Well, we finally have a resolution. This was one of those adventures that my husband and I couldn’t have done better on our own. We each took part of the negotiation, and I’m pretty pleased with the end result.
Who Paid for What
The original bill was $5,300. Here’s how our recovery broke down:
Manufacturer. First we pursued the manufacturer (with the help of the plumber). Since our house was only 2 years old, a possibility could have been a faulty pipe. That was a dead end and we did not receive any warranty coverage.
Insurance. Since I used to work in the insurance industry, I know that homeowners policies aren’t always very straight forward, especially in a water break situation. Because the break was actually under the foundation, there would be some coverage. In addition, we have a special endorsement that covers part of our land. When the claims adjuster denied the coverage, I elevated the case to a manager who reviewed it and sided with me. They covered $1,700.
Plumber. The plumber’s costs were not covered in the insurance settlement. Neither was some of the excavation work. My husband negotiated with the plumber based on the quality of workmanship since they installed the original pipe. The plumber agreed to waive his fees and picked up part of the excavation not covered by insurance, or about $3,000.
Taxes. You can deduct a casualty loss that isn’t covered by insurance. For personal property you must first deduct $100 and 10% of your AGI, which eliminates our loss. However, if you have a portion of your house that is used for business, like a home office, you can assign the casualty loss in proportion, since business losses are not subject to the deduction rules. We will be able to claim about 3% of the uncovered loss as a business loss. See Publication 547  for more information on casualty losses.
From the original $5300, we had to pay about $500 out of pocket. In addition, by making a claim on our insurance policy, I calculated that our premium will go up about $200 over the next three years. Overall, paying 13% on the bill was fantastic!
Personal Finance Lesson
Anytime you have an unexpected loss, or a bill that you weren’t planning on, it’s good to sit down and do some brainstorming. We decided that we had multiple avenues that we could pursue to see if we could negotiate. Lots of those ideas were from readers… thank you!