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Last Post 12/17/2007 10:14 PM by  HuskerCat
What Is The Definition Of Replacement Cost Coverage?
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Ed The Roofer
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12/06/2007 2:20 PM

    I have another thread about a 2 layer Tear Off and 2 layers of illegaly installed plywood decking completeley broken through the rafters from wind damage from a very large tree falling on the house and detached garage structures.

    Tha Good Hands Adjuster had the contract in his hands prior to work starting which listed per lineal foot and per square foot costs of various wood decking and rafter replacement that may have been required.

    Now, 3 weeks since the job has been completed, he finally returned my message and stated that my pricing on several items are too high. 

    Shouldn't that have been discussed before authorizing the work to proceed?

    What is the industry accepted definition of "Replacement Cost" if it is not the actual contractually listed prices agreed to before starting a job?

    If you do not have the answer, could you please point me in the right direction to look it up myself.

    I recall reading something from the "Insurance Information Institute", but I do not know if that associations definitions are commonly accepted.

    Thank you for any guidance you can offer in advance.

    Ed

    Please Stay Tuned For A Very Important Message From Our Sponsor http://www.rightwayroofingcompany.com/ www.rightwayroofingcompany.com Roof Estimates, Roof Repairs, Roofers, Roof Leak Help, Elgin, Carpentersville, East Dundee, West Dundee, Sleepy Hollow, Algonquin, South Elgin, Huntley, Lake In The Hills, Illinois
    Leland
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    12/06/2007 4:12 PM
    Taken From:

    Allen Financial Insurance Group. For those of you who don't know us, AFIG is a national full service provider of personal, commercial and agribusiness insurance products....

    Actual Cash Value vs. Replacement Cost


    There are several different methods by which your insurance company may calculate the amount it will pay you for a loss. Payment based on the replacement cost of damaged or stolen property is usually the most favorable figure from your point of view, because it compensates you for the actual cost of replacing property. If your camera is stolen, a replacement cost policy will reimburse you the full cost of replacing it with a new camera of like kind. The insurer will not take into consideration the fact that you ran three rolls of film through the camera every day for the last two years, causing a considerable amount of wear and tear.

    In contrast, actual cash value (ACV), also known as market value, is the standard that insurance companies arguably prefer when reimbursing policyholders for their losses. Actual cash value is equal to the replacement cost minus any depreciation (ACV = replacement cost - depreciation). It represents the dollar amount you could expect to receive for the item if you sold it in the marketplace. The insurance company determines the depreciation based on a combination of objective criteria (using a formula that takes into account the category and age of the property) and subjective assessment (the insurance adjuster's visual observations of the property or a photograph of it). In the case of the stolen camera, the insurance company would deduct from its replacement cost an amount for all the wear and tear it endured prior to the time it was stolen.

    What Does "Replacement Cost" Mean?

    The term "replacement cost" is defined or explained in the policy. Simply stated, it means the cost to replace the property on the same premises with other property of comparable material and quality used for the same purpose. This applies unless the limit of insurance or the cost actually spent to repair or replace the damaged property is less. Refer to your policy for the exact definition and explanation of replacement cost.

    What is "Actual Cash Value"?

    The term "actual cash value" is not as easily defined. Some courts have interpreted the term to mean "fair market value," which is the amount a buyer would pay a seller if neither were under undue time constraints. Most courts, however, have upheld the insurance industry's traditional definition: the cost to replace with new property of like kind and quality, less depreciation. Courts have varied in their rulings as to whether or not depreciation includes obsolescence (loss of usefulness as a result of outmoded design, construction, etc.).

    So What's the Difference?

    The only difference between replacement cost and actual cash value is a deduction for depreciation. However, both are based on the cost today to replace the damaged property with new property.

    Leland
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    12/06/2007 4:19 PM
    Here's another helpful explanation from "insuranceforUSA.com". By the way, I just Googled it. Looking things up helps me learn lots of things... And like it says above- you need to get the definition from the policy, not a general definition which may be different.

    There are different methods to determine the value of a house. Market value is the price paid for your house. Replacement cost is the price or cost it will take to rebuild your house in the same spot, same size and same quality of construction, at today's costs. Insurance companies use the replacement cost valuation. These can be two completely different numbers.

    For example, a home purchased in a depressed city neighborhood, may have a market value of $120,000. The exact house, located in a nice suburb, may have a market price of $285,000; however, the cost to rebuild the house after a loss would be the same in either location. The insurance company is looking to insure the home for the full replacement value, not the current market value. Remember, they are going to pay to build you a new home, not buy one for you down the street.

