Legal/Ethical question about deductibles
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Legal/Ethical question about deductibles - 7/15/2006 3:22:52 PM
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givemeroofs
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Home base: Houston, Texas
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Is it legal for a roofer to waive/absorb a deductible?
Does an insured not paying the deductible count as a profit?
I am asking because I was privy to a conversation between a roofer and insured where I overheard the roofer tell the insured that they could get the carrier to overpay for the roof and gutters allowing for no deductible. The roofer was basically telling the homeowner they would get a "free" roof.
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RE: Legal/Ethical question about deductibles - 7/15/2006 3:45:38 PM
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trader
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Well so much for the old argument "it cant be done for that" In the $250. Deductible days it was rather common,(** for the consideration of placing a yard sign **) but $1,000. or 1%- 2% Ded.. humm don't think so with re-inspectors, diagrams, and photos; unless its a brother in law deal.
< Message edited by trader -- 7/15/2006 4:26:41 PM >
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RE: Legal/Ethical question about deductibles - 7/15/2006 6:47:53 PM
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Wes
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If the roofer is saying he is going to over inflate his price to make up for the deductible then that is clearly fraud and illegal. If the roofer is saying he will take the deductible out of his cut of profit then I see nothing wrong with that. As stated above I don't think you are going to see any roofers paying for todays high wind deductibles out of their profit so I would assume it is the other option and they are committing insurance fraud.
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RE: Legal/Ethical question about deductibles - 7/15/2006 7:01:47 PM
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dcmarlin
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No doubt about it. It is fraud. But, as said, they get around it by giving you a rebate for a sign in the yard or some other reason. The policy states "Subject to the policy limits that apply, we will pay only that part of the total of all loss payable under Section 1 that exceeds the deductible amount shown in the Declarations."
< Message edited by dcmarlin -- 7/15/2006 7:08:18 PM >
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RE: Legal/Ethical question about deductibles - 7/15/2006 8:04:24 PM
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Big Bob
Posts: 185
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Ryan, as you have describe the conversation, it is fraud. Do you have any other witnesses to this conversation or will it be 2 against 1 "thats not what I said"? Was this legally recorded? A carefully worded letter to the carriers local claim office could alert claims handlers to watch this roofers revision requests and supplements. Even big cities turn into small towns when ones business reputation is questioned.
You will be doing the honest roofers, and homeowners in that community a big service.
< Message edited by Big Bob -- 7/16/2006 9:46:18 AM >
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RE: Legal/Ethical question about deductibles - 7/15/2006 10:03:40 PM
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trader
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kinda sounds like a connected contractor, blow the whistle.
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RE: Legal/Ethical question about deductibles - 7/16/2006 1:14:48 AM
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givemeroofs
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It's really kind of a weird situation. For any of you who have worked Houston, you know that roofers here are some of the most aggressive in the nation.
They will undersell each other and do just about anything to get a contract signed.
Part of me thinks that it is illegal for an insured to "profit" from the proceeds of a claim by not paying the deductible.
The other part, thinks that I have inspected the loss, written an honest estimate, applied the deductible, and my part is done. If a roofer wants to give a "discount" so be it.
I guess it doesn't seem honest. I have seen roofers let a 4000 deductible go just to get the job.
But the conversation I heard today was just disturbing.
You know we all want to know what the roofer tells the insured when we are not around. Well today I was the fly on the wall for just that conversation and I was shocked at how blatantly the roofer told the insured how they would try all their tricks to get the carrier to pay for a new roof.
I'm no rat, but we are all supposed to play by the rules.
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RE: Legal/Ethical question about deductibles - 7/16/2006 4:23:31 AM
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PORTASATGUY
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I say you did your Job, If it were me, and I was you, I would make a note on the activity Diary, If the Roofer wants to Cut his Price, and "BUY" the Job, hey you did yours, Document it, and Onto the Next one! Just remember, Honesty, Ethics, and Professionalizm are all atributes of the one thing we were all born with.....All the rest we learned along the way!
< Message edited by PORTASATGUY -- 7/16/2006 4:25:24 AM >
_____________________________
R. Estes
Life is short LIVE IT!
