State Farm policyholders should be aware of its company’s water damage claims processes, as noted in State Farm’s Water Protocol. After reading the facts and allegations of a recent water claim denial, I would suggest they also should be concerned with alleged experts providing opinions about the cause of water losses.
These are some of the allegations of facts that the policyholder reported before the expert was retained: 1
[H]eavy winds and rains passed through Plaintiff’s Property. The heavy winds caused tiles to fall from his roof which allowed rainwater to penetrate into his home, causing substantial damage throughout the Property. (PAF 5) Following the February 21, 2023 windstorm, Plaintiff noticed large amounts of water throughout his home. Plaintiff promptly placed towels down to dry out all noticeable wet areas within his home. He also contacted Glenn Herrara at Skyline Builders to cover the roof openings caused by the February 21, 2023 windstorm (PAF 6). Despite Plaintiff’s efforts to mitigate and clean up the water damages, he observed water damages throughout his home including damage to the hardwood floors, staining in the ceilings, damage to the French doors in the living room and main hallway, and discoloration and water damages in and around his kitchen and cabinets, among other areas throughout his Property. . . .
Prior to the February 2023 windstorm, there was no evidence of any discoloration, cracking or any other damages to the floors, walls, French doors or kitchen areas. Plaintiff resided in the home since 2005 and would have realized these damages if they were present before the windstorm. The damages, which were anything but minor, arose on or after the February 21, 2023 windstorm. (PAF 8). Plaintiff has always kept his Property well maintained. He always promptly hired someone to inspect and repair any and all present damages. In 2017/2018, Plaintiff’s home sustained damages and he pursued a formal claim with his insurance carrier at that time. However, Plaintiff eventually hired Mr. Herrera to repair those damages and paid Mr. Herrera out of pocket to fix the foundations of the home (re-supporting), repairing the cracks in the ceiling and walls, and replacing the floors. (PAF 9). Following the repairs performed by Mr. Herrera in 2018, Plaintiff never observed any other damages to his home until the February 21, 2023 windstorm event.
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Here, the severe windstorm allowed heavy rain water to penetrate into Plaintiff’s home. (PAF 5). The February 2023 windstorm event caused extensive, immediate damage to the structural elements, including the roof, floors, walls, doors, framing and windows. These damages arose after windstorm event, and were not pre-existing in nature. (PAF 8-10). This was initially confirmed by State Farm, who acknowledged that the damages to Plaintiff’s Property resulted from the wind/rain storm event on February 21, 2023. More specifically, State Farm’s own adjuster inspected the Property and confirmed that the damages were the result of the windstorm event, which invoked coverage under the Policy, prompting State Farm to issue a payment of $71,594.55, representing State Farm’s total assessment of the damages related to the Water Damage Claim. (PAF 27). State Farm’s estimate and payment accounted for the water damage to the walls, doors, framing and windows. (PAF 27-28). Thus, when payment was made to Plaintiff, coverage was not in dispute. However, given the significant difference between State Farm’s estimate of $71,594.55 compared to the estimate from Plaintiff’s contractor in the amount of $760,340.21, State Farm “attempted to reconcile” the estimates to determine if further payment was owed and due. If reconciliation did not work, State Farm informed Plaintiff that it will hire a third party to provide an estimate of repairs. (PAF 26). In other words, State Farm led Plaintiff to believe that the only issue in dispute was the value and scope of the covered water damages between the two estimates.
Instead of reconciling the two estimates to determine the true value of the scope of repairs for Plaintiff’s damaged home, State Farm quickly switched gears and retained a ‘cause’ expert. The only likely reason why State Farm would retain an expert to determine the cause of damages it had already paid for is because State Farm realized that Plaintiff’s estimate was more in line with the actual damages sustained in the Water Damage Claim and that it had underpaid and undervalued the damages to Plaintiff’s Los Angeles home. State Farm’s retention of Engineering Systems, Inc. (‘ESI’) was intentionally set up to create a coverage dispute. To no surprise, State Farm’s retained engineer came up with the familiar causation defense of ‘pre-existing damages’ to defeat payment of what was initially a covered claim.
What does the policyholder argue about State Farm’s water damage cause and origin experts?
ESI inspected the property on October 24, 2023, eight months after the windstorm event and over four months after Plaintiff reported the Water Damage Claim to State Farm. (DAF 4, PAF 31). Six months after inspecting Plaintiff’s property, ESI submitted its report to State Farm, setting forth their alleged opinions and conclusions as to the cause and origin of the Water Damage Claim. ESI essentially concluded that all of the damage to the interior and exterior of the home was pre-existing and resulted from age, deterioration, deficiencies in the design and construction of the home, lack of routine maintenance and repairs, among other things.
