In the early 1990s, Marshall & Swift and Boeckh _ then separate companies _ introduced software that replaced much cruder valuation methods, such as multiplying a home's square footage by the going rate of construction. Wells says the combined company, which merged in 2001, employs its software in about 95 percent of U.S. insurance companies, allowing agents to drill into such detail as, say, the difference between a carpenter's hourly wage in Oklahoma City and Oklahoma City's suburbs.
``Everybody uses Marshall & Swift,'' said Jeff Smith, chief executive officer of ITV Solutions Inc., a rival company based in Salt Lake City. ``They have a monopoly.''
As a privately held company, Marshall & Swift discloses little financial information. When Macdonald, Dettwiler and Associates Ltd., a Canadian information provider, agreed to buy the 72-year-old company in April, it said Marshall & Swift's revenue and profits grew 15 percent annually over the last three years, with revenue currently at a clip of about $70 million a year. Macdonald Dettwiler completed the $250 million acquisition last month.
Marshall & Swift's latest customers include Ramsey and other attorneys who are toying with the software as they prepare lawsuits against insurance companies.
George Kehrer, who founded a nonprofit group to counsel disaster victims after he lost his home in the 1991 Oakland fires, says he has tested the software on about 150 homeowners and found the Quick Quote estimates to be about 40 percent below the more detailed questionnaire. Two attorneys who are suing insurance companies say they found similar discrepancies.
One night last month in Crest, a mountain community east of San Diego, Kehrer opened his laptop computer and looked for volunteers in a roomful of about 25 people who lost their homes. Pam Mitchell, 53, raised her hand.
Kehrer tells her that the quick survey pegged the cost of replacing her home at $331,000 _ pretty close to the $358,195 limit on her State Farm Insurance Co. policy. She also had ``extended'' coverage to give her some extra cushion, raising her limit to $429,834.
He then did the more detailed survey - eliciting such details as solid oak floors, two fireplaces, two wood stoves - and found in about 12 minutes that it would cost about double - $676,054, to be exact. As it turns out, an adjuster sent by State Farm after the home burned estimated $782,000. Mitchell wept.
``It's been a while since I sat down and cried but I guess I just didn't realize what we had,'' said Mitchell. ``It was a beautiful home that we worked all our lives for. There were no vacations, no fancy cars.''
Two nights later in Poway, an upscale San Diego suburb, Kehrer picked Donna Porter, 51, who lost her 3,100-square-foot home. A quick survey valued her home at $311,624, close to the $317,000 limit on her State Farm policy. The more detailed survey - which threw in extras from central air conditioning to a whirlpool spa - pegged the home at $560,251.
Wells, the Marshall & Swift executive, said he couldn't comment on these cases because he was unfamiliar with them. But he said such wide discrepancies between the Quick Quote and more detailed survey were unlikely if all questions were answered properly.
``That doesn't sound logical,'' he said. ``You shouldn't have such a wide variation.''
A State Farm spokesman, Scott Smith, declined to comment on individual cases but noted that many policies have allowances for debris removal, building-code changes and other extras that may not be reflected in the quick surveys.
About 600 State Farm policyholders lost their homes in last year's fires; between 40 and 50 have complained to regulators about being underinsured, Smith said.
Insurance officials note that years of low interest rates led many homeowners to remodel their homes, potentially leaving them with inadequate coverage.
``A lot of times people take things for granted,'' Smith said. ``Maybe they don't tell their agent about their new hardwood floors or upgraded kitchen.''
Insurance industry officials also say that replacement costs tend to skyrocket after major disasters. ``You have such a demand surge in catastrophes like these that a contractor can charge $300 (a square foot) when he charged $150 the day before,'' said Paul Rubicam, senior vice president of operations at Residence Mutual Insurance Co.