BROWN CONSOLIDATED/PSI

LETTERHEAD (re-typed from a fax)

August 1, 1996

Allstate Insurance Company

PO Box 289001

San Diego. CA 9210g-9001

Attn: Mr. Ken Baker

Mr. Baker:

My company, Brown Consolidated has been providing service as a designated plumbing contractor for Allstate policyholders since 1984; and my subsidiary, Plumbing System Investigations (PSI), has engaged in expert determination of plumbing related faults and causations for Allstate Insurance Company over the past eight years.

This was a totally amicable association up until 1993, when Allstate claims personnel began demonstrating a marked difference in the reasoning concerning policy language interpretation and coverages proceeding therefrom; moving from traditional Allstate posture of “finding coverage under the policy” to looking for any excuse to deny a claim. This growing change in philosophy has reached the point of adversely affecting my business and reputation.

I have talked with many Allstate adjusters and management personnel in your San Diego office in attempting to determine the reason for this “stiffening up” on water loss claims, however, my inquiries were either avoided or met with confusion and/or frustration. I did learn that the changes in application of coverages have not been due to modification of policy language so much as it has been a shift in interpretation. Such ideologies obviously proceed from the sanction of high level management, rather than local determinations, but in deference to proper chain-of-command discipline, I am presently directing my complaints to you.

As a matter of facility, this letter refers to the Allstate claims representatives as ‘adjusters’, even though they are all strictly employees of the company - unlicensed eyes and ears for management personnel - who are not allowed to contemplate what is right or wrong with claims procedures, and do not have knowledge or authority to interpret policy language, but must conform with what they are told; and must document their files to confirm that such is being done. They function upon the premise that merit is based solely on reduced loss ratios and a low volume of pending files, which is most efficiently accomplished through denials.

My Fundamental difficulties with current claims procedures being practiced by Allstate claims personnel gravitate around your Company training text entitled “Continuous and Progressive Water Losses” - which presents generally sensible guidelines that was apparently presented as a workshop subject in 1993/94. However, the techniques set forth in this text were not comprehended, as there has since been a sharp reversal of traditional Allstate claims handling ideology to “find coverage under the policy”. A copy of the referenced document is attached for your perusal, which I will he citing several times in this letter, prefaced by ‘your text’.

Principally, your text advises. “Remember that we have an obligation to look for coverage for the customer,” and also sets forth, “The losses often require us to look at the cause of a loss and reasonability of the Insured’s actions. As such, we must review them from a perspective that will provide our customer the benefit of doubt’. These admonitions are certainly not currently being adhered to by the Allstate claims staff.

Allstate claims personnel have always been receptive to my advices, guidance’s, and workshop presentations, including my book which was printed in 2,000 copies and was distributed by Allstate’s Tech-Cor to all claims offices; and they often asked me if a plumbing related loss should be covered. However, they have also ignored hundreds of admonitions that I have given to them over the years regarding improper claims determinations related to the various subjects enumerated below.

My appearance as a student of insurance herein proceeds from the fact that I have been a licensed life/disability agent in the past, and have been individually licensed as a Public Adjuster in California since 1991; the latter of which I have never used in a business practice to date, but have maintained for the purpose of being qualified to properly interpret policy languages, which I felt was necessary in concert with perpetuation of my business of being an expert in plumbing/insurance related disciplines, and to preserve my personal reputation and well-being.

In this respect, the following admonitions, which are based upon information in my file for Allstate that contain some 3500 slab leaks, and 8000 PSI investigations, coupled with input from adjusters and complaints I have received from Insured for whom I have done work during the past twelve years, should be heeded carefully by Allstate insurance Company.

For the purpose of clarifying some of the points at issue, a copy of my SLAB LEAKS PERSONIFIED is attached to assist you in appreciation of causations, and the great water volume impact created by such occurrences as I have discussed tinder “Slab Leak’s” “Personal Property Payments” “Cracked Slabs,” “hydrostatic Pressure” “Earth Movement” and “Subsidence”. All claims personnel in the San Diego office were previously furnished a copy of this document.

COVERED WATER. Your text denotes the term “covered water” to express that the initial sudden and accidental escapage of water, even though it may be a very small amount that causes damage to a dwelling, qualifies as a covered loss, irregardless of the many exclusions set forth in the policy; and that the excluded items are merely forms of damage, not the principle cause of loss.