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RE: Legal/Ethical question about deductibles - 7/16/2006 7:52:19 AM
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Catmandale
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Just another thought...
If the Insured buys into the line of the sleazy contractor, what in the world would make him think that he won't be cheated by the guy?
My guess is that the roofer is an equal-opportunity cheat.
I would wonder about my warranty, workmanship, materials used....
"...you can't cheat an honest man..."
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RE: Legal/Ethical question about deductibles - 7/16/2006 9:10:42 AM
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Big Bob
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Since Ryan has brought up the "Fly on the wall desire" and Catmandale is very much on target let me share how I have handled deductibles for over 20 years as an insured loss restoration contractor. I have provided GC, Roof & mitigation services. My contract is a simple authorization to proceed (per the claim, the agreed scope with carrier) & direction to pay.
1. I always try to bring the deductible subject up before the Homeowner has an opportunity. I ask" has the adjuster or your carrier discussed your deductible?" "Good, then you know that this is the part of the loss that you are responsible for. Insurance companies are not in business to make contractors rich. We will be working from a line item estimate. You will look at those line items and say How can anyone make my repairs for this. This is a nickle business. If enough nickles are piled up there is enough to perform your restoration. If more is needed I will work that out with your carrier. XYZ is a good company and they want to pay what they owe. (But, not one nickle more). If you can't afford to pay your deductible, perhaps there are line items you would like to perform. We will need to credit the carrier the O&P on those items. Homeowners do not have overhead cost and it is not legal for you to profit from this loss. (I then discuss collection of the deductible)
2, (60% of homeowners know of Ryan's roofer) The homeowner asks"hey Mr. Contractor isn't there someway we can lose this deductible?" I silently start to gather my things. I politely explain the above(#1)as I am on my way to the door I ask " do you really want a dishonest contractor working on your house"? 98% shamefully say no and ask if they could please sign the authorization to proceed,
before my hand is on the door knob.
The other 2% catch me in the driveway and ask to sign. Half of those are responsible for my grey hair. One day I'll learn to trust my gut.
< Message edited by Big Bob -- 7/16/2006 9:45:21 AM >
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RE: Legal/Ethical question about deductibles - 7/16/2006 12:12:43 PM
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BobH
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quote:
perhaps there are line items you would like to perform. We will need to credit the carrier the O&P on those items. Homeowners do not have overhead cost and it is not legal for you to profit from this loss. I am not trying to force this thread in a different direction - but do want to point out that this comment is not 100% universally applied by all carriers. So you wouldn't want to state this as a general rule.
There was some litigation several years ago against a carrier that wouldn't allow O&P unless there was a signed contract with a General Contractor. The court sided with the homeowner that the complexity of the repair would merit O&P... I forget all the details but there were changes by some carriers following that point in time, and you may see variations from State to State.
Just don't assume that if an Homeowner does the work himself that he is supposed to give the O&P back, because it ain't necessarily so.
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RE: Legal/Ethical question about deductibles - 7/16/2006 1:38:00 PM
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Dimechimes
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I'm glad to see this topic discussed. I handled staffing for a preferred contractor this year for the first time. I was surprised to learn from the adjusters reporting and attending their 2 day training that "losing the deductible" had even been instructed to them in class. Needless to say, they were disturbed and called me to advise. I was proud of them for walking away and although it cost me a staffing contract, none of us were comfortable with it and let the contractor know. I'm glad to see the consensus of the group here is the same. Sure made me proud of those independents for sticking to their ethics too and letting me know as I wouldn't want to be part of staffing for anything like that either.
Bob- I like your method of handling with the insureds too.
