Insurance Myths Exposed: What Your Adjuster Won't Correct and What You Believe That Isn't True

Myth #1: “Now That You've Hired a Public Adjuster, We Can Only Talk to Them — Not You”

This is one of the most common things adjusters say when a policyholder retains a Public Adjuster. The insurer's adjuster will tell the homeowner, sometimes with a tone of regret, that they are no longer permitted to communicate directly with the insured — that all communication must now go through the PA.

The Truth:

This is false. A Public Adjuster is the policyholder's representative, not their replacement. The insured retains every right they had before hiring a PA, including the right to speak directly with their own insurance company. There is no statute, regulation, or policy provision in California that prohibits an insurer from communicating with its own insured simply because the insured has retained a PA.

In fact, California law says the opposite. California Insurance Code Section 15027 requires that every Public Adjuster contract include a provision stating that “the insured has the right to initiate direct communications with the insured's attorney, the insurer, the insurer's adjuster, the insurer's attorney, and any other person regarding the settlement of the insured's claim.” The Legislature specifically anticipated this tactic and wrote the insured's right to communicate directly into the statute.

The confusion the adjuster exploits stems from a superficial analogy to attorney representation, where ethical rules under the California Rules of Professional Conduct (Rule 4.2) prohibit an attorney from communicating with a represented party about the subject of the representation without consent of the party's attorney. But Public Adjusters are not attorneys. The Rules of Professional Conduct do not apply to insurance adjusters or to the insurer-insured relationship. An insurer communicating with its own policyholder is not a “represented party” scenario under any legal framework.

What the insurer is actually doing is strategic. By refusing to talk directly to the homeowner, the adjuster isolates the policyholder from the process and creates the impression that the PA is a barrier rather than an advocate. If the homeowner becomes frustrated — “Why can't I even talk to my own insurance company?” — the seed is planted to fire the PA and go back to dealing directly with the adjuster. That is the point.

Myth #2: “Those Documents Are Work Product Privilege — We Can't Share Them With You”

Insurers commonly refuse to provide policyholders with copies of estimates, engineering reports, scope-of-loss documents, and other claim-related materials, citing “work product privilege” or “attorney-client privilege.” In California, this is not just wrong — it is a violation of the law.

The Truth:

California Insurance Code Section 2071 — the standard form fire insurance policy that governs every fire policy issued in the state — contains explicit provisions requiring insurers to make claim-related documents available to the insured. The statutory language was amended effective January 1, 2023 (AB 1799), and it requires insurers to (1) notify claimants that claim-related documents are available upon request, and (2) provide copies within 15 calendar days of receiving a written request.

The California Code of Regulations reinforces this obligation. Title 10, Section 2695.7(d) requires that upon request, an insurer must provide copies of “all documents that relate to the evaluation of the claim in the possession of the insurer.” The regulation defines claim-related documents broadly to include repair and replacement estimates, bids, appraisals, scopes of loss, drawings, plans, reports by third parties, and all other valuation, measurement, and loss adjustment calculations.

The exemptions are narrow: actual attorney-client privileged communications, actual attorney work product, documents indicating fraud by the insured, and medically privileged information. An engineering report the carrier hired is not attorney work product unless it was prepared at the specific direction of counsel in anticipation of litigation — and even then, the factual findings (as opposed to attorney-directed analysis) are typically discoverable.

When an adjuster tells you their estimate is “work product” or their engineer's report is “privileged,” they are almost certainly misapplying the privilege. The report they commissioned to evaluate your roof is a claim-related document. You are entitled to a copy. For a detailed discussion of this right and how to enforce it, see our article on your right to claim documents under California law.

Myth #3: “You Have to Use Our Preferred Contractor”

After a loss, the insurance company often shows up with a mitigation company already in tow, or insists that you use their “preferred vendor” or “network contractor” for repairs. They may tell you that using someone else will jeopardize your claim, slow payment, or void coverage.