Mr. Al Pitt, who was a claims executive in the Allstate Home Office and involved with Tech Cor, described a form of “covered water” to me in 1987, which he termed as “first wave,” wherein he explained that the initial amount of water that escapes from a plumbing system or appliance would be considered sudden and accidental, and a covered loss under any circumstances, and that the only other determination necessary would be the scope of coverage for ensuing damage, which might be tempered on the merits of when the Insured should reasonably have known that a leak existed.

Although there has been no published change in Allstate philosophy as set forth by Al Pitt, nor in the policy contract, your claims staff have been taught to disregard the “covered water” adage in their scramble to deny all claims that show any trace of deterioration, or that could be characterized as ‘over a period of time.’

RUST CORROSION, DETERIORATION, etc: A large percentage of your water damage claims are being denied by Allstate adjusters pursuant to this caption, disregarding the admonitions of your text, and is a principle subject of concern.

In this respect, page 6 of your text describes that, “Close examination shows a lot of rust around the failed fitting. There is a fair amount of rust inside the fitting. It appears that the rust has weakened the fining to a point that it could no longer withstand the pressure from the threads and water. The joint then failed, allowing a solid spray of water to escape.”

“The damage to the pipe by rusting is excluded The water coming from it should be considered ‘covered water’ because there was a sudden and accidental escapage.”

“……….This escape was caused by rust, so the event complies with the last paragraph of Coverage’s exclusion 13.” You are aware that this portion of the excluding sets forth that even though excluded perils may cause escapage of water, “we cover the loss caused by the water.”

This is justly demonstrated in damage to dwellings caused by leakage from old rusted out water heaters, which your Allstate adjusters cover without question.

Your text therefore instructs that there is “covered water” applicable in virtually all losses related to escapage from a plumbing system, irrespective of invasion by rust, corrosion, deterioration, or the presence of mold. mildew, rot. etc.; yet these are being denied by Allstate adjusters on a daily basis

MOLD, FUNGUS, WET OR DRY ROT: Allstate adjusters summarily deny claims when these conditions are found. However, your text says, “Isn’t rot and mold also excluded under exclusion 13? Yes it is, but it is excluded as a cause of the loss, not as damages that result from a covered cause, . . .the most reasonable conclusion here is that the mold and rot are merely forms of damage: not the principle cause of a loss.” More proper investigation and attention to facts would dictate that coverage applies in many of the instances that are not now being allowed.

Moreover. I have preached that mold and fungus will build up very rapidly in environments of closed atmosphere where moisture and heat are present. It is thus often not possible to determine that period of time involved, yet Allstate adjusters seize upon any such visible conditions as a supposedly plausible excuse to deny claims.

WEAR, TEAR, etc: Allstate adjusters instantly deny most all claims related to any visible manifestation of this subject, even when related to water escapage from plumbing systems. These forms of damage fall into the same category, and properly qualify for coverage, the same as the rust and deterioration scenario previously described. Your text confirms that these type conditions would not themselves be covered, but any loss due to escapage of water from .a plumbing system proceeding from these occurrences should properly be honored as “covered water”; yet they are being denied by Allstate adjusters on a daily basis.

Your text further points out that, “It is important to distinguish between water originating from a defective plumbing system and water , the plumbing system is intended to release. For an example, water should be released from a shower head, not from the elbow joint inside the wall………..” In essence, this tells you that conditions being denied by Allstate people as maintenance problem leakages should be allowed as covered losses when the leakage originates behind the face of a wall Again, these types of claims are being denied by the Allstate claims staff on a daily basis.

SEEPAGE: Your text improperly characterizes ‘seepage’ as some form of leak from a plumbing system, which Allstate adjusters are relying on for a large volume of improper coverage denials

Simply stated, intended flow of water contained in plumbing systems or appliances is termed delivery. An unintentional flow, no matter what the volume, rate of movement, or period of time involved, is a leak from which the water escapes. Moreover, plumbing piping and fixtures confine water, and are absolutely not porous, so it is impossible for ‘seepage’ to occur from them.

