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AttyHeather, Lawyer
Category: Consumer Protection Law
Satisfied Customers: 677
Experience:  15 years law practice experience
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I opened an insurance claim with my homeowners policy

Customer Question

I opened an insurance claim with my homeowners policy regarding water damage. When my adjuster came to my property, I told him that the water mitigation company contacted a "pack out" company that came and picked up my items to try to salvage my documents. I told him that I had 15 years of work in file boxes in my garage. The packout company came on the day of my claim, my adjuster came two days later after most of my items had been packed. Now, they have a bill for $50K because there were many hours of drying out pages and pages of documents. I received a RESERVATIONS OF RIGHTS letter saying that my policy only covers for personal property related to business up to $2500. I explained that I am a sole proprietor and that I file a Schedule C. The files kept in my garage I have been keeping in case of an IRS audit, etc. I don't consider them "business" I consider them my personal property. How can I respond to the ReSERVATION OF RIGHTS letter, and what rights do I have as an insured?
Submitted: 7 months ago.
Category: Consumer Protection Law
Expert:  AttyHeather replied 7 months ago.

Hi! I'm Heather. I've been a practicing attorney for the last 15 years, and I'd be happy to assist you for informational and educational purposes.

Expert:  AttyHeather replied 7 months ago.

This is a situation where you need to get very familiar with your insurance policy document. You need to know what is covered and what is not covered, and make sure that you categorize your loss under what is covered. I can't tell you what is covered and what is not. Policies vary from company to company, so you will have to read your policy and have a good grasp on it. You can dispute the insurance company's decision, but you need to make sure you posture your claim correctly from the beginning, or you risk losing coverage. Does this make sense?

Customer: replied 7 months ago.
I do understand that policies differ. I am in the real estate business. In my policy there is a special limit of liability for $2500 "on property on the "residence premises" used mainly for "business" purposes. I have kept these files for the past 10 years in case of an IRS audit. (which I have had in the past) I do not consider this property used for "business purposes" as I file a SCH C as a sole proprietor. An audit would not be on my business, but would be on me personally. I consider this my personal property. The definition used in the policy states that a "Business" is a) "a trade, profession, or occupation engaged in on a full time, part-time, or occasional basis; or b) any activity engaged in for money or compensation. These files are not a business asset, I consider them to be my "personal property." The letter is a Reservation of Rights letter. It is not a denial of my claim
Expert:  AttyHeather replied 7 months ago.

You are definitely in a grey area in the policy. I have had alot of cases where I have had to just argue it out with the adjustor, and we'd go back and forth for a while and alot of times, they'd come back and pay it, even though they first denied it. You can say that those tax records were not used in the actual "activity engaged in for money. . ." But rather, they were for your personal audit purposes. In addition, just because property was once business property does not mean that it always retains that character of business property. It can become converted to personal property if that is the new use of the property. Did you have any records in there that were strictly personal, and never related in any way to your business? That might help. You might also argue that your business property is kept at another location (perhaps you have an office that is not in your home), and when you put the records in the garage for storage, with your other personal storage items (such as Christmas tree decorations) that the property became personal in nature. You could also argue that you do not pay business taxes on this property (I don't know how strong this argument is, but many states have personal property taxes assessed against business property, and if it was really business property, maybe it would have been listed as business property in that tax assessment). Like I said, I really think this is a gray area - It's not going to be cut and dry. I actually had my home burn down about 8 years ago, and I had a bunch of law books that were destroyed in the fire, and even though I'm a lawyer, they were covered under the homeowners policy, since they were at my home. I really did not get alot of grief over that either. I hope that has helped. And feel free to ask follow up questions if you need to.

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