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Discussion Starter · #1 ·
This topic has popped-up in various Threads and unfortunately, often takes away from the "real" intent of the Thread (I too, am guilty of this). I'd like to move all the "legal" discussions to this thread so as not to dilute the others.


The general assumption seems to be that if you do NOT get a permit, do NOT follow code, or even alter a device to the point where it is no longer within code, that the Insurance can an (presumably) will use that as a reason to deny your claim for a loss, regardless of whether the item in question actually caused the loss. As the homeowner, it will be up to you to prove otherwise. The converse, is that if you DO get a permit, and DO get everything inspected, that the Insurance company cannot deny your claim.


I find it hard to believe that an insurance company can actually deny a claim simply by finding 1 incidence of a code infraction. That seems way too simplistic. I mean, I've seen people who've burned down their house by storing a propane tank in their garage. As far as I know, the Insurance company paid. I can, however, see an Insurance company (after paying for a loss) going back to a company, a contractor, or an inspector, in an attempt to recover partial damages through subrogation.


I am NOT a legal expert, in any way. And I am NOT trying to attack anyone's comments or opinions. I have never even had the misfortune to make a claim against my homeowners insurance, so I speak completely from the hip. I'd be interested to hear any evidence for or against the various claims. And please, let's try to keep the "urban legends" out of it.
 

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I am not an insurance expert, but I am an attorney. The answer to your question, is that an insurance company cannot deny your claim simply because you failed to obtain an inspection and get a permit.


They must show that your failure to follow codes caused the damage. As a practical matter, however, they will always find creative ways to latch on to your failure to get a permit. This is a classic tactic of making you look bad as a defense.


At a minimum they can attribute a portion of the loss to your failure to follow codes - e.g. a kitchen fire would not have spread as rapidly if the theater had the appropriate .


Hope this helps.


On a related note, anyone had a UPS claim? I've had 2 in 3 years, both for electronics, and their immediate reaction in each is to deny the claim for poor packaging. After talking to a couple other people, I've heard identical experiences. My problems are:


1. There is no way to re-create how I packed the object (either the material has been pulled out, the box ripped, or the packing thrown away by the recepient before UPS inspects it).


2. When you ship a package by phone, online, or at UPS, they sell you the insurance, but do not offer any of the terms. The website doesn't even have a click-through to the terms of the insurance on the pickup request.


3. Even when you do dig through the website to the shipping guidlines, they are presented as "good ideas" and "tips" not rigid guidelines.


Frustrating!
 

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I lifted the following quote from a newsgroup posting:


"Most insurance policies provide exclusions for when you've done something illegal. In many areas, doing electrical work without a permit or getting inspected is illegal. In Canada, in theory, you can even go to jail for

violating the electrical code."


Sounds like a round about way to deny coverage.


Bottom line, the insurance companies are out to make money, and if they can reasonably find an excuse to deny you coverage, they'll likely pursue it. For me, the $40 permit was worth the extra piece of mind.
 

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Quote:
On a related note, anyone had a UPS claim? I've had 2 in 3 years, both for electronics, and their immediate reaction in each is to deny the claim for poor packaging. After talking to a couple other people, I've heard identical experiences.
I had the proprietor of a storefront mailbox establishment tell me a few years ago that UPS’ standards for “properly packed†is a minimum of 4†inside between the item to the box, the space tightly filled with packing material. I’m sure UPS likes this because packing as such virtually and physically guarantees no claims. Not to mention higher shipping charges due to the larger package. Of course, this would preclude “send it in the original factory box;†none of them meet the 4†standard.


As far as “proving it,†I’m sure photo documentation of the item and packing process would suffice.


Bottom line, I would never expect to get an insurance claim from UPS short of an actual lost or stolen package. So I pack mine as if I expect it to be run over by bulldozers.


Regards,

Wayne A. Pflughaupt
 

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I just wanted to post a few links concerning this topic:


========================================

CONSEQUENCES OF WORKING WITHOUT A REQUIRED PERMIT:


...

