Your Homeowner's Policy Doesn't Cover Everything

You awaken at midnight to the sounds of howling wind and rain beating against your bedroom window and tree limbs snapping in the backyard. It’s disconcerting, to be sure, but you take comfort knowing you have an “all-risk” homeowners insurance policy.

You might be surprised at what “all-risk” doesn’t cover.

“There’s a misconception that if you get full coverage, you’re covered for everything,” says Pamela Okano, an attorney with Seattle’s Reed McClure. “There are always going to be things that aren’t covered.”

“People tend to take their homeowners insurance for granted,” says attorney Paul Lawrence, with Preston Gates & Ellis in Seattle. “It’s just a bunch of paper that comes in the mail each year. We often don’t pay attention to the policy until there’s a problem.”

Policies touted as all-risk tend to lull homeowners into complacency, but Lawrence warns that the all-risk policy is not what it used to be.

“The scope of exclusions tends to grow over time as new issues arise, such as mold,” says Lawrence. “Then companies start limiting their exposure.”

Construction defects and mudslide, earthquake, and natural disaster damage rank among the common exclusions. Earthquakes can be covered, however, for those with a tolerance for high prices tags and huge deductibles.

Because companies vary in their coverage, Okano advises buyers to shop around. “Homeowners should talk with different agents and ask specific questions about what policies cover.”

It’s also a good idea to check with the Washington State Office of the Insurance Commissioner (www.insurance.wa.gov) to see if complaints have been filed against an insurance company.

Although insurance policies outline coverage, disputes still arise. Although mold is often excluded, there are situations in which it would be covered, depending what caused it.

“Mold is a complicated issue,” Lawrence explains. “There is some degree of a natural presence of mold [here] because of the climate in the Northwest. Insurance companies typically dispute whether the mere presence of mold is enough to trigger an obligation for remediation or if the degree of mold has to be significantly higher than a natural occurrence.”

Individual reactions play a critical role as well. “Not every person is equally sensitive to mold,” Lawrence says. “In addition, some scientific information suggests that, as you’re exposed to mold, your sensitivity increases over time. Insurance companies have argued that they don’t have to go to extremes to remediate mold problems to accommodate an occupant with an extreme sensitivity. I haven’t seen that argument prevail, however. What has generally prevailed is that the insurance companies have an obligation to put the home back into the state it was before the damage so the homeowner can inhabit it without adverse physical reactions.”

If an insurance company denies a claim, Lawrence advises homeowners to have an independent investigation, preferably by the type of contractor who repairs the particular type of damage.

“These issues turn on fairly fact-specific, event-specific determinations,” says Lawrence.

Companies are required by the state to respond promptly throughout the claims process—but exactly what that means is somewhat vague.

“In one situation, a 30-day response time might be adequate,” says Okano. “In another situation, there would be no way the claim could be adjusted in 30 days.”

“One of the best ways to protect yourself,” says Lawrence, “is to inventory your household, particularly items that are unique or of particular value.” Insurance carriers aren’t obligated to cover high-end jewelry, art or unique fixtures unless you’ve listed the items with the company or purchased specific coverage. Lawrence urges homeowners to discuss coverage with their insurance agent and to store receipts and the inventory outside the home.

Okano adds that homeowners should consider raising their coverage limits if significant home improvements have been made.

It’s best not to wait until the tree falls on your house before finding out whether your insurance company will make noise about paying your claim.