House Rules

Think your home is fully insured? Think again.

Yeager says there is no state law that prohibits insurance companies from using their own attorneys as "unbiased" appraisers. "It's something we need to look at on a case-by-case bias," he adds. "It's certainly a red flag."

State Farm's Campbell won't comment on the Watts case and doesn't know if the company still uses its attorneys as appraisers. In McGaw's case, the company's appraiser is a contractor, but McGaw doesn't regard him as unbiased, either. She says he told her appraiser at their first meeting that he'd been instructed by State Farm not to negotiate the main points in dispute or he wouldn't be paid.

Last month, McGaw filed her own complaint with the Division of Insurance concerning State Farm. Among other allegations, she claims that one company official attempted to discourage her from hiring an attorney, telling her father that things "will only get worse" if she did, and that the company is "making a mockery of the appraisal process."

Money pit: Renee McGaw and her daughter, Jane, look 
into the basement of their Washington Park home.
Eric Bellamy
Money pit: Renee McGaw and her daughter, Jane, look into the basement of their Washington Park home.

Campbell says State Farm is drafting a reply to McGaw's concerns. She says the company hasn't reached any final figure on what it will pay to compensate her loss. "The replacement cost for Ms. McGaw's house has not yet been determined," she says. "The appraisal process has not been completed. We will honor whatever the result of that process is."

Bachus says whatever amount State Farm offers probably won't be enough to rebuild the bungalow McGaw once had. "They're not really bidding to rebuild her home," he says. "They're bidding to build a house with similar qualities but not the same materials or methods. What you can sell it for is different than what it would cost to rebuild the same house from the ground up in 2004 dollars. That's never explained to anybody."

Yet pursuing a bad-faith case against a major insurer is "horribly difficult," he says. "They have a lot of money and a lot of power, and they know all the tricks. They understand how to manipulate the paperwork, and they hold all the cards."

Recently, McGaw received a renewal notice on her homeowner's policy. The coverage limits had been raised to $244,000, she notes, suggesting that State Farm is still happy to accept her premiums for that level of coverage, even if the company doesn't believe her house is worth it.

"It's their rules, and they won't play by them," she says.

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