All of ESI’s conclusions are based on faulty and erroneous assumptions and/or are contradicted by substantial evidence in this case. In particular, while ESI concludes that the water damage observed was the result of ‘age-related deterioration’ over a long period of time, conveniently omitted from ESI’s report is that it inspected the home eight months after the storm. In other words, while ESI assumes that the damages pre-dated the loss, ESI conducted its investigation 8 months after the water damage loss occurred and failed to consult with witnesses with personal knowledge of the pre-loss condition of the interior elements of the home, most significantly, Plaintiff himself. Had ESI communicated with Plaintiff himself, ESI would have realized that the alleged ‘preexisting’ damages and deterioration it saw did not exist prior to the Water Damage Claim and instead, Plaintiff observed all of these water damages after the February 2023 windstorm event. All other damages had been timely repaired.
ESI does not identify case-specific evidence of gradual effects of wear and tear and earth movement to the Property over time. ESI failed to account for the fact that the windstorm event occurred eight months prior to the time the water intrusions occurred and thus, cannot say when the damage occurred and did not perform any evaluation of how long it would take for such alleged ‘pre-existing’ conditions to appear. Similarly, there is no evidence that ESI had or asked for pre-loss photographs of the interior of the home. ESI did not speak with Plaintiff before concluding that the damages were caused by lack of routine maintenance and repairs. ESI’s conclusions are also refuted by State Farm’s claim file which acknowledges evidence of prior repairs to the home. (PAF 52). ESI’s conclusions are also refuted by State Farm’s claim adjusters who determined that the cause of the damages was the result of the windstorm event and the other adjuster, Mr. Thomas Jones, who agreed with Plaintiff’s flooring expert that the solid oak wood flooring throughout the home needed to be replaced for a uniform appearance.
ESI identified four possible causes of the damages but failed to explain how any of them caused the damage or was the predominate cause of damages to the home. ESI has no idea how much water entered the home on February 21, 2023 and if those water intrusions caused the damages observed, yet, summarily concluded that all of the damages were pre-existing and attributable to everything but the windstorm event.
In this case, the court declined to grant State Farm’s motion for summary judgment, 2 indicating that the policyholder should be allowed to prove the facts and allegations about the wrong, biased, and outcome oriented claims investigation and that discovery should proceed. So, there may be more to report about this case in the future. For all we know, the ESI experts and State Farm may be entirely right.
On the other hand, many of us are skeptical of experts, and I noted and provided an example 16 years ago in Insurance Company Experts Are Often Biased And Outcome Oriented. The sentiment may best be described in my post, The Plague of Wrong and Insurer Worded Engineering Reports by Insurance Company Retained Engineers:
Today’s blog is not going to endear me to HAAG, Rimkus, JS Held, and other regularly retained forensic engineers working for insurance companies. These engineering and consulting firms are big business. So much so that Sedgwick, a large independent adjusting firm, has acquired a number of these engineering firms. I can imagine many of you wondering how an adjusting firm representing the insurance company’s interest can obtain an independent and honest opinion under such circumstances.
Many skeptical public adjusters, contractors, and critics tell me that they do not have to wait to know what the engineering report is going to say if a certain engineer has been retained. Not only are the scientific findings adverse to the policyholder, but the wording of the report also inextricably dovetails with the insurer’s exclusionary or limiting policy language. It is much easier to prove that an engineering report’s conclusion is wrong than it is to prove that the errors and wrong conclusions were the result of bias or an outcome-oriented state of mind.
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I recently attended the Georgia Association of Public Insurance Adjusters meeting, where an expert in fire damage and remediation gave an extraordinary admission about the types of financial pressure placed upon forensic experts regarding their reports. He explained how his testing resulted in conclusions that infuriated the desk adjuster, who would have to pay more on the claim. Rather than send his report to the policyholder, it was buried. The desk adjuster hired another expert who performed different testing to arrive at an erroneous conclusion. Eventually, the truth was uncovered. His point was that this was not an isolated instance and that many adjusters, unfortunately, are not looking for the truth but a report which leads to less paid on a claim.
One reason I wrote Supporting the American Policyholder Association With Time and Money Is an Obligation If You Are a True Policyholder Advocate, is because of the APA’s warnings about outcome oriented reports. The engineering reports often seem to dovetail with exclusionary language from the policy. Policyholders have reason to be skeptical.
Again, the findings of this active case will be sorted out later. The lessons are that some insurers have claims processes designed not to pay certain claims and that skepticism is deserved when reading the insurance company’s expert cause and origin report.
Thought For The Day
“Blinding ignorance does mislead us. O! Wretched mortals, open your eyes!”
—Leonardo da Vinci
1 Oakenfold v. State Farm Gen. Ins. Co., No. 2:24-cv-07455, [Doc. 32], 2024 WL 5337691 (C.D. Cal.).
2 Oakenfold v. State Farm Gen. Ins. Co., No. 2:24-cv-07455, 2025 WL 574629 (C.D. Cal. Feb. 14, 2025).
