 Welcome to Kondo Insider on Think Tech Hawaii. I'm your host, Attorney Nalan. Joining me today is our guest attorney, Trad Ierley, an expert on insurance law and my fellow director of our law firm, Daman K. Leon Cupchuck-Hastard. Trad once again was selected by his peers for inclusion in the 2023 edition of Best Lawyers in America for his work in insurance law, litigation insurance and commercial litigation. He was also named Best Lawyers 2022 litigation insurance lawyer of the year in Honolulu. Trad is also recognized by super lawyers in the area of insurance coverage and in the top 25 Hawaii super lawyers list. He's the author of the very popular legal blog, www.insurancelawhawaii.com. He has regularly presented at American Bar Association Insurance Coverage Conference and published in the ABA's coverage journal. As we all know, many homeowners and businesses who suffered loss in the Maui fire are currently navigating the insurance claim process. Total loss from property damage and business interruption caused by the devastating fire was believed to be over $4 billion per recent news report. I along with my colleagues recently participating in the HSBA's legal line for Maui, many questions received are insurance related. For example, vendors approached homeowners representing themselves as independent public adjusters soliciting business and alleging they can help homeowners recover loss. Many are wondering whether these are legitimate inquiries or scammers and what they need to do. So today I invited Trad to share with us some basic information on the claims, tendering, adjusting and settlement process, rules of different type of adjusters and insurance coverage attorney, hope the information provided will be useful to the people you need. Welcome, Trad. Thank you, and thank you for the nice introduction. So, Trad, I believe many homeowners now have located their paperwork probably has already tender to insurance and they are now in this process. Can you help us point out some of the considerations the business owners, homeowners, they should keep in mind when filing this claim and then cooperating with the insurer to provide information and documents? Yes, so yes, hopefully by now insurers have given notice of the loss to their insurers. Some policies have time sensitive reporting deadlines, but certainly three weeks out from the fire is still well within the period for submitting a claim. And as you noted, it's important to cooperate with the insurance company. There's typically a duty to cooperate in the policy. So the insurance company is probably going to request records, deeds, pictures, anything that you have to substantiate your loss and coverage items under the policy. And insurers should keep paying their premiums to make sure the policy is current and valid throughout this period, right? That's important. Yes, that's important to keep the policy valid, to keep payment of premiums and cooperate with the insurance company. So now let's move on to the adjuster topic here. So what is the adjuster and what do they do? What are the different types of adjusters out there? So there are several different types of adjusters. One is an adjuster for the insurance company. And of course they're looking out for the interests of the insurance company. There might be an on the ground adjuster who comes to investigate. Sometimes that is a company adjuster who's sent out by the company or an independent adjuster that's hired by the insurance company to come and inspect the loss. And then an advocate for the insured is a public adjuster. There are three or four good public adjusters in Hawaii and they assist the insured in investigating and substantiating the loss. They typically charge a percentage of what your recovery might be. So if there's no recovery, there would be no charge. So the insured doesn't have to pay anything for the company adjuster or independent adjusters but they need to be prepared to be willing to pay the public adjuster according to their contract. And their laws in Hawaii requiring licensing and bond for public adjusters. So people can try to look that up to see if the winner who approached them are legitimate or not. That's correct. And I'd be surprised if a good public adjuster is on the ground trying to solicit business in Lahaina. But there's a public adjuster, Robert Jocelyn in Waaluku and there are a couple of public adjusters here on Oahu, they're all good. So, but there's a question that, okay, so your public adjuster help you put together, estimate the damage. Is there an obligation for the insurer to just accept that estimate or they can disagree? You mean the estimate from the insurance company? Yes, the insurance company can disagree with the estimate provided by the public adjuster, right? Correct, yes. They will likely have an estimate from their own adjuster which may be different from that of the public adjuster. So when the parties are into disagreement, how do they resolve their disputes? So typically there is an appraisal procedure in the policy and if the parties disagree on the amount of the loss, a dollar value of the loss, either party can give notice to the other that they want to invoke the appraisal provision and typically each side appoints their appraiser, one appraiser and then the two appraisers, if they cannot agree on the dollar value of the loss, then they appoint an umpire who is the final decision maker and deciding the amount of the loss. And then the insured and the insurer would each pay for their appraiser and then typically split the cost for the umpire. Thank you. And then the appraisal process can be, it depends on the policy language, but it could be determined just on the basis of written materials submitted or there could be an actual hearing that's like an arbitration to determine the dollar value of the loss. The appraisers do not determine the cause of the loss. They only determine the dollar value of the loss suffered by the property. And according to the