Seepage is defined in Webster’s 9th Collegiate, and Webster’s 3rd New International Dictionaries as:

Seep: “to flow or pass slowly through fine pores or small openings”

Seepage: A: “the act of process of seeping; oozing………….B: a quantity of a fluid that

has seeped through porous material [as soil]…………….”

Seepage: (1) “the process of seeping: OOZING (2) a quantity of fluid that has seeped (as through porous material)”

Ooze (1) “to pass or flow slowly through small opening or interstices. (2) to move slowly or imperceptibly”

“Seepage” would thus best be described as ground water that accumulates in earth behind a vertical barrier such as a concrete block retaining wall, and which progressively passes through the pores in blocks and/or grouting, and manifests itself on the face of the wall in a subtle manner. Due to absolute non-porosity of piping and fixtures, this phenomenon could never occur directly from any part of a plumbing system other than a leach field of a septic system, which is designed to allow seepage of waste water.

I have advised Allstate adjusters of this hundreds of times.

SHOWER PANS: Claims for shower pan leaks are commonly denied by Allstate adjusters on the basis of “seepage,” which is totally improper in light of the correct interpretation, and on the basis of your text instruction concerning a “covered water” situation. The first water that escapes is sudden and accidental, and causes initial damages, which constitutes a covered loss, and qualifies under the policy provision relating to the necessary removal and replacement of the shower the system in order to access the pan for replacement. Leakage that may have been continuous, and which Allstate chooses to describe as ‘seepage’, might be excluded in relation to more advanced damages to the dwelling structure.

Also, adjusters have a habit of inspecting tile in a shower floor, looking for deterioration, wear-and-tear, rot or other maladies as a basis for denial of a claim, when in fact the pan is situated beneath the tile system, so it cannot be seen or judged as to condition until the tile system is removed.

Determination as to whether a shower pan is leaking can be accomplished by hydrolevel testing, however, the source or cause of a failure cannot be determined until the pan is exposed.

“OVER A PERIOD OF TIME”: I have given depositions and Court testimony as an expert in many cases involving the question of time lapse in relation to water losses, in which I have always been able to sustain my position that all such expressions are subjective in nature. This gives credence to my contention that the “over a period of time” language in the Allstate policy is ambiguous, so cannot be sustained in concert with a claim denial.

SLAB LEAKS: In previous years, Allstate Insurance Company has provided coverage for slab leaks of any nature. However, in the past year this attitude has changed to the point that claims adjusters, guided by inane interpretations(s) of policy language, were declining payment for virtually all underground water leak claims. 1 his transition was being compounded by attempts made to characterize direct physical loss as ‘visible” damage(s) and/or water appearing above the slab surfaces, though there is no such wording in the policy as to require visible damage or water in order for coverage to apply.

Allstate claims personnel are also considering slab leaks only under “Coverage A Dwelling Protection”, and “Section 1 - Losses We Do Not Cover,” ignoring the fact that there are several other sections salient to this subject which collectively provide coverage of slab leak, which is totally bifurcated from Coverage A, as well as from all of its attendant exclusions.

The applicable sections referred to are:

1. “Definitions………………. 6. “Direct loss” - means that loss is caused by a peril named in the applicable provision of this policy if: a) the named peril……………has physical contact with the covered property; and b) the named peril is the last in time to occur when the loss is caused by more than one peril…………………”

2. “Property damage” - means physical injury to or destruction of tangible property including loss of use resulting from such physical injury or destruction…………..”

3. “Coverage C - Personal Property Protection……………1. We cover personal property owned or used by an insured person anywhere in the world………………”

4. “Losses We Cover: We will pay for sudden and accidental direct loss to the property described in the Personal Property Protection coverage, except as limited or excluded in this policy caused by:…………………12. Bulging, burning, cracking or rupture of a steam or hot water heating system………………or appliance for heating water………………13. Water or steam that escapes from a plumbing, heating or air conditioning system or from a household appliance due to accidental discharge or overflow…………….. We do not cover loss to the , system or appliance from which the water or steam escape……………”

5. “Section 1 – conditions………….3. What You Must Do After A Loss;……………….(b) protect the property from further loss. Make the reasonable repairs necessary to protect it ………” This wording requires that the insured take whatever steps are necessary to mitigate the loss, which necessarily involves stopping the leak. This can be done only by opening the slab to repair the pipe, or rerouting overhead. The absence of any other requirements leaves judgment as to the most efficient and economic method of doing this work to the Insured.

