From the outside, the house was unremarkable and blended in with the rows of others just like it in the typical suburban neighborhood. Inside, however, it was more like a house of horrors. A gas malfunction in the kitchen caused a fire that affected the dining room, living room, and part of the master bedroom.
Upon entering the home, the restoration contractor found the living space barely navigable, filled with mounds of debris from piles of clothing and shoes to newspapers and apparent trash. The contractor had entered the home of a hoarder and was about to face a complex—and increasingly common—extreme claims situation.
Compulsive hoarding (or pathological collecting) “is a pattern of behavior that is characterized by the excessive acquisition of and inability or unwillingness to discard large quantities of objects that cover the living areas of the home and cause significant distress or impairment,” according to Wikipedia.
Hoarding used to be considered a symptom of other mental illnesses such as obsessive-compulsive disorder (OCD), depression, and anxiety. As recently as 2012, local townships and cities across America began to pass laws citing hoarding as a form of “theft of surrounding property values,” making it a minor felony. In 2013, however, hoarding was officially classified as a mental illness with its own diagnosis in the Diagnostic and Statistical Manual of Mental Disorders (DSM-5, psychiatry’s standard guidebook) and, as a result, no longer can be legislated as a felony. According to the DSM-5, symptoms of hoarding disorder include:
- Persistent difficulty discarding or parting with possessions, regardless of their actual value, due to a perceived need to save the items and the distress associated with discarding them.
- The difficulty discarding possessions results in the accumulation of possessions that congest and clutter active living areas and substantially compromise their intended use. If living areas are uncluttered, it is only because of the intervention of third parties (e.g., family members, cleaners, or the authorities).
- The hoarding causes clinically significant distress or impairment in social, occupational, or other important areas of functioning (including maintaining a safe environment for oneself or others).
- The hoarding is not attributable to another medical condition (e.g., brain injury, cerebrovascular disease, Prader-Willi syndrome).
- The hoarding is not better explained by the symptoms of another mental disorder (e.g., obsessions in obsessive-compulsive disorder, decreased energy in major depressive disorder, delusions in schizophrenia or another psychotic disorder, cognitive deficits in major neurocognitive disorder, restricted interests in autism spectrum disorder).
The number of Americans considered to be hoarders is more than six million, according to psychologists Randy O. Frost and Gail Steketee, authors of Stuff: Compulsive Hoarding and the Meaning of Things, while Scientific American reports that between five million and 14 million people in the U.S. are compulsive hoarders. Additionally, a survey by Insure.com reports that 46 percent of adults say they know someone who hoards. Clearly, the illness is widespread with far-reaching implications, particularly for the insurance industry.
Each state insurance department has its own rules on how insurers may proceed once hoarding is revealed prior to a claim. Depending on the severity of the problem, the insurer could cancel the policy immediately, or it may try to work with the homeowners to reduce the risk, especially if state law prevents cancellation right away. In some states, a policy cannot be canceled unless there is an increase in hazard. If debris was present when the policy was written, the law may require the insurer to send the homeowner a notice spelling out the problem and warning that it must be cleaned up or the policy will be canceled. If the homeowner doesn’t act, the carrier may have the right to cancel. Some states require an insurer to wait until the policy’s term is up. The insurer then can decline to renew the policy, citing a bad exposure risk.
Hoarding may give rise to potential coverage implications based on the insured’s failure to comply with the policy’s post-loss obligations. Standard homeowners’ policies contain defenses and exclusions of coverage based on the insured’s neglect, failure to protect, or improper maintenance of the property. For an insurer, the investigation of the loss by a qualified individual is critical, along with a thorough review of any prior claims and inquiry of the insured to determine a specific timeline of events related to the loss.
Currently, there are no official industry guidelines regarding homeowner hoarding. Each insurance company must decide whether the level of contents in a home has become an insurance risk. Agents should be trained to identify hoarding risks, such as a request for excessive contents coverage, before writing a policy and, ideally, to look beyond only the outside of the home when evaluating the value of a property.
Hoarding also exposes carriers to a variety of potential claims or lawsuits. For example, indoor air quality, which often is impaired, can cause health concerns that the insured may associate with a loss rather than with pre-existing conditions. Due to the maze of items within the home, the homeowner and visitors are more likely to stumble or trip, resulting in injuries, and those who rent to hoarders are liable for injuries that occur on the property.