Post Disaster Claims Guide published by National Association of Insurance Commissioners which our audience can download a copy from our DCCA website, there are two tips given in this guide. One is public adjuster should always provide the insured a contract which explains the scope of services they're gonna provide to the insured and how much the insured will pay. And the other tip they gave is if you hire a public adjuster before the insurer, insurance company provided an initial offer, has already made an initial offer, then always ask about the fee and the contract should clarify. If the fee you will pay to the public adjuster will be based on the total the insurance company pays or on the amount of the public adjuster negotiates for you that will make a difference there. And now let's move on to coverage council. In the worst scenario and there are many people out there that will be a desperate situation when the insurance company denies coverage or there's a super long delay in adjusting the claim or when not issuing payments. And then we will be thinking about that's a good time to get coverage council involved. So what is the typical procedure or process where the insurer notifies the insured of its coverage possession? There's always the concept called reservation of rights for common people with no legal background. What does that mean? So when the insurer is not approving the claim and maybe they're investigating or they need more information they will typically send a reservation of rights letter advising the insured of possible exclusions or reasons for denying the claim. Explaining that they're not sure at this point if the claim will actually be excluded because they're still doing an investigation but they are reserving their rights to deny the claim based upon certain provisions in the policy. And as they continue their investigation they may decide there is no coverage and they'll send a denial letter or on the other hand they may agree that there is coverage and then agree to a payment. So then that's when they will probably propose a settlement offer to the homeowner or business. And then what about the payment part? Is it gonna be a lump sum or multiple payments? How does that work? It depends sometimes early in the investigation the insurance company realizing that there probably is a covered loss may make a partial payment and then continue its investigation to see if further payments are warranted or it could be that the insurance company in a fire loss that's generally covered by a homeowner's or a commercial business policy and the insurer may just decide to pay a lump sum for the loss. And then again, if the insurer disagrees on the amount of the payment and thinks they are not being fully compensated they have the option of invoking the appraisal process. I see, I mean there's gonna be situations where very quickly a homeowner could get a very shady settlement offer. You may be really short on cash. Is it a good idea to rush to accept that claim or even some insurer may present a release paperwork immediately accept this and sign this paperwork. That would be a big no no right for insurers. Yes, I think that's correct. At that point, I think it would be prudent for the insured to contact a public adjuster because they can help the insured evaluate the amount of the loss and advise on what might be covered and what benefits are due under the policy. When should insured consider like higher escalating, getting an insurance coverage attorney like you getting your assistance? Well, I think some insurers may want a coverage attorney at the outset to help guide the process. So after the Maui fires, some large companies, big businesses have hired coverage counsel right away to help orchestrate putting the claim together, business interruption claim and having a coverage counsel sort of oversee what's being done and what's being offered to the insurance company. A homeowner, maybe it's a little more difficult to go out and hire a coverage lawyer. They may want to wait and work with the public adjuster. And if it looks as though they're not being treated fairly or their claim is about to be denied, then they may want to talk to a coverage counsel who can more easily argue the merits of the claim and try to dissuade the insurance company from denying the claim. And if that doesn't work, then of course the coverage counsel with the approval of the insured can prepare and file a lawsuit, a coverage lawsuit to recover benefits under the policy. If the insurance company denies a claim and the insured is forced to file a lawsuit and if the insured prevails in the lawsuit and from the court gets an order to pay benefits, then the insured under a statute in the insurance code can recover reasonable attorney fees in addition to the benefits under the policy. That's a great to know. And we've all heard about the concept insurer bad faith. So what is that? And what are some typical examples of potential bad faith claims insured can make against the insurance company? So under Hawaii law, bad faith is defined as unreasonable behavior by the insurance company. So it doesn't have to be malicious. Doesn't have to be willful, but if it's an unreasonable decision. So if there's no dispute that it should be covered such as a fire loss and the insurance company does not have a good basis for denying the claim that it would be unreasonable for them to deny the claim. So that would be grounds for a bad faith lawsuit. Even if there's no coverage under the policy if the insurance company mishandles the claim. In other words, they're not responding to the insured's inquiries if there's a long delay and they're investigating the claim. If they're losing documents and repeatedly asking for documents that they already have that may be deemed unreasonable by a court and could be an act of bad faith even if there's no coverage under the policy. Wow. So who has the burden of proof to establish such a claim? So the insured has the burden