Question Ethics and Roofing My spouse and I live in a house whose roof who has been in place for 15-20 years of a purported life expectancy of 25 years. Recently we had large hail stones and strong winds that accompanied a nearby tornado. We have homeowner’s insurance that covers storm damage—a particular type that provides “full replacement value” for legitimate claims (which we pay for by an increased cost). The insurance company told me that damage caused by a storm is a legitimate claim, and that I should get an estimate and call them back. A roofer who looked at the roof estimates that the entire roof would need to be replaced at a cost of $7,000-10,000 (minus the deductible) It turns out that my spouse and I have different views of this situation. My position is that insurance represents an investment you make to protect yourself against major setbacks. The fact that the storm happened towards the end of the roof’s life-cycle is irrelevant My spouse, however, considers it unethical and even “sleazy”, since we would have to replace the roof at some point through its natural wearing out, and the current situation was just a way to get a new roof for little money. We probably would never have taken any action had not the roofer himself informed us about that insurance would cover storm damage (this might very well be true.) My spouse feels that the situation would be different if we had just recently installed a new roof, since its value would be higher and thus more worthy of a claim. What is your opinion of the ethics of this situation?

Accepted:
April 27, 2011

Comments

There is a difference here between what you are legally entitled to claim and the loss you have actually incurred. You believe that it is permissible to claim the former, larger amount. Your wife believes that you should claim no more than the latter, smaller amount.

Suppose the difference would only affect the other policy holders through an adjustment of their future premiums. Would you then have an obligation to ask for less as your wife suggests? I think this depends on the prevailing habits and practices among those who would benefit: how are they disposed to act in a case like yours? In the urban world of the East Coast I am familiar with, nearly all those buying insurance would claim no less than they are legally entitled to claim. If this is the prevailing attitude and disposition among the policy holders in your insurance as well, then it is factored into the prices of policies. So you have all along been paying premiums priced to cover people claiming what they are legally entitled to rather than merely their actual cost. And it would therefore not be unfair to the other policy holders if you, too, were to submit the larger claim. Suppose, conversely, that the customers of your insurance all think the way your wife is thinking: they find it sleazy to claim more than one's actual cost and then refrain from doing so. If the premiums you have paid over the years reflect this attitude and disposition on the part of other policy holders, then it would be unfair to them to claim more.

Your decision may not merely affect other policy holders, but also the insurance company or rather its owners/shareholders. Some of the money you might fail to claim would presumably end up as extra cash that this insurance company might reinvest or pay out as dividend to shareholders. In this relationship between you and the company the same question arises: would the company be "decent" or "sleazy" if your roles were reversed? Suppose you made some silly mistake on a claim form and suppose the insurance company is legally within its rights to deny your claim on this basis (you cannot re-file, perhaps, because the filing deadline has since passed). Would your company be generous and let you correct the mistake and then pay your claim? I don't know about your insurance company, but my sense is that most insurance companies would typically insist on their legal rights and deny your claim in such a case (perhaps pointing out that they have a priority obligation to the firm's owners, the shareholders). Assuing that this holds for your company as well, then again it would not be unfair for you, too, to insist on your legal rights with regard to your claims. The legal contract you have with this firm is then a kind of bet between competent adults. What matters here are the legal terms of the bet, and not the actual costs incurred. You can make a bet with a rich friend that you will pay her $100 and, if a tornado strikes your town, she will pay you $20,000. It would not be wrong to collect this amount even if the tornado that strikes your town causes zero damage to your own property. You can think of the insurance cover you bought along the same lines. The company understood that your roof might sustain damage near the end of its natural life and that, if it then paid you "full replacement value", you would benefit from the damage. The company -- certainly a competent party -- nonetheless wrote the policy in this way and charged you appropriate premiums to cover the anticipated extra expense. So why not let the company make good on the promise to which it chose to commit itself in writing?

The only good reason I can see for resolving the question in the way your wife advocates presupposes that your failure fully to claim what you are legally entitled to would benefit other policy holders who are disposed to act in the same manner. If (as seems highly likely to me) this is not your actual situation, it would seem morally permissible for you to claim the full amount.