6. “Additional Coverages………………6. Necessary Repairs After a Loss. We will pay reasonable expense for necessary repairs to protect covered property from further loss following a loss we cover……………” This is a promise to reimburse the Insured for the repairs necessary to terminate his loss; which must include the loss of Personal Property in the form of water and natural gas.

The above Chronology demonstrates that coverage for a slab leak, including “the cost of tearing out and replacing any part of the residence premises necessary to repair the system or the appliance,” is applicable as to mitigating the loss of Personal Property - in the form of any water and natural gas consumed in excess of normal use levels; with no affect necessarily related to Coverage A - Dwelling Protection, or it’s attendant exclusions, nor is there any requirement for damage or water appearance of any nature within the dwelling.

WITHN THE DWELLING: Language in the most recent Allstate policy related to leaks in underground piping has been modified in an attempt to allow coverage only when leakage occurs directly underneath a dwelling The above Chronology of coverage for leaks pursuant to the loss of water as Personal Property is perfectly applicable to the underground water supply piping anywhere on the Insured’s premises - including yard areas; so all such leaks would be covered irrespective of any “within the dwelling” language. -

PERSONAL PROPERTY PAYMENTS: Allstate adjusters rarely offer payment for Personal Property lost in the form of water and/or natural gas resulting from a covered loss. Most such claims are honored only when requested by an Insured. In some instances, the Insured has been improperly advised that demanded payment for the unusual loss of water would be paid under an Additional Protection feature of the policy, and would not be subject ‘a deductible.

My files contain a plethora of covered losses in which there was no payment made for water and natural gas lost pursuant to slab leaks, apparently due to intentional ignorance by Allstate adjusters. This is a subject that has been specifically set forth by the Insurance Commission as Unfair Claims Practice - failure to advise the Insured of all applicable coverages.

I have made a point of advising Allstate claims management personnel of this glaring transgression, and the only response was that such an accusation “would be considered tortuous.”

CRACKED SLABS: In the course of slab leak assignments from Allstate adjusters, Brown Consolidated commonly finds cracks in slabs that may have been caused by diminishment of underlying support, due to the washing away of soils by water escaping from pipes. This phenomenon not only proceeds from slab leaks, but is most commonly caused by escapages from sewer/waste piping.

Cracked slabs will present themselves rather promptly after occurrence of a pressurized water leak, while sewer/waste system escapages commonly takes a longer passage of time to produce such an effect. Clay soils can be especially damaging in this respect, as they often present dramatic movement due to bulging when wet, and shrinking when dry. Hundreds of these conditions now exist under dwellings I have worked on for Allstate.

My initial practice was to faithfully report conditions of this nature to the respective adjusters, but all such information apparently fell on deaf ears. And as time passed, it became quite evident that Allstate desires to ignore cracks in slabs wherever possible. In spite of my advices in this respect on hundreds of occasions, the current attitude of the Allstate claims staff is, “just don’t tell us about it.”

I have also been specifically admonished, in no uncertain terms, by many different adjusters on dozens of occasions, that Brown Consolidated and PSI people are not to mention cracks (which is referred to as the “C” word), in walls, foundations or slabs to Insured or to others, to avoid triggering any claims for such conditions.

In my opinion, this is a form of concealment, because diligent investigation should be pursued to determine any possible concurrent losses that may be discovered in concert with slab leaks, sewer/waste system problems, or any other type of claim. To do any less would constitute a failure to advise Insured of all applicable coverages.

HYDROSTATIC PRESSURE: I have extensively lectured Allstate claims staff that moisture invasion of residential flooring is often the result of residual wetness in earth under a building, which is drawn up to the slab surface by ambient temperature, and that the source of this earth wetness is often post slab leak, which can leave water residing under a dwelling for many years.

Thus, water from an initial loss such as a slab leak, which is normally enormous in volume, can be expected to create residual wetness that will reside in each under slab floors for many years. Allstate adjusters have had me go jack to slab leak Sites on numerous occasions to determine the source of moisture invasion under flooring, which I have often found to possibly be residual from a slab leak that had long since occurred.

In spite of such findings, these slab leak related aspects are intentionally ignored by Allstate adjusters, and considered as new claims, which are being denied on the basis of ground water causation.