    Home in Thriving Suburb Home in Depressed Neighborhood
    Square Foootage of Home 2,500 2,500
    Year Built 1920 1920
    Market Value $285,000 $120,000
    Cost to Replace/Rebuild Home $275,000 $275,000

    For insurance purposes, you should insure your home to 100% of it's replacement cost. This will ensure the ability to rebuild the entire house, the way it is now, in the event of a total loss. One thing to remember, you're not insuring the land so leave this out of the replacement cost valuation of the dwelling.

    Consult with your insurance agent and explain your home in detail regarding: square footage, number of bedrooms, bathrooms, kitchen, basement, fireplace etc. Insurance companies use a formula to generate the correct replacement cost. The coverage amount and the premium might be a bit higher, however you'll be properly insured. After a claim occurs is not the time to find out your insurance is not adequate. Having 100% replacement cost on the dwelling takes away this possibility.
    Ed The Roofer
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    12/06/2007 7:06 PM

    Leland,

    Thank you for the definitions.  They sound either verbatim or extremely similar to the definition I had previously read on the Insurance Information Institute website a while back.

    Now comes the determining factor.  How can the actual prices charged, which were in the contract, not be viewed as a true replacement cost figure?

    The adjuster had a copy of the contract with the prices spelled out for varying items we suspected we may encounter, rather than leaving it open ended on a T & M basis.

    He told me when he met with me prior to starting the job, that he hopes we can get started very quickly, since their were gaping holes in the homeowners house and detached garage only being protected by a tarp and that inclement weather would soon be coming in.

    As stated in the other thread and in the beginning here, I kept him informed as to all of the lineal and square foot quantities on a daily basis, with an accumulative total added up at the end of the job.

    Now, 3 1/2  weeks after we are 100 % done, he informs me that the Good Hands people will not be paying the prices in my contract and that they do not match their pricing.  He would not even tell me which items or how much he felt we were off on.  These are the same prices I charge for all competitive bidding projects and have been relatively the same for several years, with no significant increases, except for the initial asphalt shingle portion of the estimate. 

    My contract is with the home owners, but it has been relied on in good faith from the acceptance of my proposal, that they had no issues with any of the specifications or pricing and that the adjusted settlement would be forthcoming upon completion.

    Both the home owners and I relied on this good faith understanding to proceed with the contract and provide the necessary documentation and it would seem to not serve justice well if I had to lien the home owners property for work that was required and counted on to be paid for via their insurance contract.

    What are my options, without soliciting legal advice?

    Ed

     

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    Leland
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    12/06/2007 7:36 PM
    Get a buddy contractor with Xactimate and insurance experience to prepare a coparative estimate, have the homeowner request or demand a reinspection meeting with the adjuster, Meet the adjuster with the homeowner and your contractor freind, go over the entire scope of the work, detail by detail, attempt to reach agreement on every detail that needs to be included in the work, then after the SCOPE is agreed upon, try to agree on the prices for each part of the work, then, if the amount is close you might want to accept it, otherwise don't, your homeowner can ask for the adjusters estimate as the "undisputed amount", the carrier should pay that part at least, then you can haggle over the difference later- you can write a letter, the homeowner can ask for appraisal or arbitration, the homeowner can pay you the difference, if the homeowner pays you the difference they can chalk it up to experience or they can keep trying to get it reimbursed, small claims is always an option, another choice is to get the agent involved, you or the homeowner can also try to get the adjusters supervisor involved, THERE ARE A MILLION WAYS TO RESOLVE THIS, good luck.

    As an adjuster if it was my claim I would probably do all or some of the following:

    1) Meet you and the homeowner at the job.
    2) Tell you and the homeowner specifically what I disagreed with.
    3) Recommend payment of at least my estimate amount if it looked like it was going to take a while to agree (undisputed amount)
    4) I might ask my boss or carrier for an OK to bring in a roofer to get a paid second opinion
    5) I would review my estimate to see if I made any mistakes or ommissions. I might not agree with something you want but maybe I left something out that my company feels is correct.

    6) If I was really sure that your numbers were incorrect I would write a (partial) denial letter so the insured could see in writing exactly what I wasn't approving and why.
    7) Do anything else which would result in a fair adjustment under the policy and avoid a bad faith claim.
    Ed The Roofer
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    12/06/2007 7:52 PM

    Just one minor addendum to the conversation with the adjuster.

    He stated that we were in agreement with the entire scope submitted.

    He just now, after having my contract with line itemed add on costs, is stating that those charges are higher than he is willing to pay.

    Thanks so much for your input. 

    Ed

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    LarryW
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    12/06/2007 8:12 PM
    Ed,

    A couple quotes from your recent posts:
    1. "Tha Good Hands Adjuster had the contract in his hands prior to work starting which listed per lineal foot and per square foot costs of various wood decking and rafter replacement that may have been required."
    2. "The adjuster had a copy of the contract with the prices spelled out for varying items we suspected we may encounter..."

