Liberty Mutual Tried to Screw Me and I'm Not Liable... Here's How You Can Prevent This From Happening

The Water War: An Odyssey of Leaks, Claims, and Unyielding Insurance Companies That Try To Screw You

In the world of real estate investment and property management, the journey is rarely a straight path. It's filled with unforeseen challenges that test your resolve, your resources, and your ability to navigate the complex interplay of tenant rights, property maintenance, and, most dauntingly, insurance claims. My story starts with a trash experience that caused me to terminate my insurance with Liberty Mutual permanently. I will never work with them again and here's why: Even when the other insurance company claimed liability, my insurance company (Liberty Mutual) refused to represent me or subrogate for me on my behalf. Instead, they refused to accept my claim in its entirety and I believe Liberty Mutual was wrong the entire way. 

Battling insurance is not just a test of patience but a deep dive into the often opaque world of contracts, laws, policies, claims, and the intricate dance between homeowner associations (HOAs), tenants, and insurance adjusters.

This is a tale of water – not the life-giving kind, but the kind that brings with it damage, despair, and the daunting task of seeking justice and compensation.

The Mysterious Onset

In early summer of 2023, my tenant reported a peculiar case: water mysteriously appearing, waging an uninvited war against the floors of the unit. The water would sometimes appear, but it wasn't exclusively with rain and it wasn't consistent. So this doesn't sound like rain water, nor pipe water. What could it be?

I called a plumber, A Fish Plumbing and they were awesome in the process. They helped me figure out and absolutely verify that my unit was not leaking. Thanks Abraxis!

*Where is the water coming from?

I then made a claim with Liberty Mutual. I was promptly told my policy doesn't cover flood so unless I could find the source of water, the source of water would be deemed groundwater, which isn't covered. 

The Quest for Answers

By August 2nd, the plot thickened. Liberty Mutual hired American Leak Detection. They came to the unit and also verified that the water was not coming from my unit. However, they were unable to assess the plumbing in the units directly adjacent. Since the walls were not substantially wet, and the HOA didn't have a record of anyone complaining, rather than providing clarity, American Leak Detection, erroneously pointed to groundwater – a verdict that threatened to leave me without coverage. Liberty didn't cover groundwater, and neither did the HOA. My unit is above grade and is on a hill above a creek. There was no possible way water was being pulled into the unit unless there was something else I was not aware of.

The tenant's insistence that the interior water was not correlated to the rain had multiple people stumped. The wood in the middle of the floor was beginning to warp just as though a pipe directly under the floor was leaking, however, no such pipe existed. If I didn't find the source of water, how was I supposed to fix the problem?

We made a decision to hire a local contractor who agreed to pull up the floors to see if there was piping or something in the foundation that was causing water to come into the unit. Upon opening the floor some small cracks were observed in the foundation. Could this be the source of water?

Over a few weeks, water did not emerge from those cracks whether it was raining or when it was dry. 

*Cracks in cement

So we called the HOA insurance (Concord Insurance) to investigate. The HOA insurance also assigned the water to groundwater because the water source could not be identified, and was therefore not covered. The claim was denied. The foundation was not deemed a problem since I shared the same foundation and slab as my neighbors, and none of my neighbors were experiencing water issues. This was deemed to be a problem exclusively to my unit and therefore, it was my problem.

So now, I'm definitely on my own. My options are to seal the concrete and then rebuild the floors or do nothing. Starting such a costly repair was concerning because I still did not definitively know what was causing the water to enter the unit. 

So if I spent the money and repaired the floors, would there be any guarantee that water would not reenter the unit? No one could answer that question. 

Chapter 3: The Water Breaks

On September 23rd, the water started flowing into my unit from the adjoining wall with one of the units. Unfortunately, the neighbor wasn't home and my tenant wasn't able to get support or help to shut the water that evening.

The next day, my team comes to inspect it and they immediately come to the conclusion that the water is coming from the neighbors unit. We knock on the door and alas, we have found the source of water. It turns out the water was coming from my neighbor's leaking water tank. Oddly, the tank was ruptured at the top of the tank, not the bottom. There was mold throughout their water tank closet which suggested the water had been leaking for a long time. I had made the decision to seal the foundation cracks and restore the unit with Nest Construction (highly recommended for their honesty). It just so happens that my re-construction project was supposed to start the next week when this happened, so I had a team ready to go.

*Neighbor's Tank

At this point, I am extremely relieved. The source of water was identified and we now could repair the unit. I immediately file a new claim with Liberty Mutual this time for a water heater damage claim. While making the claim, Liberty Mutual says you should begin mitigation immediately. It provided a list of service providers, who I called. None were able to help immediately. So I went with Nest and they handled the job. At this point, water had been damaging my hardwood floors for months. We immediately started pulling soaked wet materials and drying the unit. 

Happily, the very next day, September 25, 2023 my neighbors insurance company called me the very next day and confirmed they were accepting liability. 

So now my thoughts are, great, we have a source of water, and the repairs are paid for, let's get this done.

Chapter 4: Welcome To Hell

In a normal incident where an insurance claim is made, your insurance should represent you and often, they will reimburse you first, and then get the funds from the liable insurance company through a process called subrogation.

When I was hit be a drunk driver, my insurance covered the costs of my repair immediately. They then went after the drunk driver's insurance company for all damages plus my deductible. This is how I understand insurance to work.

Wow was I wrong. Oddly, Liberty Mutual did not agree to represent me. On the Liberty Mutual side, they sent an adjuster, Melissa Compton, however, the adjuster was not assigned until 09/26/2023 and did not come to the unit until 09/27/23, a full 3 days after the water tank break was reported.