The Truth:

In California, the policyholder has the right to choose their own contractor. California Insurance Code Section 758.5 — the anti-steering statute — prohibits insurers from requiring policyholders to use a specific repair facility and bars them from denying a claim, raising rates, or penalizing a policyholder for choosing a non-preferred contractor. Title 10 of the California Code of Regulations, Section 2695.9(b) further provides that when an insurer elects to repair, restore, or replace damaged property, it must provide a list of at least two contractors. The regulation also states explicitly that policyholders may select their own contractor — the insurer's list is a convenience, not a mandate.

The reason insurers push preferred vendors is financial, not quality-based. Preferred vendors have contractual relationships with the carrier. They agree to use the carrier's pricing, follow the carrier's scope, and — in many cases — keep costs as low as possible. Their financial incentive runs to the insurance company, not to you. For a deeper look at how preferred vendor arrangements work and the problems they cause, see our article on preferred vendor problems and our guide on choosing your own contractor.

Myth #4: “We Only Owe You Actual Cash Value”

Adjusters sometimes present the actual cash value (ACV) payment as the final settlement — as though depreciation is a permanent deduction and the policyholder is not entitled to anything more.

The Truth:

If your policy provides replacement cost coverage — and most HO-3 policies do — the ACV payment is only the first installment. The insurer pays ACV upfront (replacement cost minus depreciation), and then owes the remaining depreciation (called the “recoverable depreciation” or “holdback”) once you complete repairs or replacement.

California Code of Regulations Title 10, Section 2695.9(f) establishes the framework: when a policy provides for replacement cost settlement, the insurer must pay actual cash value initially and the remainder when the insured completes the repair or replacement. The insurer cannot treat ACV as the final word.

Additionally, following a declared disaster in California, insurers must provide advance payments under Insurance Code Section 2051.6. These are not optional. The carrier must make partial payments while the claim is being processed — the policyholder does not need to wait for a complete estimate. For a complete discussion of ACV versus replacement cost, see our article on ACV vs. RCV and loss settlement provisions.

Myth #5: “Our Estimate Is What the Claim Is Worth — Take It or Leave It”

The insurer presents a Xactimate estimate and treats it as a final determination of value. If the policyholder objects, the adjuster implies there is no recourse — or that disputing the estimate will only delay things further.

The Truth:

The carrier's estimate is their opening position, not the objective value of the loss. Xactimate is an estimating tool — it produces a cost projection based on the inputs the user selects. Different users can produce dramatically different results for the same loss depending on what line items they include, what measurements they take, and what options they select. The software itself disclaims pricing accuracy.

Under 10 CCR § 2695.7(g), an insurer may not deny a claim without conducting a thorough, fair, and objective investigation. If the estimate is based on a 15-minute drive-by inspection, or if it omits damage the adjuster never bothered to document, the estimate itself is evidence of an inadequate investigation. Policyholders have the right to obtain their own estimates, hire their own experts, and dispute every line item. If the parties cannot agree, most California homeowner policies contain an appraisal provision that provides a binding process for resolving valuation disputes.

For a detailed analysis of how Xactimate estimates can understate claim values, see our articles on why your insurance estimate is lower than your contractor's quote and common Xactimate estimating errors.

Myth #6: “We Can't Process Your Claim Until You Give a Recorded Statement”

Adjusters frequently present the recorded statement as a prerequisite to claim processing — as though the claim cannot move forward without one.

The Truth:

This is technically true — a recorded statement is not a standard policy condition, and the insurer's duty to investigate your claim under 10 CCR § 2695.7(b) is not contingent on your agreement to be recorded. Most standard homeowner policies require the insured to “cooperate” with the insurer's investigation and to submit to an examination under oath if requested — but a recorded statement and an examination under oath are different things. A recorded statement is an informal interview conducted by the adjuster. An EUO is a formal, sworn proceeding that is a policy condition.

However, while technically you are not required to give a recorded statement, refusing one outright is a dangerous move. If you refuse the informal recorded interview, the insurer will very often pivot to demanding a formal examination under oath — which is a policy condition, which requires sworn testimony, and which will almost certainly require the assistance of an attorney. An EUO is a significantly more adversarial and expensive process than a recorded statement.