ROOTS:. Damage pursuant to root invasion into plumbing pipes, which was summarily considered a covered loss by Allstate in the past, has now come to be the subject of total denial in the San Diego claims office.

I have been advised that the current basis for this attitude is the language contained in your new AP2 Form, “We do not cover loss to the properly described……………consisting of or caused by…………….. 15. c) growth of trees; shrubs, plant or lawns………………” But the exception “If any of (a) through (h) cause the sudden and accidental escape of water or steam from a plumbing……………system within your dwelling; we cover the direct physical damage caused by the water…………… If a loss to covered property is caused by water vi steam not otherwise excluded, we will cover the cost of tearing out and replacing any pan of your dwelling necessary to repair the system or appliance……………”

This clearly leaves coverage applicable for damage caused by leakage from sewer/waste lines beneath the dwelling, because such systems are, in essence, a part of the dwelling; yet denials for these types of losses are continuing to be issued by the Allstate claims staff:

Up to the advent of the AP2 Form, there was no language in the Allstate policy relating to root invasion of plumbing piping, including sewer lines anywhere on the Insured’s premises, so these should have been covered without question; yet they were often denied by the Allstate claims staff.

In the face of the new policy language, I still question the validity of denials of claims proceeding from root invasion into sewer piping, because the same (a) through (h) exception still applies, so coverage would be applicable for direct damage to the dwelling, as well as costs for tearing out and replacing any part of the dwelling necessary to repair the sewer system.

The only reasonable difference between coverage for losses caused by root invasion in sewer lines is that language in old Allstate Policy Forms allowed payment for direct damage to the sewer system, while the new Form logically excludes payment for damage to the sewer system itself.

EARTH MOVEMENT: The earth movement investigations conducted preparatory to a projected denial are similarly administered in a cloaked manner by Allstate adjusters. These, in my expert opinion are a sham as far as the plumbing systems are concerned. It is an accepted fact that water invasion of support soils will cause the dislodgment of earth that will affect the stability of building structures, so the integrity of total underground plumbing system piping needs to be determined in relation to all earth movement subjects.

Sever/waste piping is quite obviously a factor in this type of loss, yet Allstate adjusters studiously ignore this type of requirement, and allow my suggested hydro-level testing and/or internal video scans only in instances where a direct demand is made by policyholders or their counsel, rather than as a routine determination.

In these respects, one adjuster advised me that “We don’t owe to investigate what we don’t owe,” which is an attitude that certainly fails to conform with the duty to investigate that is reasonably expected by policyholders, and by Insurance Codes.

SUBSIDENCE: In the course of slab leak and sewer/waste system assignments from the Allstate adjusters, Brown Consolidated and PSI repeatedly encounter marked diminution of sublateral and subjacent support under slabs and foundation walls of dwellings due to ablation of soils; caused by washing away of the earth by water escaping from pipes. This condition, when it exists, is visually identified when a slab is excavated to expose pipes for repair; and is reasonably expected to be present in various neighborhoods that are notorious for the existence of subsidence pursuant to a slab leak.

It has always been my practice to report such conditions to the respective adjuster however, the receipt of this information has proven to be undesirable to them. More recently, it has twice been suggested to me by an Allstate claims management person that rerouting be done rather than excavate through slabs in any areas where unstable earth conditions are expected to exist; so as to avoid the Additional Coverage feature of the policy that allows payment of up to $10,000 for restoration of support soils under a dwelling.

Moreover, in a very recent QVP evaluation of my business, an Allstate supervisory person delineated the necessity to provide a photo of flooring conditions to support any determination that rerouting would be the most efficient and economic method for the repair of a particular slab leak. During the ensuing discussion, I logically related the adjuster’s suggestion that reroutes be done arbitrarily in known subsidence areas; and I inquired as to what the Allstate’s position was in this respect. The reply was, “Off the record I hope we don’t get bit in the ass... but you should comply with adjuster’s guidance; and if any problems arise, we will handle them on a case-by-case basis”.

This approach characterizes the willingness of Allstate to temper claims ratios at the expense of passive policyholders by means of misrepresenting pertinent facts or policy provisions in settling of claims. It is possible that Allstate could end up being required to go back and properly investigate the subsidence aspect of all previously covered losses related to slab leaks and sewer/waste piping, to determine integrity of support soils under dwellings.