    Was the work which "may have been required" and which you suspected you might encounter actually performed?
    No one is absolutely worthless, at the very least you can serve as a bad example.
    Ed The Roofer
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    12/06/2007 8:54 PM

    Larry,

    Without forcing you to read through the entire 6 pages of posts on the 2 LYR T.O post, just below this one, I will highlight the entire scenario summary.  Wind damage from 8-23-07, with a very large tree falling across the entire home and also on the detached garage.

    1st adjuster only measured house at 40 % of actual size.

    2nd adjuster showed up and said there is nothing he could do.  Everything seemed correct. 2 minutes at home.

    3rd adjuster gets on roof with me there and we measure together.  It is the exact dimensions I stated.

    House = 1 lyr comp shingle

    Garage = 2 lyr comp shingle

    1/2" or 3/8" cdx on house and 1" x 6" plank board decking on garage.

    Start Job

    Holy Moley!  Someone cut back the original layer of shingles on both the house and garage and there is 1 more layer on each structure.

    Also!!!  There is another plywood decking under the viewed plywood decking on the house.  WTF!  Yes, thats right.  Plywood then shingles then cut away bottom row of shingles.  Install plywood on top of original decking and shingle roof.  Then the shingle roof that was observed during the estimate.  The gutter apron hid the sub level decking during all estimating procedures.

    I e-mail every single day the amounts of wood being replaces and back it up with photos of every step of the progression.  Rafter replacement up the wazoo.  Decking required to be removed to get to the rafters.

    I request;  Urgent Need for your immediate attention.  You need to come out to the job site.  No reply.

    Every day, I repeat this request and send e-mail photos with written tallys of amounts of wood replacement required.

    I set up web site forum with over 200 progression photos for him to receive electronically, since he is not returniong any messages at this stage.  The roof is in progress and I can not assume liability, so job proceeds.

    website address to view Alvarado Photos from November, 2007:   www.rightwayroofing.freeforums.org

    Mid job and post job inspection done and okayed by village inspector.

    Done with job, now he responds and says he will meet me at 10:00 am the next day.  I show up at 9:30 am and my gutter installer was there since 8:30 am.  He is no where to be found at the home.  I wait until 10:30 am to call him to see how late he is running.  He states that he did not think I would be there, so he went there earlier, just to see that the job was done.

    Invoice submitted and he says we are in agreement with the scope of work required and done.  He says the only thing he needs is verification from the village as to why the plywood decking needed replacement.  (SEE THE PHOTOS.  A TREE FELL ON BOTH STRUICTURES AND CRACKED AND DISLODGED MANY RAFTERS.  DUH!)  He wants a copy of the code book from 1995 CABO which this village uses, since he spoke with the head of the building department and was told what was needed.  Now he needed me to get him a copy of the code book.

    I scan and e-mail him the copy.  This was the only item according to him holding things up.

    Now, I have been done with this job and got him his code reference he requested and once again, I am geting no contact from him.  We have been done with this job for 3 1/2 weeks and I have not even been paid a deposit yet. 

    Now we are at the point of determining why my contract prices are not what je says he is willing to pay.  I have not changed or upgraded my pricing list just for this job. 

    That is what brings me to the,"What Is Replacement Cost Question".

    I will provide any additional information you may need to properly answer my question and guide me in this procedure.

    P.S.  I think that the previous response gave me some workable information and I want to thank that poster very much.  Was that Leland again?

    Thank you for joining in and assisting in this discussion and hopefully, find an agreeable solution.

    Ed

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    Leland
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    12/07/2007 11:47 AM
    Your question made me curious so I read my own policy on my home- the term "Replacement Cost" is not defined in the policy. The term is however defined in case law, which of course varies a bit from state to state. Here's an excerpt from the State of California's Insurance website:

    ------http://www.insurance.ca.gov/0100-co...-insur.cfm

    1. Replacement Cost Coverage provides a dollar amount to repair damaged property or to replace it with new property of like kind and quality, without deducting for depreciation (that is, the decrease in value due to age, obsolescence, wear and tear and other factors.)

    Replacement cost policies cover the full cost of replacing the damage to your home up to your policy’s limits. For example, a replacement cost policy with a $100,000 coverage limit on the dwelling would cover the cost of replacing a $100,000 house, regardless of whether the house rose or fell in value.

    2. Extended (or Modified) Replacement Cost coverage will provide a certain percentage over the policy limit to rebuild your home – 20 percent or more, depending on the insurer -- so if building costs go up unexpectedly, you will have extra funds to cover the bill. These types of policies are not offered by all insurers.

    3. Guaranteed Replacement Cost policies are rare. This policy pays out whatever it costs to rebuild your home as it was before the disaster--well over the policy limit if necessary.

