What is the win for the insurance industry that has made me write an article like this? It is the fact that a new Endorsement, commonly referred to as the Cosmetic Endorsement, has been developed and is being sold, in order to give the property insurance industry a break on the large amounts of money they are now paying out for wind and hail damage to the roofs and exterior walls of homes and businesses.
This Cosmetic Endorsement has been filed for review and subsequently approved in several states. I guarantee that if it is seen as a money saving mechanism it will become the standard on all homeowner and commercial structure policies in California and throughout the nation.
This is how the Endorsement is structured to work: if your home or business suffers damage to the exterior walls or roof, it will be covered only for what is referred to as the functional repair. This means that if a strong Santa Ana windstorm would blow 16 shingles off the western exposure of the roof, causing your roof to leak, you will only be entitled to have 16 new shingles replaced. If a claims situation such as that occurs and if the shingles on the western roof exposure were for instance 10 years old and the color, or even type of shingle is no longer produced, you will be given 16 new shingles which do not match the other shingles on your roof. This would create an esthetic problem and quite possibly reduce the value of your home.
If that same wind storm peels the paint off the same exterior wall of your home, your adjuster will be able to tell you that since the function of the exterior wall was not impacted to the point it was blown down, or has a hole in it, you will receive no help from your insurance company in repairing it.
I understand completely the great financial hit certain insurance companies have taken due to Hurricane Sandy, but we are all hurting financially. Insurance companies are doing everything they can to make their system work; however, this endorsement will impact people who really can’t stand the hit. If your roof leaks the insurance company will fix the leak subject to your policy provisions, but if a peril like wind or hail takes place and the functionality of the home is not impacted, they will have to tell you that you will need to do the repainting, or even repair the roof yourself.
I seldom find myself in agreement with the California Legislature or for that matter even the Insurance Commissioner’s Office, but in this instance, concerning the Cosmetic Endorsement, do the right thing and say no