Car owners have begun a sad trend of suing their insured and claiming that the insured's contractors and / or public adjuster fraud inflate prices. Car owners charge these charges even if the insured's contractors and / or public adjusters also use Xactimate to estimate the repair costs to reach a one-time agreement. By taking this drastic step, car owners and their attorneys confusingly claim that Xactimate results are fair and reasonably priced for them, but result in fraud when the insured's contractors and / or public adjusters produce an estimate using the same software. This trend is both shocking and worrying for car owners' insured.
Like many other insurance companies, car owners use Xactimate to provide estimates to repair damage resulting from a covered loss. Xactimate is the standard cost estimation software used by adjusters in the insurance industry to calculate the expected cost of repairing damaged property. 1
Recently, my colleague Larry Bache took the closure of car owner adjuster Lloyd Hoagenson and asked him about car owners using Xactimate. When asked "What is Xactimate", Hoagenson replied that it is the software that Autoowners use:
Question: What is Xactimate?
Answer: Xactimate is an automated estimation program that we
use to make estimates of all our claims .
When asked if car owners rely on Xactimate for pricing of work and materials, he answered in the affirmative:
Question: Do car owners rely on Xactimate for pricing? for
work and materials?
When asked if Xactimate pricing was fair and reasonable, Hoagenson simply answered "yes."
Question: In your experience, is Xactimate line pricing
not fair and reasonable?
As any authorized Xactimate user understands, the software allows users to correctly identify and / or assign the correct retail speed for a row by using programmed drop-down menus. For example, if a row includes the replacement of an HVAC condenser, Xactimate allows the user to select HVAC workers from a drop-down menu. If the scope of work includes removing a roofing system, Xactimate again provides suitable labor in the drop-down menu, "Roofing" or "RFG", not "Demolition" or "DMO." The HVAC labor and “RFG” options in the drop-down menu were preset by Xactimate, not by the user. My company has spoken to several Xactimate-certified trainers on this issue to confirm that these actions are the intended use of the program. Everyone is unanimous. If a user makes a real "change", Xactimate identifies changes by marking the line with an asterisk (*). If there is no asterisk, there has been no "change" in the pricing or description of the item. However, through a misunderstanding of how the program works or otherwise, insurers and their lawyers confuse the use of "drop-down menus" as a "change" of the workforce level even when the line does not present an asterisk. Despite this, insurers are now suing contractors and policyholders based on their own misunderstanding of the Xactimate software.
The decision of car owners to sue their insured is in conflict with their own claims that adapt practices to estimate the cost of repair with Xactimate. If Xactimate pricing is fair and reasonable for car owners, Xactimate pricing is fair and reasonable for contractors and public adjusters. While car owners are not alone in trying to exploit fraud against contractors and policyholders in an attempt to force down lower settlements, it seems to be doing more fraud measures in Colorado than all other insurers combined. A legal strategy or a coincidence?
1 Mason v. Texas Farmers Ins. Co. 2011 WL 10845765, vid * 2 (S.D. Tex. 1 December 2011).
2 Xactware Pricing Research Methodology; Banta Properties, Inc. vs. Arch Specialty Ins. Co. 2011 WL 13096477, * 4 fn. 3 (S.D. Fla. December 12, 2011).