    -----

    Notice the words "like kind and quality", another term that is defined in case law. For an example, let's say that in Minnesota a judge ruled that a wood grained hardiplank siding was "like kind and quality" substitue for old asbestos shingle siding, then that would be true for all subsequent claims in the State of Minnesota. If a subsequent lawsuit in Minnesota revolved around the question of whether a ceramic tile was "like kind and quality" to a porcelain tile, the judge in the new case would read the previous case for guidance because it would be a precedent. In my hypothetical example this Minnesota case law would have no bearing on an Arizona case, but an Arizona judge might like to read how another state thought the issue through. If the legislature in Alaska decided that this was too important an issue to leave to haphazard court decisions, they could pass a law which would define what "like kind and quality" or "replacement cost means" and that would be a STATUTE that would trump case law. (Constitutional Law is higher than case law). I'm not a lawyer so anyone who has a better understanding of this please comment. I would like to point out one thing I know, that many adjusters get wrong, and that is like kind and quality is state specific, what passes for a good match in Alabama would not be good enough for California, no insult to Alabama intended.

    In summary, I think you're almost asking a legal question when you ask "What is replacement cost".

    I think you might be barking up the wrong legal tree and it might be better to focus simply on what is the fair market price in your locality for the work performed. As you stated, the scope is agreed on. To me that says there is no disagreement on "like kind and quality" because scope includes materials. The disagreement is simply over the cost of the materials and/or labor.

    No Xactimate estimate is ever more than a hypothetical unless a licensed,(where required) bonded, insured contractor is willing to do the work,in a workmanlike manner, for the price shown.

    Would other contractors do the work for the adjuster's estimate? If so, then your price might not be in line with the market.

    If your price is a little high the insurance company might just go ahead and pay it since the work is completed.

    Here's an example, Let's say a homeowner has an emergency sewage cleanup and calls a company out of the yellow pages at 3 AM, and that company charges $2340.00. Two days later the adjuster arrives and prepares an Xactimate estimate which totals $2210 for the sewage cleanup. Should the adjuster tell the homeowner, "Sorry your contractor overcharged you, my computer says that job was only worth $2210 so thats all I will pay."?

    So the real question to me is: Did you charge fair market prices for the work? Are you equal to other contractors on similar jobs? If you are a little bit higher is it small enough of a difference for the insurance co to go ahead and pay it or for you to give a reduction? If the difference is large, and verifiably fair market pricing for your neighborhood, will the carrier recognize that their pricing is not accurate?

    I question whether you really have an agreement on scope. If you have an old building that needs partial reframing, it would be reasonable in my opinion to add a few hours labor to "old construction" work. This is the principle of why Xactimate has an additional line item for retrofitting a replacement window vs. simply installing a window while building a hose from scratch (new construction). If the adjuster's estimate has all the Xactimate line items but no addl labor for tie in/old construction etc. the adjusters estimate would be, in my opinion, a few hundred dollars low.

    Which brings up a really important question: How much money are we talking about anyway? Please don't tell me its just $100.!

    okclarryd
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    12/07/2007 12:04 PM
    Edward,

    Just as a suggestion.............................start up the ladder at the insurance company. If the adjuster(s) activities are as you listed, and I don't doubt what you have posted, then go to the next level.

    And, I too hope it's not just $100 or so.
    Larry D Hardin
    Ed The Roofer
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    12/07/2007 2:28 PM

    No, it is not a difference of only $ 100.00

    I wish!

    I have not been told directly by the adjuster what his figures are.  I sent him my invoice based on the per lineal foot and per square foot prices in my contract, which he had in his possession prior to requesting us to start expeditiously, due to the oncoming inclement winter weather.

    I have been in business for 24 years, and have evolved into a locally recognized company name in my area.  NW Suburbs of Chicago, by the way.  During a recent T.O.M.A. (Top Of Mind Awareness), campaign the local newspaper did, my company was ranked 2nd in local branding recognition.

    I spoke with the home owners daughter last night, (Hispanic Family, and the daughter is about 23 years old and translates English/Espanol very fluently.), and she told me that the mortgage company received about $ 5,000.00 from the insurance company so far and that the adjuster told her about $ 15,000.00 more is all they will be paying.  He also told her that I was overcharging them.  I feel that was completely unethical and way out of bounds for him to make a comment like that after the contracted work was done very professionally.  It hints towards libel or slander, with malicious intent, which may harm my good standing with my customer and any future referrals from them.

    At one point, when I spoke with him to ask why he missed that appointment with me when the gutters were being installed, it seemed as if everything was in agreement with the entire scope required.  Heck, I was e-mailing him every single evening with quantities and photos.  He even had told me that I would be entitled to an additional 29 % for Overhead and Profit, since we did such extensive work requiring multiple trades.  I did not ask for that, but since he said I was entitled to it, I will gladly accept it.

