guidelines and accurately assess the risks associated with a property.

     Recent legislative changes have aimed to pressure insurers into responding and paying claims faster. While these reforms are a step in the right direction, the practical application is often challenging, particularly for large-loss claims involving multiple perils. Insurance professionals we know have shared that these challenges frequently lead to the issuance of reservation of rights letters. When insurers suspect questionable practices or pre-existing damage, they may escalate scrutiny by involving mitigation auditors, causation experts, and engineers. They will also send lengthy information requests to associations, requiring full compliance with post-loss duties.

     We are also familiar with the intense scrutiny of windows and sliders; while some older buildings may be technically impact-resistant, they often have gaps or missing caulk, leading to water intrusion. Each claim is unique, and the evaluation must be fair and based on merit. While expert reports are often generic and filled with broad assertions, it’s crucial to understand the gravity of these issues for both sides as they can lead to criminal charges. Due diligence, vigilance, and being well-informed are essential.

What Is Pre-Existing Damage?

Pre-existing damage refers to any damage that occurred before you purchased your insurance policy or prior to the event specified in a claim. Sometimes this damage is known, and other times it goes unnoticed. It’s important to note that nearly all insurance policies exclude or preclude coverage for pre-existing damage, and the insurance companies can be very aggressive using these issues as a means to deny coverage.

Common Examples of Pre-Existing Damage

• Damage Before Policy Purchase—Any damage that was present before you acquired your insurance policy
• Natural Wear and Tear—The expected deterioration that occurs over time with normal use of the property
• Lack of Maintenance—Damage resulting from inadequate upkeep of the property
• Failure to Protect Property—Damage caused by neglecting to take necessary measures to safeguard your property

Best Practices for Your Association

1. Document
   • Carefully record your property’s current condition, including ongoing maintenance and preventive measures that address any pre-existing damage.
   • Photograph potential problem areas such as under sinks, near doors, and around windows even if they appear to be in good condition.
   • We recommend documenting your property’s condition now and doing so annually through appraisals or reserve studies. At Tutwiler we offer a similar service called Disaster First Recovery Services.
   • You should also encourage every unit owner to do the same documentation before they leave for any prolonged length of time.
2. Prepare
   • Keep detailed records of any repairs, including invoices, photos, videos, receipts, and remedial notes. For instance, if you’ve fixed a minor water leak or repaired damage to your roof or windows, retain evidence of the repairs to counter any future claims that unresolved issues caused additional damage.
   • Be aware that insurance companies are increasingly inspecting areas beyond the roof, focusing on fixtures under sinks, around toilets, and other water-prone locations.
   • Familiarize yourself with the limitations on water damage coverage, pre-existing damage exclusions, and the specific details of your policy.
   • These precautions can also help prevent disputes with the association and unit owners after a storm, particularly if owners are absent. Pay special attention to critical areas like electrical panels, plumbing fixtures, roofs, and metal mansards.
3. Understand
   • Read your insurance policy thoroughly. If you’re uncertain about any terms, deadlines, or insured responsibilities, consult your agent, a lawyer, or an adjuster who understands policy language to ensure that your coverage is up to date and that you fully understand any potential exclusions.
   • Stay informed as insurance companies are often a step ahead.

     Taking the measures above can go a long way in avoiding protracted disagreements and delays settling the claim. At the same time, the association board must ask itself if the insurance company scrutiny is justified related to the pre-existing condition of their property? It depends on the circumstances.

     On one hand, ethical insurers may be acting in good faith to prevent contractor liens, accruing interest, and costly assessments for unit owners. These measures could ultimately protect a legitimate claim from being denied.

     On the other hand, some insurers use these measures as a defensive tactic, but without thorough investigation, their justifications often fall short. In recent years, insurers have ramped up scrutiny, deploying teams of experts—sometimes as many as 30—to inspect every corner of a property, often multiple times, to build a case for exclusions. However, the conclusions drawn by their engineers are often unfounded and sometimes predetermined. For instance, in one case an association client’s roof that was damaged by Hurricane Ian should have been covered, yet the insurer denied the claim based on their engineer’s report. Fortunately, the adjuster indicated a willingness to reconsider if we provided a counter-report from our own engineer. In this instance, the denial was proven unjust, and we were able to overturn the denial.

     Some practical steps to take if your association gets denied for pre-existing conditions are to ask questions, maintain open communication with your insurance company, and do your homework. Always prioritize doing the right thing. For unit owners returning for the winter to find damage, ensure you document everything thoroughly, keeping detailed photos and records of any repairs. 

     When it comes to adjusting claims and distinguishing between different types of damage, a proactive and detail-oriented approach is crucial for securing a quicker settlement.

Rick Tutwiler

President, Tutwiler & Associates

Established in 1984, Tutwiler & Associates Public Adjusters is a highly regarded, licensed insurance claims adjusting firm that works exclusively for associations and their residents. Our property damage adjusters will remove the stress of dealing with insurance company red tape, freeing you to focus on more important association issues. Our adjusters are known for their expertise, attention to detail, client service, and results. If being treated fairly and getting paid quickly are important to you, consider hiring an experienced adjuster to represent your best interests and manage your claim. For more information, contact Rick Tutwiler, president of Tutwiler & Associates, at 800-321-4488 or visit www.PublicAdjuster.com.