4. If you have an insurance claim related to any work done without permits, your carrier may not pay the claim. They often check with building departments for permits and the required inspections.

http://www.mountolivetownship.com/building.html


I have found numerous similar wordings from various city hall web sites.

========================================


Here is an interesting (but not entirely revelant) court case where a building permit DEFINITELY saved their a$$!

http://www.ibiblio.org/pub/docs/nc-s.../may1794/banks


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From Standard Insurance's "How to file a Claim" page:


FILING FIRE CLAIMS


ADDITIONAL REQUIREMENTS


For building Loss

...

4. Certified copy of the building permit

...

http://www.standardinsurancecom.com/claims.html


I have also found other instances of the above at other insurance company web sites.

========================================



If you have a code infraction that is not related to the claim, then the insurance company is not likely to use it against you. However, if you build your entire HT without a permit (including wiring), and a fire starts in there for any reason, you are going to face extreme difficulties.
 

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Quote:
On a related note, anyone had a UPS claim?
I think UPS has been eaten alive with claims in recent years, most of it due to their own rough handling of shipments.


Ironically, the one time I did ship something that was indeed improperly packed, it got damaged and they paid the claim promptly. Go figure.


Our local UPS facility will no longer accept sealed packages. They want to see the packing, then they seal it. I should think that would backfire on them, because I should think they would have no recourse except to pay if they've pre-inspected and approved the packaging.


Deane
 

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Discussion Starter · #7 ·
Good links cgblack!


There is no doubt in my mind that a permit and inspection record will definitely help if there ever is a question.


In states where homeowners are required to have all work performed by licensed contractors, I can that ANY unlicensed work could be considered illegal, although it still seems like they would have to "prove" that it was the illegal work that caused the loss.


But I wonder what would happen if it WAS inspected, and there was still a failure in one of the "inspected areas". I know my city (sorry, no links, just words from the building inspector) that the city cannot be held liable for a failed system even if they DID inspect it. In either case, I may have caused the failure because of shoddy work. It just doesn't seem like an argument that can hold up.


It would be interesting to hear a case study of someone who has actually had a claim denied based on these grounds. What provoked the Insurance company to investigate? What was the appeal process?
 

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They make their money by paying out as little as possible. It's that simple.


If you even have to ask, you are better off getting the permit. What a long and expensive headache it would be if something bad happened which may or not have been your fault and they decide to limit reimbursment or not reimburse at all.


If the damage was significant enough, it could be a financial life changer if you are deemed inelidgeable for coverage.


Remember, an ounce of prevention..............


Jeff


Jeff
 

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Quote:
Originally posted by thebland
They make their money by paying out as little as possible. It's that simple.

Actually, they make money by spreading risk, and must strike a a balance of being credible and avoiding fraudulent claims. If your toaster causes a fire in your kitchen, they will not deny your fire loss because you have a home theater. They will pay for damage to any equipment you have to policy limits, as well as any damage to policy limits. They will likely investigate as far as to exclude arson, assess monetary damages, and make you submit receipts for things that seem out of line with statistical data. (for example "$8,000 seems excessive for a pair of speakers since the national average is under $500, do you have a receipt?")

On the other hand, if faulty wiring in your jury rigged home theater causes a fire, and the fire department isolates the cause to uninspected, out of code, shoddy workmanship, you have a problem.
 

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What about the case where you did all the work yourself (to code) but do not have a permit nor had the work inspected? It really isn't that hard to run a new circuit from the box to a room. Most (all?) of this is really common sense.


I did all of my own wiring (new circuits) and I have never had a problem; it has been wired to code. I guess if you stay up all night worrying about it it is better to either get someone to do it or have it inspected.
 

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I think it only matters if (in the unlikely event) a fire is determined to have started from there, the house burns down, and the fire dept determines it came from your non-permited basement. Then, you might be in trouble.