    My original contract for the house and detached garage tear-off of shingles and replacement and remove and replace gutters and downspouts was $ 10,232.00 which could not include any totals for rafter removal and replacement, plank board decking removal and replacement, and plywood deck sheathing replacement.  There was no way in the world that any of the 3 adjusters or I could have envisioned that there was an additioal layer of shingles and an additional sub-layer of plywood decking in place on this home or an additional layer of shingles only on the detached garage, since the bottom course of shingles was cut back to intentionally hide this fact from the building code enforcement officials.  The total additional costs ran about $ 13,000.00, bringing my total to approximately $ 23,149.00.  Based on the instructions given to me by the adjuster at the end of the job, that I would be entitled to that 29 % premium for O & P, I also included that in on the invoice.  I was not even aware of this factor, so my original cost is my main beef, but if in fact there should be a mandated additional amount added to my original invoice, then I guess it would seem appropriate to request that be added to the total due.

    Here are the prices in my proposal:

    R & R 2" x 4" rafters = $ 6.00/ft

    R & R 2" x 6" rafters = $ 7.00/ft

    We had to strap the remaining unbroken rafters together during the deck sheathing removal, so they would not sway and crack the interior ceiling drywall.

    R $ R 1" x 8" wood soffit = $ 5.50/ft

    R & R 1" x 6" plank board decking = $ 3.50/ft

    R $ R 1" x 6" wood fascia = $ 4.50/ft

    R & R 1/2" cdx plywood decking, $ 52.00/sheet

    Nightly tarping with sections of 2" x 4" to hold the tarps down were required due to the wind gusts that week ranging from 35 mph to 45 mph.  Also, while replacing the decking, our actions were impeded because the homes attic was filled with about 18" to 24" of loose blown in insulation and if we removed too much decking at once, the winds started to blow the insulation out of the attic space.

    When I inquired on a contractor discussion forum to see if my carpentry prices were in line with the trsdesmen on that forum, they seemed to think that my costs were substantially too low.

    Remove original hidden layer of asphalt comp shingles = .50/sq ft  This is priced at the cost of an original layer and not a 2nd layover layer, since it was seperately attached to its own deck sheathing.

    I am rarely the lowest bidder on any roof that we do, but I do not subcontract out, nor hire any low paid "Day Laborers" for my crew.  The crew members that work for and with me have been employed full time, year round for nearly the past 9 consecutive years.  I pay higher wages than a typical illegal subcontractor set ups may charge to a roofing contractor who prefers that method, but it is not operpaying of wages or overpricing of estimates.

    There are several other established roofing contractors in my area who charge nearly identical as my company pricing, for comparison.  Smaller, relatively newer start up one man shows obviously charge less and even sometimes significantly less on their bids than I do, yet I remain in business after 24 years when most of the lower priced companies fail and go out of business.  I have copies of approximately 135 other roofing companies bids collected over the years, so that I know what the competition is specifying and pricing their jobs and for what exact amounts.

    Would a dedicated crew of professional true Carpenters be able to perform the rafter removal and replacement quicker?  Probably yes, because although we "Can" properly perform those additional tasks, it is not our every day routine.  But, how much would a trade specific Carpentry or General Contractor have charged, without knowing what they were facing?  Surely, they would not have been able to peform the other roofing aspect of the job as efficiently as our dedicated roofing crew.

    I hope this accurately gives the complete picture, so that this commentary can continue to move forward.

    Thank You All Sincerely,

    Ed

     

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    Leland
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    12/07/2007 6:58 PM
    It sounds like to me like you and the adjuster are NOT in agreement on the scope of work.

    Just one example: "We had to strap the remaining unbroken rafters together douring the deck sheathing removal, so they would not sway and crack the interior ceiling drywall."

    Have you looked through the adjuster's estimate and seen if an allowance was made for strapping the rafters as you mention? Let me be clear- I'm not commenting on whether the strapping was justified or what it should cost- My main point is, it sounds like your estimate has a different scope than the adjuster.

    A proper scope is every little detail- the length of the gutters, the size of the gutters, the material of the gutters, pretty much every detail.

    Some examples of items that may differ between your estimate and his:

    25 yr shingle vs 30 year
    shingle waste factor
    15 yr felt vs 30 year
    chimeny flashing including size
    pipe jack flashings
    existence of drip edge
    length of drip edge
    waste factor for drip edge
    labor for magnetic cleanup of nails
    trash disposal
    dump fees
    building permits
    extra labor for certain operations

    etc etc etc

    I'm not saying any of these items are the "right" items or the "wrong" items. I'm just asking if your estimate and his show the same items with the same quantities for each.
    From your story it doesn't sound at all like you have the same scope.