The better approach is not refusal but negotiation. Consider these alternatives:

• Ask the insurer to submit their questions in writing first, then agree to a recorded interview to follow.This is often the strongest approach. The insured answers written questions at their own pace, with time to be accurate and thorough. Once the written questions are complete, the insured agrees to a recorded follow-up interview. By that point, the insured already knows what the insurer is asking about, many questions are already resolved, and the recorded session is shorter and less exhausting. This sequence is especially reasonable when the insured has a legitimate basis for needing written questions first — limited English proficiency, hearing difficulties, cognitive issues, early-onset dementia, or the emotional toll of a recent catastrophic loss. An insurer that refuses a reasonable accommodation for a policyholder who is willing to cooperate and has agreed to a recorded interview afterward may be creating a record that an attorney could later use to the policyholder's advantage. Consult with an attorney about your specific situation.
• Consult an attorney.A recorded statement is an informal process — it is not an examination under oath. With an EUO, the insurer's attorney is present, you typically need your own attorney on the record, and everyone knows the lawyers are in the room. A recorded statement is different. It is usually a phone call between the adjuster and the insured. Nothing prevents a policyholder from consulting with an attorney beforehand to understand what to expect. And because a recorded statement is not a deposition, there is no procedural rule governing who may be sitting next to you in your own home during an informal phone call — or whether you happen to be taking the call from your attorney's office. Whether that matters is a conversation to have with your attorney.
• Agree to an unrecorded interview. You can cooperate and answer every question without consenting to the recording itself.

The myth is not that you must give a recorded statement — the myth is that the claim cannot proceed without one. It can. But the practical question is how you handle the request, not whether you can technically refuse it. For a thorough discussion, see our article on recorded statements and SIU investigations.

Myth #7: “You Missed the Deadline to File Your Claim”

Adjusters sometimes tell policyholders they reported the claim too late, or that the one-year suit limitation in the policy has expired, and therefore the claim is dead.

The Truth:

The one-year suit limitation in the standard fire policy (California Insurance Code § 2071) does not begin to run until the insurer formally denies the claim or a portion of it. As long as the insurer is still investigating, negotiating, or processing your claim, the clock has not started. The California Supreme Court established this principle in Prudential-LMI Commercial Insurance v. Superior Court(1990) 51 Cal.3d 674, holding that the suit limitation period is equitably tolled while the insurer is “leading the insured to believe that the claim will be paid.”

Furthermore, prompt notice provisions are not strict filing deadlines. Late notice alone is generally not sufficient to deny a claim in California. The insurer must show it was actually prejudiced by the late notice — that the delay caused a concrete disadvantage in investigating the claim. Shell Oil Co. v. Winterthur Swiss Insurance Co.(1993) 12 Cal.App.4th 715 established that the “notice prejudice rule” applies to first-party property claims.

For a detailed treatment, see our articles on equitable tolling of the statute of limitations and California insurance claim deadlines.

Myth #8: “Overhead and Profit Is Only Owed When Three or More Trades Are Involved”

This is perhaps the most widespread carrier myth in the industry. Adjusters routinely strip overhead and profit (O&P) from estimates, citing the so-called “three trade rule” — the claim that O&P is only owed when a general contractor must coordinate three or more subcontractor trades.

The Truth:

The number of trades involved is one factor some courts have considered when evaluating whether the complexity of a repair justifies the involvement of a general contractor — and therefore the inclusion of O&P. There is case law in several states that has discussed the number of trades as part of a broader analysis of job complexity. But carriers have extracted that single factor, stripped it of context, and turned it into a bright-line rule: fewer than three trades means no O&P. That rule does not exist in any insurance policy, California statute, regulation, or reported decision. It is a carrier-created guideline dressed up as an industry standard.

The actual question is whether the scope of work requires a general contractor. A two-trade job can absolutely require a GC — if it involves coordination, sequencing, permitting, supervision, warranty responsibility, or any of the other functions a general contractor provides. Overhead and profit represent the real cost of hiring a contractor to manage and perform the repair. If the scope of work requires a contractor — and most residential insurance claims do — then O&P is a component of the cost to repair. Stripping it from the estimate means the policyholder is being underpaid by 20% or more. For the full analysis, see our article on overhead and profit.

Myth #9: “That Damage Was Pre-Existing / Wear and Tear”

This is the single most overused denial in property insurance. The adjuster looks at damaged property, notes that it was not brand new, and attributes the damage to wear and tear rather than the claimed peril.