My contracting team immediately started repairs and the first step they did, was they stripped out the hard wood floors. By 09/26/23, the floors and walls that were damaged were removed with a 24" flood cut, which is the standard cut for water damage. By the time the adjuster came to the unit, the floors and walls had been removed. 

A few days later, I get the call from Liberty Mutual that they can't represent me because they are the secondary insurer and the primary insurer was the HOA. I asked how could that be because State Farm clearly represented my neighbor immediately.

I wasn't provided a clear reason, other than, they can't represent me until they know that the HOA insurance will not represent me. Meanwhile, I have an emergency flood situation, and a unit that is not suited for a tenant. So I make the call to get an AirBnB for my tenant and pay for a POD to store all of the tenant's belongings. I reviewed my policy thinking loss of use is part of the policy so this should be reimbursed too. 

My next step was to contact the HOA's insurance to ask for a formal denial of representation or claim denial for the water heater. This turns into a logistical nightmare of back and forth because remember, the last time they were called, they deemed the water as groundwater and the denial was for groundwater. 

The HOA's insurance cited the groundwater as the source of denial of coverage. This was deemed not sufficient according to Liberty Mutual. Liberty Mutual insisted that they needed a decision for the water heater. So we go back and forth with the HOA's insurance. On October 17th, 2023 I officially get a denial for water heater coverage, so now I'm thinking we're set. It's been 24 days, the repairs are almost done, but surely this will be settled now. 

Oh was I wrong. 

Now Liberty Mutual comes back and asks for evidence and proof that the floors were present. They also continually cite reference that my policy doesn't cover for seepage and standing water. Liberty Mutual claims the only thing covered is the cabinets because they were present during their inspection on 09/27/23. They take the position that even if there was any additional damage, I had to prove it was only from the water tank burst and not from the standing water or seepage (slow leak).

Think about that. In what world do you think walls and floors did not exist in the unit!!! That was Liberty Mutual's position. 

I start to provide proof via photos and videos, but during the exchange of files, they ask if I can prove in meta data that the photos exactly occur between 09/25-09/27. If that meta data cannot be retrieved, they won't cover anything else. 

Eventually after days of rage calls and frustration, Liberty Mutual offers me $4,800 minus my deductible, and they will go subrogate with State Farm for $4,800 and when that is done, I will get my deductible back. 

By this time I had spent approximately $33,000 to repair this damage, house my tenant, and restore the unit. Luckily, I am in a position where I can front the repairs, but if wasn't, my tenant would not have a place to live, I'd have to release the tenant from the lease, and by then a ton of water damage would incur and my house would likely be covered in mold.

This enraged me as I really felt I was being royally screwed by Liberty Mutual who made no effort to explain what they needed during the rebuild process only to tell me after the fact that nothing is covered. The level of anger I felt was something I rarely experience. I actually was wishing ill-will onto others. 

Ultimately, I did hire an attorney to represent me and despite the fact that Maine Law allows for testimony to serve as evidence in the event photos could not be produced, Liberty Mutual maintained that unless I was to formally take the case to court, they would not allow statements from the HOA, My Tenant, My Contractors, The Other Insurance Adjusters, to serve as evidence the floors and walls were present at the time of incident. They were only willing to subrogate for $4,800. 

So my options were to litigate against Liberty Mutual which had no guarantee I would win and likely cost me more than the cost of the repairs, or just file a claim directly with State Farm and hope they do better. This process to come to this conclusion took months and by late January, I decided to just go with State Farm and let the results fall where the results fell.

State Farm was quick in their assessments, accepted the evidence I provided as sufficient and reimbursed a large majority of the repairs. I was offered 5x more than Liberty Mutual and I accepted the offer happily as this ordeal could be put behind me. In the end, I did lose approximately $7,000 for my neighbor's water tank to leak into my unit but it felt like a win. It still does.

It was at this moment after the check deposited, that I officially terminated my insurance with Liberty Mutual and went to State Farm. 

Liberty Mutual is not here to support you. There here to actively screw over their clients and waste money on LiMu Emu ads. 

Epilogue: Lessons from the Deep

This odyssey taught me lessons more valuable than the compensation received. It underscored the importance of not just understanding your insurance policy in depth but being prepared to fight for your rights as a policyholder. It highlighted the value of persistence, the necessity of independent investigation, and the unexpected alliances that can emerge in the face of adversity.

For my fellow property managers and real estate investors, this tale is a cautionary reminder: when navigating the murky waters of insurance claims, arm yourself with knowledge, question the status quo, and never underestimate the power of tenacity. 

Here are the big takeaways: 

1. Always capture photographic evidence and immediately upload to cloud of all damages before repairs
2. If using a contractor, structure the deal that there are penalties or projects cannot commence without photographic evidence of damages and repairs
3. Do not accept a lowball subrogation in the event the other insurance company is liable. Your insurance is not going to fight for you even if they are going to get reimbursed. You can tell they want the easy way out. 
4. If your unit shares walls with a neighbor and your unit is leaking water, pay for the leak test in the other unit. Had I done that it would've costed so much less for everyone involved. Just pay the leak test for your neighbor and save yourself months of headaches.
5. Get trusted advice. A special shoutout to Mike Caggiano, my business partner, and Travis Edmonds of Williams Realty who really helped me make contracting decision and understand the prices of repairs. General contractors are really an opaque operation so the more information you have the better.