    Don't even bother to discuss price until after you have tried to reach agreement on scope- it's pointless.

    (Example: it doesn't make any sense to argue about how much drip edge should cost per foot if the adjuster says he won't allow for it because the roof didn't have drip edge in the first place. )

    It's very possible that a sharp estimator could take YOUR scope and write a professional estimate in Xactimate (using insurance company acceptable pricing) that is even HIGHER than your estimate. But what's the point? - it sounds like your estimate already has things the adjuster's estimate doesn't.

    I think you need to get agreement on scope.
    LarryW
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    12/07/2007 6:59 PM
    Ed,

    Replacement cost means that depreciation will not be applied in calculating the loss payable. Are they trying to apply depreciation? If not, there is not a replacement cost issue.
    No one is absolutely worthless, at the very least you can serve as a bad example.
    Ed The Roofer
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    12/07/2007 7:38 PM

    Leland, I just want to say that I really appreciate the thoroughness of your responses.  I can take something out of each one of your replies and will be able to utilize them in business, both now and in the future.  Thank you very much.

    Also, he did not supply me with a copy of his estimate, even though I have requested it several times.

    It seems as if he does not want to deal with me, the contractor who the home owner hired, at all.

    As an example of that, after he missed the appointment on November 14th, the day we were 100 % complete with all phases of the job, when I called him ans inquired how late he would be, after I had been waiting there for an hour already, he told me that he didn't think I would be there, so he just showed up earlier.  I also asked him why there was no attempt at all for him responding to any of my contact calls and e-mail while the job was in progress and I was trying to make sure everything was clarified foer him and approved.....Well, his response to that question was that he only has to deal with the insured party, meaning the home owner.

    Once again, I will request the adjustment figures from him, but he told me before, that he only needs to supply that to the homeowner, not the contractor.

    Ed

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    Leland
    Advanced Member
    Advanced Member
    Posts:742


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    12/07/2007 8:12 PM
    1) If the adjuster won't meet with you or share the estimate with you, you can't force him to. He has a contractual, even fiduciary, duty to the insured- but not to you.
    2) You are entitled to get paid a fair price for your work.
    3) The homeowner is your customer- you need to look to the homeowner for your money.
    4) The homeowner won't want to pay the difference out of pocket or get a mechanics lien on the house or a lawsuit, should it come to that.
    5) The homeowner has an interest in working things out with you.
    6) Obviously you need to ask the homeowner for the scope and estimate prepared by the adjuster.
    7) The homeowner needs to ask the adjuster to meet you at the house.
    8) The adjuster possibly exposes his company to a bad faith claim if he refuses to properly investigate the claim by refusing to meet the reasonable requests to meet the the insured and the insured's contractor, refuses to consider all the evidence, refuses to consider the input of a licensed general contractor (who is doing the work) and puts the insured in a position where the insured gets sued or ends up with a lien on the house.
    9) An experienced, intelligent supervisor would not want the adjuster to expose the insurance company to such an unneccesary risk.
    10) If the adjuster doesn't cooperate, get the homeowner to bring it higher up the chain of command. Like I said before, the agent might help.

    Ok?
    Ed The Roofer
    Member
    Member
    Posts:59


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    12/07/2007 8:24 PM

    Understood!

    I will be meeting with the home owners tomorrow, as they are really ticked off at the way the Good Hands people tried to establish an adjustment on an incorrect initial measurement, which only provided for less than 40 % of the original base contract amount.

    Is there a source I can tap into for a fee, to have a complete and thorough full scope of adjustment done from someone who is adept at the Exactimate or Marshall Swift estimating programs?  Or whichever software that All State uses?

    At the bottom left corner of the original adjustment estimate the home owners gave me to review, there is the following script:

    Estimate (MS/B 0120) and then the claim number just below that.

    I would venture to guess that is the Marshall Swift Bockman(SP) estimating software I saw mentioned in the software threads.

    Ed

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    Tim_Johnson
    Member
    Member
    Posts:243


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    12/08/2007 9:06 AM
    I would not screw with Allstate one more day on this. File a lien on the house and see how fast Allstate will get their policyholders paid.
    Tim Johnson
    Dales Consuelo
    Guest
    Guest
    Posts:10


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    12/08/2007 2:27 PM

    Ed,

    Allstate, with developmental cooperation from Marshall Swift & Boeckh (MS/B), uses their own flavor of "IntegriClaim, a construction cost estimating program that many contractors across the nation are quite familiar with.

    Please note that the default MS/B prices they use and present to their clients are (supposedly) based on AVERAGE construction costs in a given region of the country. So if you are 50% higher than them, you are, (theoretically), still in the fair market price range for your area.  