The Truth:

The wear and tear exclusion is a cause of loss exclusion, not a condition of property exclusion. Your policy excludes damage caused by wear and tear. It does not exclude damage toproperty that happens to be old or worn. If a windstorm blew shingles off a 15-year-old roof, the cause of loss was wind — a covered peril. The fact that the roof was 15 years old does not transform the cause of loss into wear and tear. The insurer addresses the age of the property through depreciation, not through denial.

California courts have consistently held that the burden is on the insurer to prove that an exclusion applies. Aydin Corp. v. First State Insurance Co.(1998) 18 Cal.4th 1183 established that the insured bears the initial burden of showing a loss within the policy's coverage, and the insurer bears the burden of proving an exclusion applies. For a thorough treatment, see our article on wear and tear as a cause of loss exclusion and pre-existing damage vs. storm damage.

Myth #10: “We Depreciate Both Materials and Labor”

Insurers routinely apply depreciation to the full cost of repairs, including the labor component. They treat labor as though it ages and loses value the way a roof shingle does.

The Truth:

In California, this issue is settled by statute. California Insurance Code Section 2051.5, enacted in 2011, provides that “the expense of labor necessary to repair, rebuild or replace covered property is not a component of physical depreciation and shall not be subject to depreciation or betterment.” There is a narrow exception for labor costs that are “an intrinsic part of the materials used to construct or install the property” (such as the labor cost embedded in factory-made products), but the labor to install, build, or repair cannot be depreciated. This is not a gray area in California — the Legislature wrote it into the Insurance Code in plain language.

Outside California, the picture is mixed. A growing number of courts have reached the same conclusion. In Hearn v. Farmers Insurance Exchange(10th Cir. 2019), the court held that depreciating labor was improper when calculating actual cash value. Arkansas, Kentucky, Oklahoma, and other states have adopted this position through case law or regulation. But in many states, insurers are still permitted to depreciate labor, and the issue remains actively litigated. Under California's broad evidence rule adopted in Cheeks v. California Fair Plan Association(1992), ACV must account for all relevant evidence of value, and there is no logical basis for “aging” the cost of future labor. For a full discussion, see our article on labor depreciation and excessive depreciation.

Myth #11: “The Earth Movement Exclusion Bars Your Claim”

After a water leak causes soil erosion and foundation damage, or after a wildfire triggers a mudslide, the insurer points to the earth movement exclusion and denies the claim.

The Truth:

In California, the earth movement exclusion does not control when a covered peril set the chain of events in motion. Under the efficient proximate cause doctrine, if a covered peril (such as fire, water discharge, or vehicle impact) was the predominant cause that initiated a chain of events leading to earth movement, the loss is covered — despite the exclusion. The California Supreme Court established this in Sabella v. Wisler (1963) 59 Cal.2d 21 and reaffirmed it in Garvey v. State Farm Fire & Casualty Co.(1989) 48 Cal.3d 395. The doctrine is codified in California Insurance Code § 530.

For specific application to wildfire-triggered mudslides, see our article on mudslide after wildfire coverage and our guide to the efficient proximate cause doctrine.

Myth #12: “We Don't Pay for Code Upgrades”

Adjusters frequently tell policyholders that the carrier only owes to restore the property to its pre-loss condition — and that any code-mandated upgrades are the homeowner's problem.

The Truth:

Most homeowner policies include Ordinance or Law coverage (sometimes called “building code upgrade” coverage) as either a built-in coverage or an available endorsement. Under California Code of Regulations Title 10, Section 2695.9(d), when a loss requires repairs that are subject to building code requirements, the insurer must include the cost of complying with current building codes in the settlement. Failing to do so results in an estimate that does not reflect the actual cost of repair — which violates the insurer's duty to fairly evaluate the claim.

Building code upgrades can add 25–50% to the cost of a claim. Electrical rewiring to current NEC standards, Title 24 energy compliance, ADA requirements, structural upgrades to current seismic standards, and modern plumbing code compliance are all costs the insurer may owe. See our articles on ordinance or law coverage and code upgrade coverage.