of proof to show that the insurance company has been unreasonable and then the insured has to show how they've been damaged. There has to be damage because that's an element of bad faith. But if there's a long delay and the insured is having to pay out of pocket to mediate the loss or to fix or replace damaged property then that's probably a good indication of damage that the insured can recover. And then of course, if it's really bad, if it's really willful, wanton, unconscionable, the insured can also make a claim for punitive damages which is designed to punish the insurance company for really egregious bad faith. So if I insured believes there is such a bad faith going on what kind of evidence they should start gathering to be prepared for a potential action down the road or consultation with coverage council? I think it would be good to keep notes on all communications with the insurance company, keep all written communications, make notes on any phone calls back and forth with the insurance company especially if there's a delay in processing the claim it would be very important to know the dates upon which communications were had and what the insured is asking for and what the response of the insurance company is. Let's see, you know, assuming I'm a homeowner I got a call from the insurance side and I can turn on the audio recording on my phone and record that since it's in Hawaii one party comes into that that would be a admissible evidence, right? Right. Yeah, so let's see, give some examples if you know an insurance company made a wrong decision not to pay the claim. Is that enough to prove there's bad faith? It may not be because it has to be unreasonable. So if there's a difference in interpretation of the policy and whether or not a claim is covered and the insurance company is not being unreasonable maybe it's an issue that has not been decided in Hawaii. So it may not be unreasonable for the insurance company to deny the claim. But if it's obvious that there's established cases or if the language and the policy is clear that there should be coverage and the insurer is still denying coverage that could amount to an unreasonable denial and raise to the level of bad faith. What is the Hawaii statute of limitation or time bar on this kind of action against insurance companies? So it's unclear if under Hawaii law if bad faith is a breach of contract or a tort claim a breach of contract statute of limitations is six years but for a tort it's two years. So we always advise clients who may have a bad faith claim that they need to file any claim for bad faith within two years of whatever the bad faith action might be. That reminds me of another provision in the policy in some policies. In addition to the statute of limitations there may be a suit limitation provision which says if you're going to sue the insurance company you have to do so within a certain number of years stated in the policy. So the statute of limitations may be two or six years but the suit limitation provision may say you have to sue us within one year and that would prevail over the statute of limitations. What is the typical process for a homeowner or business to resolve coverage dispute with the insurance company? So the typical process is I think for the insurer to communicate with insurer to try to get some relief. If that doesn't work then I think it's time to consult with a coverage council who's probably going to write a detailed letter arguing why there should be coverage breaking apart all the language of the policy going over the substance of the loss and arguing that there's coverage. Typically the insurance company is not swayed by the coverage letter or the demand letter from the attorney. So unfortunately that means that the next step is to file a lawsuit against the insurance company. Is it a typical for insurance contract to also have ADR clause and would that be binding upon the insurer? Yes, there are policies that provide for even sometimes mediation and also provide for binding arbitration. So if there is such a provision and if neither side, if one of the two sides does not agree to waive the arbitration provision then the dispute would go to arbitration instead of going to court. I see. Thank you so much for your time. I think we've covered a lot of information and we wanna wrap it up like for the people who are navigating that difficult and will be very likely would be very lengthy process. If you make three like summarized advice or suggestions, what would you see to them? First of all, read your policy. If you are having trouble understanding the policy then consult with a lawyer. Secondly, if you're having problems with the insurance company and you're having problems collecting information and establishing the amount of the loss I would consult with a public adjuster. And thirdly, I would consult with coverage counsel if you're still getting nowhere after working with a public adjuster and consider the possibility of having to file a lawsuit. Yeah, and also I think you should definitely do diligence before you hire the or pay out of pocket for your public adjuster because there may be bad guys engaging in kind of scams post-disaster which is horrible, but you don't wanna be victim again and that kind of post-disaster scams. And if you have, I think if you have difficulty affording attorney, the HSBA right now has expanded its legal hotline to serve Maui residents. And before it was only run on one hour on Wednesdays but now the program's gonna run on Tuesdays, Wednesdays, Thursdays till September 21st from 9 a.m. to 5 p.m. And the hotline number is 808-537-1868. And many of my colleagues and my peers at the bar, we've been all voluntary at our time. There are also attorneys who take on pro bono representations at this point to try to help as a community. Our peers are with all the people who lost their life or properties, suffered loss in the fire and wished them the best. Thank you so much, everybody. Thank you, Tread.