    The weight of your commentary seems to indicate that other consumers and contractors in your area may be running into the same Allstate construction work scope and cost methodology they have been habitually trying to promote for a number of years now.

    The 29% cost factor they disclosed is simply a base mark for the various individual speciality trade contractors mark-up placed in the "Contractor's O&P" line item, which line item is reserved for a general primary contractor. Many adjusters, home owners, business owners, and contractors, do not realize how they are misusing that line item, which could also be throwing their figures off.

    Too, they "allow" another 20% for general primary contractor O&P involvement if the work scope is "complex enough" to "require" a general contractor.  Both the 29% and 49% O&P cost factors are not based on sound construction business cost accounting methods, and a fair and open market is what general contractor's work in. 

    Too, depending on how far you want to research this issue, you could ask your client to show you how their agent estimated the construction costs to replace their house. It may be MS/B data originally used to define anticipated replacement procedures and costs is not being referenced in their claim adjuster's estimation data.  

    http://www.accucoverage.com/SampleEstimate.htm

    (AccuCoverage costs contain labor and material, normal profit, debris removal and overhead as of the date of the estimate. Costs represent general estimates that are not to be considered a detailed quality survey. Your estimate is based on the typical construction type for your home’s style and year built. Please discuss this with your agent.)

    irvingsewell
    Guest
    Guest
    Posts:11


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    12/10/2007 5:40 PM

    Just because the adjuster has your estimate in hand and understands your bid does not mean it is correct. This does not imply either that he is giving you permission to repair the home this can only be done by the homeowner who should, however doesnt have too wait for the adjuster to complete his job. Sounds like someone jumped the gun on this one.

    Thanks,

    Irving Sewell

    Ed The Roofer
    Member
    Member
    Posts:59


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    12/10/2007 6:29 PM

    Irving,

    Just to clarify, since this topic spanned 2 seperate threads. 

    Upon meeting with the adjuster and having provided him a complete copy of the signed proposal agreement between the home owner and ourselves, he stated that he wanted us to get started as soon as possible with the roofing and carpentry repair work, since the home had gaping holes through the shingles and decking and were only protected by someone elses protective tarping job. 

    I can not see at any point where we jumped the gun to start with the project.

    The adjuster requested us to start as soon as possible.

    We had a signed agreement with the home owners.

    The adjuster had a copy of the signed agreement.

    He was notified every single day as to what items needed replacement and to the exact quantities, along with providing pictures on a daily basis.

    Once we were started on the project and discovered the illegaly applied hidden layer of shingles and the additional layer of plywood decking, and finally discovering the extent of the rafter damage, it would have not only been negligent, but professionally unconscionable to leave the home owners waiting to see if the adjuster would ever return a phone call or e-mail, with the exception of after the first day, which he responded that he had gotten the e-mail and photos and authorized the fact that all of the described additional work required was affirmed and necessary.

    It was a contractual obligatgion with the home owner, to proceed in good faith, since the only other option we would have had, was to abandon the job and go work elsewhere awaiting a return call or reply to any of the daily e-mails.  Who would assume the potential liability had we had to leave a strpped off roof bared down to the broken rafters with only a tarp to protect it, had we even considered that to be an alternative?

    Remember, after I initially notified him and sent photos, he agreed that the additional work was necessary, but he had not remained in contact with me at all from that day on and intentionally showed up more than 1 1/2 hours for our scheduled end of job appointment on the last day we were working there to install the new gutters and downspouts.

    Respectfully,

    Ed

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    Ray Hall
    Senior Member
    Senior Member
    Posts:2443


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    12/11/2007 7:12 PM

    Mr. Contractor: Just have the insured send in a sworn proof of loss to the insurance company for the amount of the loss, by registered mail. Also send your documantation and photos and he/ and you (with a direction to pay) should get a joint check within 5 days. If the property has a mortgagee call them for instructions and you may not need to have them included if they are confident their interest in not impaired, or just ask for a three party check.

    Doug Weaver
    Guest
    Guest
    Posts:4


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    12/12/2007 6:45 AM
    Sounds like a typical Allstate experience to me. They claim to allow 29% O&P but there estimates always fall short of actuall Xactimate pricing. Allstate uses a different estimating software program. As a contractor I truly hate to hear an insured tell me there company is Allstate.
    Good Luck with this brother, and keep us poster on your results with them.

    Doug
    Ray Hall
    Senior Member
    Senior Member
    Posts:2443


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    12/12/2007 11:43 AM

    What is the definition of replacement cost coverage ? This seems to be a hard question for many as it is not in the definition page of the HO-3 (last) ... "new for old; except the betterment will not be paid up front in all claims".

    Ed The Roofer
    Member
    Member
    Posts:59


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    12/12/2007 11:57 AM

    Well guys, lets put my own situation aside for a moment.