JEff
 

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Discussion Starter · #12 ·
Quote:
Originally posted by Swampfox



...They will pay for damage to any equipment you have to policy limits, as well as any damage to policy limits. They will likely investigate as far as to exclude arson, assess monetary damages, and make you submit receipts for things that seem out of line with statistical data. (for example "$8,000 seems excessive for a pair of speakers since the national average is under $500, do you have a receipt?")...
Once my basement and Theatre were finished, I went an talked to my Insurance Agent (State Farm) and had both the basic square footage added, as well as declaring the Theatre as a "special purpose" room. This was to register the fact that the cost to reconstruct this room would be much more than the standard charge per sq. foot.


Although they insisted there would not be a problem replacing the equipment, I listed my projector and the electronics as addendums on the policy. State Farm considers the Theatre equipment as part of the house "contents", not the dwelling. In the case of a complete loss, the "contents" of the house is limited to 50% of the cost of the dwelling.


In the end, they tell you what your $$ coverage is for dwelling and contents. If you feel that these numbers are too small, they will gladly charge you a larger premium for a larger $$ coverage.
 

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I would have to say that most of the work that seems to be done by members of this forum would be considered over kill by most standards. The term GROSS NEGLIGENCE I believe would be how the insurance company would describe using 18-gauge zip cord to run an outlet. The reason that some chose not to pull a permit isn’t to do shoddy work. Fire marshals can see the size wire used, the breakers used, ect, ect. As far as fire spreading in a theater. Where’s the air going to come from? Most are so damn tight that the fire would snuff itself if it did start in there. I am going to climb on a soapbox her for just a second. I do feel that a hard-wired smoke detector in the theater are a MUST just so that you know if a fire is in the house. Most of the theaters are so sound proof that with a movie playing you wouldn’t know till it was to late and most only have one way in and out. That would be catastrophic. Ok I am climbing down. I did lose a home to a fire. It was because of wiring. It was an older home, and the work wasn’t mine. The work wasn’t visible, and I didn’t have a dedicated theater. My new home is new so any work done beyond the final is defiantly mine. I am sure I would have a little flack if the insurance had to pay a claim for all the extra equipment I have that isn't the norm, but I doubt from what I have heard, read and seen they would deny one. Just my opinion for what it is worth. If you realy think about it I would venture to say that over half of the finished basements and attics don't have a permit for them.
 

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I do alot of shipping with UPS and have had a few claims. Only in one case was the claim denied based upon packaging. I protested their poor judgement and they sent someone out to inspect the packaging. They again denied the claim. In this case, the items were shipped in the manufacturer's original shipping boxes (these were amplifiers) and the manufacturer was a contract shipper with UPS. The manufacturer contacted their UPS rep and the claim was paid ASAP.


Then there is FedEX Ground. I shipped a product via FedEX Ground (motorized curtain rod) which arrived at the customer's home in very bad shape and bent. Again, the product was shipped in the manufacturer's original packaging. Their claims procedure required they pickup the package from the customer, ship it to a "center", and evaluate the claim. They picked up the package (failed to give a receipt to the customer) and then lost the package. They denied the claim for damage on the basis they couldn't inspect the damage. They denied the claim for loss since it could not be proven they picked it up. I denied FedEX further business.


Insurance


I have my electronics scheduled on my homeowners policy to avoid debates later. I also have a video tape of every room in the house showing all furnishings, collectibles, etc. The video tape is in a safe deposit box.
 

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I don't understand why someone wouldn't get a permit and inspections if it's required in their area. If it's illegal to make certain modifications to a structure without a permit, then it's illegal... period. Would you consider telling people not to bother to get a driver's license if they know what they're doing behind the wheel -- probably not because it's illegal. There are other repercussions to building without a permit including becoming liable for back payment in property tax resulting from the increased value of the modifications (a potentially huge surprise tax bill), difficulty in selling your property as a result of having work that was not authorized or inspected... there are more.