Deb
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RE: Legal/Ethical question about deductibles - 7/16/2006 3:39:45 PM
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rhking
Posts: 125
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I'm with BobH and Portasatguy on this one - note the info in the file and turn it in. Re: O & P, I don't know which carrier BobH is referring to, but I would agree that withholding O&P can be dicey at best. Here's a link to a settlement sheet from a class action where the carrier allegedly wrongly w/h O&P:
http://www.recallproduct.com/_documents/Final%20Detailed%20Notice%20to%20PD.pdf
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RE: Legal/Ethical question about deductibles - 7/16/2006 4:55:36 PM
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BobH
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Your link was for a very recent action involving Hartford Ins: "There is a class action about whether Hartford Insurance Company of the Midwest and certain affiliates (“Hartford”) improperly withheld payments of general contractor’s overhead and profit from amounts paid on claims for Structural Losses under homeowner’s policies."
The one I was referring to was older, 1998 "Salesin v. State Farm". There was a Claims Mag article of August 2000, focused on O&P. In that case, the agreed repair was $27,908.98 including O&P. The ACV settlement (prior to completion of repair) was for $20,778.75 as they held back $5,581.79 in O&P as well as depreciation.
"Despite the fact that the repairs had been completed for $14,451.00, the Salesin court affirmed an award in favor of the insured in the amount of an additional $5,581.79. Thus, the insured received $11,909.54, in addition to the actual cost of repairs". "It is uncomfortably true that finding that State Farm owes Salesin an additional $5,581.79 for contractor's overhead and profit will result in a payment to him for costs that he has not incurred and almost certainly will not incur. However, it is also true that Salesin has paid a premium for a full replacement cost policy."
(the courts comments go on, but I think you get the idea). There was a series of rulings that kind of whacked conventional thinking on it's head, in terms of paying more than the amount actually and necessarily incurred to do the repair. It is almost impossible to be aware of all the changes and court decisions - but I have adopted a willingness to listen, and change, because things just don't stay the same.
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RE: Legal/Ethical question about deductibles - 7/16/2006 6:43:54 PM
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Big Bob
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Ms. Deb thank you for your kind words.
Mr. Bob H., Thank you for your valuble input in your 2 posts.Please know that most HO's (96%) when faced with a properly written line item estimate choose to "let the contractor do it for that" as opposed to performing some of the tasks themselves. ( and find a way to pay the deductible). The (4%) need so much hand holding the contrator ends up doing the work over. The O&P not earned is usually given in a credit to carrier durring a suppliment request 99.9%. The very few times (4) in twenty+ years, that I needed to provide a check (contractor to carrier) for o&p not earned, the following occured. Twice the check was greatfully accept. Once the adjuster tore it up in my face and said" what are you trying to do... get me fired? Once the adjuster said" I don't know what to do with this...please give it to the HO. ( which I did.)
Bob H. post # 2. ( three of the four above where to big red) I noticed in 2000, (I think) that SF staff adjusters started to add O&P to fire losses before the HO had a contrator. I was advised " that's the way we pay fire now."
Mr. rhking, Interesting. Looks like Harford paid off the lawyers 20MIL, if i read this right. No addmission of guilt by Hartford for not offering O&P.
Side note:* Friday 7/14 I received a (oops it's another Ha carrier) estimate via fax. The loss was Wind/ tree to residence. 6-8 trades and Contractor O&P not offered or mentioned on x-mate estimate or cover letter. This estimate $3 kish was also written labor burdens factored in. I am progressing with a revision request and will request customary GC O&P of 10 % & 10%.
PS. if adjusters would plant the seed after dealing with the HO" by the way if a contractor offers to misplace your deductible, please know that it is highly unethical and may cross the line to insurance fraud. Do you really want a dishonest contractor working on your house?"
Who knows, maybe this "losing the deductible thing" will go away, one day.
Mr. Roy, I truely value your wisdom and many posts. but I must disagree that(well) perhaps you are right, born with integrity and honesty: maybe for some, it gets lost along the way.
Do the right thing: no matter how long it takes. You will make up the time by sleeping so much better.
< Message edited by Big Bob -- 7/17/2006 9:32:32 AM >
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RE: Legal/Ethical question about deductibles - 7/17/2006 9:52:03 AM
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Medulus
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On the original subject:
Though the insured and contractor colluding together to bury the deductible is a clearly fraudulent practice, it is the type of fraudulent practice that is rarely, if ever, prosecuted.
