Appraisal Clause: Water Damage & Mold in Florissant, Colorado

Peak Claims received a request and made an agreement to appear as the independent appraiser for a private property owner (the “insured”) in an appraisal clause dispute for damages that originated as the result of an ice dam.  The property in question was a remote mountain custom built log home near Florissant, CO.  Phillip Crimaldi appeared as an appraiser for the insured on behalf of Peak Claims.

The insurer initially assigned the adjustment to an independent adjusting company (before appraisal) and offered final indemnity of $10,001.75 for repairs, and $2,337.38 for mitigation, totaling $12,339.13 before the policy deductible.

Background. 

This file is unique because the property is constructed on a hill-side, which rendered part of the property walls (in the kitchen) to exist below the grade, as shown in the photograph below.  The property entrance is located several feet below the northern wall and upper grade of the property.  This regional location receives more than 200 inches of precipitation per year, and the majority of the roof faces north which is exposed to lower levels of sun-light, therefore creating a large potential for ice dams.  Colorado is a notorious state for ice dams because of our large temperature fluctuations, not only between sunrise and sunset, but also in the middle of the day between light and shaded areas.

Photo of roof and property

The insured property owner realized a large ice dam several feet thick had grown onto his roof, and took to his own defense by using a propane torch (normally used for sealing asphalt) to melt the ice from the roof.  Hail damages were found on the roof and could plainly be seen at the time of our inspection.  Therefore, the residual heat from the winter heating months (evaporating through the roof) was likely the source of water intruding into the structure.

Hail damages were not pertinent questions to the appraisal because the cause and origin was already decided by the insurer to be a covered peril.   Generally, when dealing with the appraisal clause, it is outside the interest of appraisers to decide on any “coverage” related issues, including any questions of peril, or cause and origin.  The roof was affected by the ice dam and damages were significant enough to consider replacement of the affected section, which was included in our appraisal.

Mold and mildew conditions were also present in the areas which water crept through the concrete cast wall and roofing material, but the insurer alleged the mold and mildew were caused by smoke damage from the property owner’s use of a torch to melt the ice dam.  Of course, this makes little sense since the insurer shouldn’t be voicing their opinion during appraiser, whether at their own discretion, or through their appointed appraiser.  Additionally, smoke damage normally doesn’t cause mold and mildew; rather it is the use of water to mitigate the smoke (fire) damage that results in such concerns.   This portion of the appraisal was referred to our selected umpire, who is Certified Industrial Hygienist (CIH) experienced with mold damage.

Due to a unique configuration of a utility room and kitchen which sustained water damages the cost of the repairs were significantly higher than comparable losses.   Although not shown here, the utility room contained pump and sewage systems in close proximity to each other (due to the property’s remote location) which had to be removed and reset for access to mitigate and repair certain areas along the north wall of the home.  Colorado property owners are also subject to higher costs for repair when located in excess distance from major city hubs.

Water entry from ice dam

Appraisal Clause & Due Diligence.

This appraisal clause read similar to others and required a “competent” and “impartial” appraiser, noting the difference between the requirement of some policies for a “disinterested” appraiser.

Two conferences in person were held between Mr. Crimaldi and the opposing appraiser (for the insurer), along with several other telephone conferences, but no conclusion on the total amount of the loss could be made and the matter was referred to the umpire for a ruling on concerns that could not be agreed upon.

Mr. Crimaldi argued the mold, mildew, and all other visible damages not otherwise disputed by the insurer were caused by water damage flowing from the ice dam.  The insurer wrongfully argued that mold and mildew were limited by the policy, but our experience is correct in stating that such matters are questions of policy language, and therefore reserved for the resolution outside of appraisal.  As appraisers (and umpire) it was our duty to determine the “amount of the loss”, including damages resulting from mold and mildew if they appear to flow from the declared peril.

Umpire Findings & Award.

Contrary to clear and evident findings of mold growth in the crawlspace at the time of our appraiser survey, these conditions had apparently “dried up” by the time this umpire’s survey was conducted several weeks after our original survey, leaving only water stains on the interior sheathing of the roof.  Peak Claims expected that appraisal clause discussions will be an “open forum” (to the immediately concerned parties) but we did not receive a copy of documentation presented by the insurer’s appraiser.

In consideration of the umpire’s cost for services we opted not to engage further and the total award presented by the umpire was $27,379.51.  This figure represented an increase from the original indemnity of $15,040.38, (+121.9%) before service costs from the umpire and insureds costs for our appraisal service; ultimately an award in favor of (our client) the insured property owner.

Analysis. 

An independent appraiser often has a unique window into the findings of other independent (or staff) adjuster predecessors.  Although it may not be relevant, a property owner is almost always willing to share claim documentation that existed before the appraisal, which can help paint a picture about the evolution of a claim.  An appraiser must make an independent determination of loss value, but it’s helpful to review correspondence between the insured and insurer to help gather opinion and fact regarding the loss itself.

In this case, several items were awarded by the umpire which were not considered in the adjustment (pre-appraisal) process.  Those damages are normally covered losses when they flow from the covered peril, and were good cause for discussion at appraisal.  We also knew the heat (from the insureds use of the torch) didn’t create mold and mildew because such damages stem from moisture rather than dry heat applied briefly in an effort to melt ice, and the insured had an obligation to mitigate his damages.  We do not, however, recommend any homeowner utilize an open flame source to mitigate an ice dam.  Warm water is an appropriate method for resolving ice dam concerns, and other equipment such as heat wires are widely used for the prevention of such conditions.

Despite extensive communication between appraisers and a significant amount of time spent determining whether all parties met the independent requirements of the appraisal clause, we were able to limit the cost of appraisal services to this insured (prior to appraisal) for an amount of less than $900.00.  This was easily accomplished because Mr. Crimaldi was able to quickly identify factors important to this appraisal and because of previous similar experience.

This appraisal resulted in a final increase of 102.8% after costs which included 50% of the umpire’s fee.  Minor costs for additional living expense were also considered in this loss due to the modest size of the insureds property and lack of usable facilities within the property at the time of the loss and during construction.

Phillip A. Crimaldi has over ten years of experience as an appraiser representing “both sides of the fence” (property owners / insurance carriers) in residential and commercial property damage appraisal clause valuations.   Peak Claims is happy to assist you with any appraisal clause service needs, and you’ll enjoy the savings compared to our competitors.