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In order to head off a class action suit, required permits, taxes and the like should be shown as a line item.

Perhaps the vendor and company should be queried as to wheter or not a line item for permits should be included.

Wait until a sharp plaintiff's lawyer gets you on the stand and asks why no permits, permits required to be legal.

I agree w/ Claims_Ray, the file simply needs to be documented.

Permit fees vary by local community, and with large fire claims I have seen 1 to 2 percent of cost of repair to determine the fee. Other items have a flat fee - and most estimating programs leave the value "0.00" noting it as a "bid item" which would be based on factual cost.

Like Chuck said, you aren't going to "deny" legit fees (and I have seen them added to "overhead" and don't consider it to be included in overhead personally).

I have included permit costs on major and large loss claims, but don't normally do it on claims that don't require a gc. However, if I think a permit will be required, I make a phone call to the permit office to find out if it is required and what their fee formula is.  I consider it to be a job cost just as much as material and labor. It definitly is not an overhead item any more than shingles or windows are.  As a contractor, I always include the permit and inspection fees in my estimates and have never had an adjuster or carrier balk at paying it.  I believe it is important for an adjuster to know the permitting and inspection rules in the area they adjust.  

There are many more fees and costs now than there was just a few years ago. With the new "green" codes, builders often have to pay to have blue prints analyzed by software which is one charge, then 2 inspections by the insulation inspectors because the city code inspectors are not educated nor qualified to handle these.   There are more specialty items being added. 

As of this year, the federal govt. requires all renovations of any house built prior to 1978 to be tested for lead, lead abatement procedures to be used if there is lead, and for the general contractor to have a person who is certified and licensed to oversee all work where there may be lead. That person has to be on the job continuous whether he is a contractor or employee. Many states are now implementing these rules into the state code.  Knowing how Dallas works, they probably will refuse to issue a permit until proof of compliance is presented. They did this for a while on other types of laws, and I believe will not now issue a permit until the energy analysis is completed on the drawings.  I think this will ultimately require the adjuster to obtain lead tests prior to completing an estimate on a house that falls into this catagory in order to get an agreed settlement with the insured and/or with the contractor.  In many cases, such as a major fire, this extra cost could push the repair cost beyond the limit resulting in a total loss that otherwise would not be.   In other words, I think this is going to be as big a deal as mold remediation was, but maybe not quite as costly.

All of these types of costs now being added to renovation jobs are direct expenses and not overhead.  10% overhead is intended to cover the contractors vehicle, tools, office rental and  utilities, certifications of employees, advertising, and other such business expenses. It does not cover any direct expense for the job nor workers workers comp which can be another line item in the estimate depending on what trades are being used and whether the labor costs in the software include the WC expense.

Posted By L on 09 Feb 2010 10:51 PM
............. There is plenty of profit in just the estimate to cover it.

This is what a DOI would call "bad faith". Permits are a minor expense in most cases, but they are an incurred expense, and should be put on the estimate. In most cases it is not required on a simple roof replacement. In my hometown, we have a $10k threshold for premit requirements, and that may even be overlooked when just replacing the roof.

The idea that the contractor should just take it out of his end will get you called on the carpet. There is also enough profit in our end to cover it also, but I doubt if you are willing to give it up.

JWG

Since I started this, I guess I will jump back in.

I agree with everything ya'll are saying. A permit is a legit expense and part of the job cost just the same as a shingle or window is part of the job cost.  It should be covered and included in an estimate. The project manager will have to get the permit and later meet with the city inspector. All of this is time and money incurred by the contractor. It is not part of overhead and takes away from profit. I have no issues with adding in for a permit if incurred and/or presented. If it is required, just like state tax, it should be included.

With all that being said, I guess what I was just trying to point out is, in the normal course of everyday business, when writing an precise and complete estimate, whether it is for a $2,500.00 hail damaged roof or a $500,000.00 fire or water damage loss, I can probably count all of the times I have actually added in a separate line item for a permit.

I'll state again, never do I have an established local GC or local roofer ever ask to add for permits. It seems the only group that even asks for this cost seems to be these "out of town" roofers or GCs who come to town when a hail storm hits.

Maybe, because it is usually a minor cost and, once the initial estimate is agreed, most contractors do not supplement for it. They know once an adjuster closes a file, it is a hassle to re-open it for this minor cost and they want to maintain a good relationship. Maybe, the adjuster added enough in other areas of the estimate and overall the contractor will easily reach its desired gross profit margin. Maybe, because it is a CAT situation and the municipality waived the permit fee. Whatever the reason, it appears (in my opinion) this is an issue encountered mainly when dealing with storm chaser type contractors.

I'll admit, it ticked me off, after completing my estimate and obtaining an agreement on the scope and cost of the damage and dealing with a supplement, the contractor then hit me with this permit fee.   

As for the 10 & 10, although a completely separate issue, most will agree a GC could not survive if only 20% is added to actual job costs. The average restoration GC has an overhead cost of approximately 25-30%. Most estimating programs used by insurance adjusters takes this into consideration.