By the way, if you get a licensed professional to do the work, then they should have liability insurance which covers faulty or defective workmanship. If there is an issue of faulty workmanship then the homeowner's insurance would have the option of denying the claim and having you file a claim against the person who performed the work, or they would subrogate (assign a portion of the claim amount) to the person who performed the work's insurance company. I don't know this from experience though... we haven't done any faulty work :D


And lastly, I strongly suggest using a licensed contractor if you're not performing the work yourself. In most states contracting without a license is a misdemeanor crime, and using an unlicensed contractor is just a problem waiting to happen -- this one I do know from experience (the problem waiting to happen part).



Disclosure: we are licensed contractors and I have professional bias.
 

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I don't know a licensed contractor that would take a job that dosen't have a permit pulled. I am sure there are some but none that I know. Most of the work done is DIY by forum members who chose not to for whatever reason. Just my $.02:)
 

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One other thing regarding insurance is the fact that your insurance policy is only as good as your agent.

My wife and I learned this the hard way during the recent completion of our new home.

I had almost $3000 in tools stolen from my newly constructed pole barn during the final completion stages of our new home. My wife and I told our PREVIOUS agent that we would be storing a good majority of our possessions in the new barn while our house was being completed so our agent told us we would be covered under our current construction policy. We found out the hard way that we should have had a home-owners policy to properly cover our belongings and we are now out the money/tools because our agent sold us the wrong policy. We read the policy many months back when we originally purchased it, and then again after the break in. It seems now, every time I read the policy, I find a new way to interpret it wording.

Bottom line, it is my belief insurance companies purposely make policies confusing so when it comes time for pay-out you are at their mercy. Make sure your agent is up on his or her knowledge of the policy you are buying and get second and third opinions on whether the insurance will suit your needs.

We now take our policies to my attorney.

Craig:
 

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Quote:
Originally posted by suffolk112000
We found out the hard way that we should have had a home-owners policy to properly cover our belongings and we are now out the money/tools because our agent sold us the wrong policy. We read the policy many months back when we originally purchased it, and then again after the break in. It seems now, every time I read the policy, I find a new way to interpret it wording.

Craig:
If you told you agent you wanted coverage, an he told you you were covered then your agent may have commited an "error or omission", which is the insurance equivalent of malpractice. He is probably insured for that risk. You should ask your lawyer if you have a valid claim.


SM
 

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Discussion Starter · #19 ·
Quote:
Originally posted by bwolff
I would have to say that most of the work that seems to be done by members of this forum would be considered over kill by most standards.

...

I did lose a home to a fire. It was because of wiring. It was an older home, and the work wasn’t mine. The work wasn’t visible, and I didn’t have a dedicated theater. My new home is new so any work done beyond the final is defiantly mine.... If you realy think about it I would venture to say that over half of the finished basements and attics don't have a permit for them.
bwolff,

Thanks for your story. That was the kind of stuff I was curious about. Did the Insurance company question whether there you had done any "improvements"? Do you know if they actually determined whether the faulty wiring was original?


I'm certainly not advocating avoiding a permit. On the contrary, I have always had a good relationship with my inspectors. What I was really digging for was to dispell (or confirm) what appears to be an urban legend about the "protection" provided by getting a permit and inspections.


I've been told by my local inspectors that the city is NOT responsible for anything they may have missed during an inspection. That seems to imply (to me) that an Insurance company would not necessarily take the existence of a permit as an acceptance of workmanship. Consequently, they could take any infraction, whether inspected or not, and use it to deny a claim. That just all seems a bit far-fetched.


Again, I'm not advocating that people just do whatever they want, with no concern for local codes. If you DO violate any codes, before or after inspection, and the city chooses to pursue the issue, they could actually shutdown your house for occupancy. They can issue a summons to the owner and condemn your house until compliant. But, I still don't think that would keep the insurance company from paying a claim.
 

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I don't know how your area is, but where I am, the permits are separate. For example, I called the building inspector and was told that unless my home improvement exceeds $10,000, I don't need a building permit, even though I still need to get individual trade permits for each install (elec, plumbing, HVAC). I'm not doing any plumbing or additional HVAC, so all I needed was the electrical permit.
 
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