    What seemingly started out to be a simple question, seems to not have a definitive answer, or does it, and some insurance companies just try to skirt around the contracted value.

    I looked up the definition of "Replacement Cost Coverage" on the Insurance Information Institute, and this is what they state as a definition:

    REPLACEMENT COST
    Insurance that pays the dollar amount needed to replace damaged personal property or dwelling property without deducting for depreciation but limited by the maximum dollar amount shown on the declarations page of the policy.

     

    That seems to allow for the actual costs incurred up to the maximum dollar amount listed on the declarations page.

    If Insurance Company X pays one sum and Insurance Company Y pays a different sum and the contractors standard everyday pricing is slightly higher than both X and Y, whos price is correct?

    From the definition, it would seem that the actual price up to the limits of the policy would be the only cost that matters.

    Besides trying to chisel down the value of the loss, would there be any other reason that I do not see, that could create this disparity?

    P.S.  When the situation begins to unfold in the actual job I have initially posted about, I will most definitely keep all of you good folks aprised as to the outcome and how it arrived there.  You all have been extremely gracious by continuing to explore this topic, and I would make certain that you all get to hear the final outcome.

    Thanks,

    Ed

     

    edit:

    I dug up this example from the Insurance Information Institute as well:

    How is the settlement amount determined?

    The settlement amount depends on which type of policy you have. Having inadequate insurance can affect the amount of compensation you get.

    Replacement Cost and Actual Cash Value
    Replacement cost provides you with the dollar amount needed to replace a damaged item with one of similar kind and quality without deducting for depreciation—the decrease in value due to age, obsolescence, wear and tear and other factors. An actual cash value policy pays you the amount needed to replace the item minus depreciation.

    Suppose, for example, a tree fell through the roof onto your eight-year-old washing machine. If you had a replacement cost policy for the contents of your home, the insurance company would pay to replace the old machine with a new one. If you had an actual cash value policy, the company would pay only a percentage of the cost of a new washing machine because a machine that has been used for eight years would be worth less than its original cost.

    Suppose, also, that the tree damaged your 15-year-old roof so badly that it had to be completely replaced. If you had a replacement cost policy, the insurance company would pay the full cost of installing a new roof. If you had an actual cash value policy, it would pay a smaller percentage of the cost of replacing it.

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    Leland
    Advanced Member
    Advanced Member
    Posts:742


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    12/12/2007 1:49 PM
    From your side of the story it sounds like you're not being treated fairly but I don't think your focus on the legal, contractual definition of replacement cost is really helping yourself.

    If you went into a local diner and ordered ham & eggs that would legally be considered a type of contract: "offer and acceptance". The sign in the window that says "Ham & Egg special $3.99" would be the offer and your words "I'll take the Ham & Egg Special" would be the acceptance. So certainly the "LAW" would apply. Now if you got a bad deal, ie. the eggs were cold, which would make more sense:

    A) Ask the waitress nicely to reheat your eggs
    B) Ask the waitress to have new eggs cooked
    C) Refuse to pay
    D Ask for the manager
    E) Research contract law in your state. Discuss the meaning of "offer and acceptance" with the waitress. Explain to the waitress what an "implied contract" is- that a reasonable person would have an expectation of warm eggs. etc etc.

    In my opinion answers A,B,C,D are all good options to get a SOLUTION.

    Leave answer E for the lawyers and legal textbooks.

    My humble recommendation is to just drop this whole focus on the legal defintion of what "Replacement Cost" means.

    My take is that you still don't have an agreement on SCOPE.

    The reason your estimate and their estimate are so far apart has nothing to do with the precise legal defintion of replacement cost. It has everything to do with the fact that you did a bunch of work the insurance company doesn't seem to want to know about.

    Talking to us adjusters about replacement cost definitions does nothing to educate the insurance company on the work you did that they aren't paying for.

    Please reread my earlier posts and other adjuster's posts. We told you numerous practical things you can do to get paid. I respectfully recommend you employ one or more of those strategies.

    If you fail to reach agreement after trying some of those ideas, and then you end up in court, perhaps your lawyer would like your theory that replacement cost equals the value of a signed "arms-length" contract that is within market pricing for the locality. Your lawyer might think that is the greatest legal argument that could be made, and it very well might be. In the meantime I don't see how this concept is helping you to reach agreement with the insurance company.

    To reiterate just two of the numerous practical strategies that have been posted on this thread:

    1) Go over the adjuster's head
    2) Have the homeowner demand a meeting with the adjuster.

    You sound like a nice guy and the discussion is educational and worthwhile but it seems like you haven't taken very much of the advice you're asking for. Maybe I'm wrong and I apologize if I sound harsh but going on and on about the definition of replacement cost just doesn't seem to me like a way to put money in your bank.

    God bless
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