INDEQUATE INVESTIGATION: As has been set forth under many of the previous captions, Allstate adjusters are denying claims on the basis of minimal justification, often with no on-site inspection to confirm causes or damages; leaving totally inadequate support in their files.

Your text sets forth: “INSPECTION The Claim Representative’s function includes examination of tile claimed damages,” “…………….in analyzing the facts gathered’, and also, “must be done while on the premises”; all of which dictates the requirement for adequate on-site investigation. Yet. Allstate adjusters often ignore these requirements as they short-cut to the point of denying all manner of claims, including the very heavy impact subject of slab leaks, simply on the basis of telephone information solicited from the Insured or other residence occupants, without ever visiting the premises.

The fallacy of this procedure is that the average person does not consider water on rigid material flooring, nor other similar conditions, to be damage. They also do not know where to look for damage caused from water surfacing from a slab leak. Therefore, when asked by telephone, “Do you see any damage,” the answer is naturally going to be “No.” On this basis, many claims are being improperly denied by means of willful and conscious ignorance of the facts.

I have also found that Allstate adjusters are unable to make proper determinations as to the difference between damages and cause of loss as it relates to plumbing systems. In other words, they commonly look at damage, which they consider to be the cause of a loss, although water escapage of some nature prior to damage is the actual cause of the loss.

In all fairness, inadequacy of the investigation in plumbing systems on the part of Allstate claims people should be prefaced with the fact that they are totally inept at all determinations related to plumbing because they ate not properly versed in the subject. They are simply not plumbers. As a consequence they have minimum comprehension of what needs to be looked for, or what is actually manifested in the course of water escapages. This problem is compounded by those who act as though they are plumbers, and who usurp determinations made by those of us who are experts in this subject.

Even in the described posture, Allstate claims people are allowed to bungle their way through the plumbing related issues, relying on misjudgment to deny claims on a daily basis, as they comply with Allstate policy to look for denials and not for coverage.

SUPPRESSION OF FACTS: Investigative assignments were once given to me without any strings attached, allowing facts to be facts, and to be so stated in attendant reports. However, this has changed during the past few years in that assignments now set forth premeditated notations such as, “Go out and prove that this is not a covered loss”; “Find long term conditions that may exist”; “Make a judgment of what is leaking, but do not tear out anything to prove the facts”; “Do not make any observations of the cracks in the slab”.

In numerous instances I have told Allstate adjusters about serious damage conditions discovered during slab leaks and sewer repairs; and in the course of PSI investigations that should be covered losses, I am told, “Just forget that part,” or “Leave it out of your report”.

I have also been specifically instructed by Allstate claims people that there must never be any kind of reference made that would alert an Insured to the capability of my camera equipment to find faults in underground piping; and that any recommendation I might make for internal video scanning of sewer/waste piping must be made directly to the adjuster by telephone, and that no such suggestions should ever be included in written reports. In this respect, camera work is rarely approved, apparently because the Allstate claims staff prefers to avoid exposing a covered loss condition wherever possible.

Also, I receive many calls from adjusters requiring that findings be changed or amended to fit a denial situation, asking for me to use couched language in a report and that I use such ambiguous clauses as “Long term”; “Continuously”; “Over a period of time”; and “Repeatedly”; all of which I have not been able to consciously comply with, but I was able to agree to use the term “extended period of lime” in appropriate instances.

My files are also replete with instances in which Allstate claims people have sent a copy of my report along with a paraphrasing letter that changes the intent of my meaning as to the proper findings; For the purpose of supporting the denial of coverage. This practice has now reached the point that Insured are being told by telephone that their loss is not covered, and that Allstate is sending me out to confirm the facts of denial.

It is obvious that Brown Consolidated and PSI are intentionally being placed in awkward positions, as well as being blamed for a substantial portion of the denials being issued by Allstate claims people.

Finally, as to investigation of claims, I need to point out that Allstate adjusters habitually allow opening of walls for an investigation to enhance a subrogation situation, yet vehemently guard against anyone opening any walls to confirm the source of a leak that might confirmed that a loss should be covered. This would seem to be a double standard, and neglect as to the required “duty to investigate.”

