If everyone making a damage estimate knew that they had to turn over the native format, collaboration files, and explain the deviations in pricing and labor burden from the norm, would this transparency help eliminate the gamesmanship in property insurance claims estimates?
This thought was in my mind as I read a transcript from a hearing I was involved in Colorado. I asked Magistrate Judge Scott Varholak to rule on whether the insurer had to produce its Xactimate files in native format. The insurer objected as almost all do, arguing that policyholders already had access to line-by-line estimates and could analyze any modifications through consulting experts.
The judge disagreed and ordered that the native files be produced under a protective order. In his words:
I don’t think there’s anything that unique about Xactimate. Every insurance company that I know of uses it. I think there is some value in being able to see how the numbers can be affected by plugging in to it.
When counsel for the insurer pressed further, the magistrate judge offered a candid explanation rooted in his own background. He stated,
Well, but it’s easier if they’ve got the program that’s doing it… it’s just easier if you’ve got the program to be able to do it. I know the program, because I had a criminal case back when I was a Federal Public Defender involving alleged manipulation of that. And so I’m familiar with the program, and it’s just easier if you’ve got the program to be able to do it.
This acknowledgment shows that even the judiciary recognizes how Xactimate can be manipulated and why direct access to the program files is crucial for fairness.
Florida has already taken significant steps in this direction through recent statutes and rules that require insurers and adjusters to provide underlying estimates and explain any changes that deviate from Xactimate or other standardized pricing tools. These laws mandate that all versions of an estimate be retained and that detailed explanations accompany any adjustments.
The public policy aim of these laws and regulations is simple. They prevent hidden reductions, inflated costs, or quiet modifications that deprive insureds of fair claim payments. Some in Florida have suggested that it does the same for public adjusters, since these new laws and regulations are a two-way street. Complete transparency is intended to stop the sort of gamesmanship that too often characterizes insurance claims.
The reasoning of the magistrate and the Florida regulatory scheme appreciates that when everyone shares their native data and the collaborative information behind their estimates, there is no place to hide improper alterations. Deviations must be documented and explained. Transparency becomes the norm rather than the exception. This is not just a matter of discovery disputes or technical software issues. It is about ensuring integrity in the claims process and restoring trust between policyholders and insurers.
Public policy should embrace this approach. If courts, regulators, insurers, and public adjusters all recognize that openness is the antidote to manipulation, then requiring the production of native estimate files and full disclosure of deviations should become standard practice long before any litigation. Doing so would reduce disputes, protect consumers, and make it far harder for gamesmanship to distort outcomes in insurance claims.
The magistrate’s order and Florida’s reforms point the way forward. They deserve to be adopted more widely across the country.
Thought For The Day
“Honesty is the fastest way to prevent a mistake from turning into a failure.”
—James Altucher
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