Hoarding environments tend to pose a high risk for fires, as clutter usually rises over the top of electrical outlets and over extension cords. Trash and debris frequently are found on the top of stoves, toasters, and other electrical appliances. Combustible chemicals often are mixed in piles with fast-burning fabric items. Hoarding fires are extremely hot, smoky blazes due to homes stacked floor-to-ceiling with highly flammable materials.
Hoarding environments also exacerbate water loss damage since excessive contents obscure the discovery of water damage in a timely manner. Simple water damage becomes complex and extensive in a short period of time. Mold grows unnoticed for long periods of time in the layers of clothing and debris that soak up water as it seeps through the home. With both fire and water losses, differentiating between pre-existing and new damage may be difficult, if not impossible.
When a loss occurs in a hoarding environment, it can quickly become an extreme claims situation. In such cases, controlling claims severity is a major challenge, and hoarding impacts multiple areas of the claim related to additional costs. For example:
- Claimants who cannot live in their home as a result of damages typically require temporary living arrangements that are paid for by the insurance company. The length of time spent in temporary housing is often twice as long in a hoarding loss due to indecisiveness of the hoarder, which prolongs the claim process.
- Contractors who experience multiple delays and canceled appointments have added costs, which increase the insurance company’s settlement.
- The claims professional often spends more time handling a hoarding loss and is unavailable to take on other claims. This results in higher costs to the carrier.
- Items that could have been restored successfully under a normal time frame become nonrestorable under delayed time tables. These items would then be reimbursed at the higher cost of replacement value for policies that pay replacement.
The aspect of restorability is particularly relevant for garments and textiles on a loss site, as this category has grown to become a larger portion of contents claims and the value of restoration compared to replacement has become more apparent. In 2014, Americans spent $366 billion on clothing and shoes, according to the U.S. Department of Commerce Bureau of Economic Analysis. That amount surpasses spending on household goods and nearly equals gasoline and other energy goods. It’s also $5 billion more than what was spent the previous year. The cumulative effect of consumer spending, therefore, impacts the exposure for carriers. Considering that restoration tends to reduce costs by upwards of 80 percent over replacement, the decrease in severity is substantial.
In a hoarding situation, however, certain protocols must be implemented in order to handle the loss in a cost effective manner. Specifically, from an operational standpoint, an on-site inventory is a critical component that gives assurance to the homeowner that all items are accounted for. It also creates an audit trail for the claims professional since extremely large quantities of items are involved.
All items the homeowner uses on a day-to-day basis are inventoried and restored using normal textile restoration procedures. Items not used regularly that the homeowner wants to keep should be restored using hoarding procedures, which include a heavy emphasis on bulking (wash and fold) and special packaging. All nonsalvageable items are itemized for the claims professional and homeowner. All items purged are listed and reported privately to the claims professional for use at their discretion.
On the invoicing side, items that are pressed or require special handling are charged by the piece, typically using commonly accepted and agreed upon third-party pricing. Items that are laundered and folded are charged by the pound as usual. Nonrestorable items are removed from the invoice, and there is no charge.
Once the items are restored, they should be kept at a location that is convenient for the insured since accessibility is an important factor. The insured likely will make multiple or even numerous trips to the storage facility when displaced from the home for any period of time.
Service providers charged with handling a hoarding situation face distinct challenges in dealing with the insured as well as the loss itself. Homeowners who have suffered a loss understandably are in a heightened emotional state, which could range from shock to hysteria. With hoarders, these emotions can be even more pronounced, and additional empathy and sensitivity are required. This encompasses facial expressions, which can be difficult to control without experience, and language that is respectful and matches the homeowner, using terms such as “collection” or “items” instead of “trash” or “junk.”
How contents are handled at the beginning of a claim sets an expectation and a pace for the entire claim. If the contents portion moves slowly, expenses rise. If it is handled swiftly, costs are controlled. Yet hoarders typically are unable to move quickly due to indecisiveness and high emotional attachment to their belongings. Oftentimes incredible frustration builds up, even to the point of anger, when a hoarder’s possessions are moved or packed out of a home. As these emotions intensify, arguments ensue that only create a more tense and uncomfortable environment. It is important to include family members in the restoration process so the homeowner can receive the support necessary for all restoration decisions to be made.
With proper protocols like these in place, the claims professional is better equipped to control costs while dealing with the irregularities of an extreme claims situation.