Back in the day when I worked on staff for Big Red Auto in the Los Angeles area, one of the larger body shops in the area had a radio commercial where they explained to the public that insurance companies were crooks who didn't want to pay their claims. They then went on to announce that they would make the insurance companies pay and they would even waive the deductible after the insurance companies paid. In addition to this public confession of their fraudulent practice, they also had a recording to which one had to listen whenever they were put on hold that was even more blatant about how unethical insurance companies were and how they could bury the deductible.
Not only did this company continue to operate, it was one of the busiest shops in the area. It was even on Big Red's second list of preferred contractors -- the list of body shops that had the facilities to do quality work and agreed to certain repair criteria, but who charged more per hour than the majority of shops in the area.
Of course, we have to take into consideration that this happened in California. Ralph Nader and others conducted seminars after the Northridge earthquake on how to bury or at least take a significant bite out of the deductible. He was hailed as a consumer advocate for teaching people how to commit fraud. Then he ran for president of the United States. Go figure.
_____________________________
Steve Ebner
"With great power comes great responsibility." (Stanley Lieber, Amazing Fantasy # 15 August 1962)
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RE: Legal/Ethical question about deductibles - 7/17/2006 10:24:38 AM
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doppler
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These are some of the reasons I'm not a roofer in Dallas any longer:
1) The homeowners are professionals when it comes to hail claims.
2) The first thing out of a roofers mouth when they are knocking doors is "I will do your roof for no money out of pocket".
3)You do not have to carry Worker's Comp or liability insurance.
4)Constant service calls because the laborers don't give a [email=s@*%]s@*%[/email]!
Check out these two stories.....
I was walking up to the front door of a home that I had prepared a bid for. The homeowner was taking delivery of a new dishwasher. The front door opened and a roofer was walking out. I had my color boards in hand, company shirt, slacks and nicely prepared bid with brochures and references. The homeowner showed me the roofers bid on the back of a home computer generated business card. He said "that guy that just left is doing the job for this and buying that dishwasher, what can you do? I dropped the color boards at his feet and said good luck. You'll probably need the shingles off of these boards to finish the job.
Another time, I prepared over 200 brochures for placing on door steps. I was 3/4 way done with the neighborhood and while back tracking to get more packets from my truck, I noticed several of the packages were gone from the door steps. I didn't think much of it and continued till all were delivered.
I had already received a call from a homeowner and headed to the address. I noticed a couple of guys walking and knocking. Ironically, they had the same type of folders I was passing out. I turned my truck around and they were talking to a homeowner at a front door. They looked my way and I stopped at in front of the next house. When they walked away, they didn't have anymore folders.
At that instance, the homeowner came out of his house and asked why they left him so many brochures. I walked up and said "it's because they are mine". He said "who are you"? I said open one of the packets and you'll see. Sure enough the roofers had been picking up my packets at every door step. The homeowner showed me their card. He said look at this. On the back there was a handwritten note "we will pay your deductible". On the front it said "Honesty and Integrity". He asked me in and I signed him up for a new roof and ended up doing 80% of the roofs in that neighborhood without paying a single deductible.
-Doppler
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RE: Legal/Ethical question about deductibles - 7/17/2006 6:22:29 PM
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swink_d
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Its clearly fraud and one of the main reasons roof prices rose dramatically in FL.
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RE: Legal/Ethical question about deductibles - 7/17/2006 6:53:34 PM
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trader
Posts: 1200
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The train got off and back on the tracks on this topic. If the unit prices charges for a roof replacement are "fair and reasonable" for both the buyer and seller, how can $1,000 dollars are more ; disappear, be absorbed, unless it was built into the estimate. If it was built into the estimate, who did/allowed this?
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RE: Legal/Ethical question about deductibles - 7/17/2006 7:01:33 PM
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trader
Posts: 1200
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Home base: Houston, TX
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quote:
ORIGINAL: swink_d
Its clearly fraud and one of the main reasons roof prices rose dramatically in FL.
If this caused the prices to rise was it the crooked contractor, insured or adjuster? Adjusters are supposed to control this situation. Did they fail to perform their duty ?
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