FAVORITISM: Allstate claims personnel are very inconsistent in applications of coverage, and extent of investigations, often deferring to the importance and intelligence of the Insured. I have documentation of multiple instances wherein more influential Insured, or those residing in affluent neighborhoods have their claims investigated much more thoroughly than normal, and they are given such privileged treatment as payment for the opening of walls to determine the cause of a loss, hydro-level testing and internal video scans, very broad interpretations of policy language, and a whole host of other considerations not normally given to less influential Insured.

I have brought these issues to your attention because the grave impropriety of Allstate’s overall claims philosophy is presently reflecting Unfair Claims Practices, misrepresentation, concealment, and bad faith, which are open invitations for individual and class-action lawsuits; none of which I desire to be caught up in. I am maintaining millions of dollars worth of these type problems in my files

Retroactive investigation, payment, bad faith penalties, and/or violation points with the Insurance Department could be assessed, either individually or collectively on every violation that I have enumerated in this letter, possibly irrespective of any time limitation that may appear in the Allstate policy.

About four months ago, I attempted on several occasions to make an appointment for a meeting with you, Mr. Baker, to personally discuss the many issues set forth herein, and to give forewarning of several Class Actions that I foresee being prepared against insurance carriers in relation to some of the subjects enumerated in this letter. However. I was advised that you were “too busy.”

I am aware that one of my admonitions has recently came to light as being correct, in that the year-long program of denying slab leaks where no damages or water appears within the dwelling, has been declared to be improper claims handling by your Regional Office, and confirmed by your Home Office. As a consequence, I understand that such claims are now to be honored if there is a “hot spot” on the floor. This reversal in procedure is a step in the right direction, but Allstate is still not covering slab leaks in conformance with proper interpretation of policy language.

Upon learning of this change, I inquired as what was going to done about the hundreds of slab leaks that were improperly denied during the past year. to which a senior adjuster replied, “Nothing.” This could pose as big-time trouble for Allstate.

I have particular knowledge of legal actions in progress, due to the fact that I regularly conduct expert investigations, and testify in depositions and Court on many plumbing related cases; both for the defense and for plaintiff counsel. The most recent case that would be of interest to you is Barton vs. The Vanguard Insurance Company, which concerned failure of sewer/waste piping that was prompted by root invasion and compounded by subsequent deterioration. A judgment was rendered in favor of the Insured, and the Maryland Casualty and Vanguard were held in bad faith for which a large award was made.

I was also recently involved in a similar case of Aguirre vs. State Farm Insurance Company, in which the company failed to properly investigate, tried to dispose of the claim unreasonable by issuing a check for $10,000 under the Additional Coverage feature of their policy relative to restoration of earth, and subsequent to that they had to pay a very large sum of money in arbitration to escape a bad faith situation

The Aguirre case also delivered first hand knowledge of what can happen to me personally when claims are unjustly denied, and the Insured files suit against a carrier naming me as one of the defendants I had to pay a large sum of money, plus the legal fees to extricate myself from the litigation. The irony of this situation was that I had conducted an expert investigation of the home in question, and had found water-related damage that clearly qualified the loss for coverage, yet the insurance company chose to issue a denial which they tried to justify through intentional misinterpretation of my findings.

This happening is of great concern for me in concert with my Allstate relationship because I recently inquired of an Allstate supervisor as to my position in case I was named in a related law suit, and the response was that Allstate would “distance themselves” from me in any such issue. In other words, the exact same situation as had occurred in the Aguirre case faces me every time Brown Consolidated or PSI does an investigation for Allstate.

On this basis, you can appreciate how disconcerting it is to have Allstate claims people ask me to front for them in investigation, observation, and/or written reports of findings.

The only viable way for me to continue as QVP contractor and expert in plumbing related disciplines for your offices would be for Allstate to cease the current business practices of short-changing Insureds, and to allow your adjusters to institute fair claims practices and resurrect proper procedure as far as Brown Consolidated and Plumbing System Investigations is concerned, and agree to indemnify me in case of my being personally named in any related law suit.

I would like to continue participating as a member of the Allstate team, but it is important for me to part of “The Good Hands People”, not the “Slap In The Face People”.

Respectfully,

Michael T. Brown

Brown Consolidated/PSI