|Posted on Thursday, July 19, 2001 - 9:40 pm: |
Andrew is right and I think I stated that in the second post. Allen was the one that set O&P at 20%. A percentage amount wasn't mentioned until a lawyer got involved. Just kidding Allen. We owe a fair amount as Andrew stated, as per the policy, which ever lower. Just because the garage was a total we do not owe policy limits if repair or replacement cost are lower. Like kind and quality up to or below policy limits. No trip to Disneyland this time.
Take care and work safe.
|Posted on Friday, July 20, 2001 - 9:18 am: |
Oh my GAWD! You're right, Jim! We all forgot to make the obligatory derogatory remarks... so here goes..., ( deep breath ), Everybody here wears ugly shoes!
No need to thank me, just doing my duty as I sees it.
|Posted on Thursday, July 19, 2001 - 9:50 pm: |
The question that you pose is totally different than the one you started with. We all know that the carrier only owes the “actual cost to repair or replace” the item. The insured did not sign a contract based on the adjusters repair figures. The contractor’s license has nothing to do with the policy provision. If the insured purchases a “like kind and quality” TV, that is all that is owed. That’s why that clause is in there. What if a person who buys a computer in 1960 and pays $4,000.00 for it and on today’s market it sells for $799.00? Same theory.
As Alan Jackson stated, the insured signed a contract based on the adjuster’s figures and the “preferred” contractors acceptance of those figures. Alan is also correct, we have TWO separate contracts and neither have anything to do with the other. If the contractor, for difference of the contract price, sued the insured, does anyone really think that a court would not make the carrier pay? Anyone?
Jim, you are an instigator. Ha. Ha. Don’t try to muddy the water. What if the limit was $50,000.00? Doug did not mention limits. However, depending on which state the loss was in, you and Bill Cook are correct, the amount of the repair is a mute point, if the garage is a total loss. Policy limits would be owed. Good point though.
I’d bet Roy Cupps is smiling from “ear to ear.” As he should be! This is what I’m sure he designed this site to be. Educational, informative, and lots of fun. Thanks Roy. We finally have a lot of “good adjusters” talking to each other, without making derogatory remarks and the best part; LEARNING.
National Catastrophe Director
RAC Adjustments, Inc.
|Jim Flynt (Jimflynt)
|Posted on Thursday, July 19, 2001 - 9:05 pm: |
Hey, I think we may all have missed something here (Thank-you Bill Cook, P.A., for pointing this out to me).
In the scenario given, the poster says that the loss is to a garage which is a TOTAL LOSS due to fire.
The only question here then should be: why weren't the Coverage B Policy Limits paid?
|Posted on Thursday, July 19, 2001 - 8:33 am: |
I am going to put my little 2 cents worth in here just because I like what Jim Flynt and Jim Lakes ahd to say. I used to be a General contractor and a sub and now I ADJUST cat claims. I just finished a storm here in Tx for a carrier that uses DRP's quite frequently. As I was checking out my file reviewer asked me ifI would review a few to catch him up on the RC's, so I did. DRP wefixum matched our estimate to the dime on every one, then subbed out the job to BillyBob off the dashboard roofer. Thing was Billybob faxed HIS invoice to the storm ofice and lo and behold every one was nearly $1,000 less than wefixum. The difference in one of them that we paid the acv on after deductible was $1.56. Thats it. That is all that is owed. Jim, correct me if I'm wrong, the contract states "Actual cost of repairs" or Replacement cost, whichever is lower. That being said, the shoe salesman that estimated the original cost needs to go back to selling shoes. And Mr. Levy, no one is attacking YOU!
|Posted on Thursday, July 19, 2001 - 3:57 am: |
The plot thickens:
I have posted this same question to the FC&S site as well. We'll see what they have to say.
All of my friends to whom I have also presented this question agree that it is a double edged sword.
Additionally, this occurs more often than one may think..Recently I have had an opportunity to review claims where the contractor has been obligated to submit invoices and sub contractor agreements. And the trend is disturbing.
The line item estimating, if it is properly performed, addresses all steps in the repair process. It is not subjective or selective. Nor is it open to interpretation, as the author of the database is liable for the product they provide. Unfortunately the providers of the databases have not been forced to defend their position on this. Most estimating databases have exact descriptions of what the line item operation detail is. It could be argued if the data contained within the database is modified, their liability could be absolved. But if I were called on the carpet for a claim that was on it's way to litigation, and I felt that I had a complete and accurate scope of loss, I would surely call on the company that provided the information to me upon which the cost of the repairs was based. Furthermore if there is a difference in price, and all scopes were in agreement, could it be argued that the database is flawed and the responsible party is the provider of the database.
If you have ever been to court, and were asked to present evidence to support your conclusions. Your "opinion" is absoultely worthless, and unsubstantiated.
It could also be argued that the adjuster scoped the loss correctly, applied his two weeks at ValeTec, and mouse skills correctly. The insurance company is legally obligated to pay the loss based on the agreed scope. And then subrogates against the estimating software company.....Hmmmmm
Riddle me this:::::In most losses in todays market, the insurance company is soley responsible for providing scope and pricing. What would be the difference if the insured were to be adjusted 2400.00 on a television. The insured is a good shopper and saves 600.00 on the television. Submits an affadavit that he has replaced the television, and sends in the adjusters estimate as his evidence of the agreed price, and requests the additional 600.00 even though the cost was not incurred? Sound familiar?
Does a contractors license guarantee one immunity from this provision?
|Posted on Thursday, July 19, 2001 - 2:26 am: |
A very interesting discussion here. Great change of pace to read. I'm surprised that I haven't heard the "estoppel" word come out yet. As a supervisor on this one I'd hate to deny the agreed amount payment on this one as it sounds like a classic case. I agree that the claim rep. is due for some further training if the amount of loss was missed that much compared to what the contractor had the repairs done for (assumming the repairs were done as estimated). Estoppel can't create coverage where coverage doesn't exist, but that isn't an issue on this as I read it. Thoughts on that aspect of the discussion?
|Posted on Wednesday, July 18, 2001 - 6:56 pm: |
I belive the insurance company is required to pay the contracted amount between the insured and the contractor for the signed contract amount. The conctractor used the adjuster repair estimate to enter a contract with the insured and all parties agreed to the contract including the adjuster (he provide the contract amount)then the insurance company is obligated to pay the amount of the contract between the contactor and the policy holder.
The contactor found a sub contractor who would and could do the job for the lesser amount and complet the project in accordance to thier agreement, with the satisfaction of the home owner.The insurance company is still obligated to pay the contracted amount between the contractor and the policy holder. It would be my assuption in this case the adjuster failed to adjust/estmate the claim properly.
In responce to the last question. "No" would be my answer. However I belive this would be for a judge to decied in a court of law, if the contract was brought to suit by the home owner. In the event the home owner won the suit then the insurance company would be entiled to recover ACV.
|Posted on Wednesday, July 18, 2001 - 8:59 pm: |
Bears vs. Cubs
Pay the RCBs per the adjuster estimate agreed to by contractor and homeowner. This estimate/contract is the actual cost to the homeowner to have the garage repaired.
The only good Claim is a Paid Closed Claim.
|Posted on Wednesday, July 18, 2001 - 10:03 pm: |
I agree with most of you in one form or another.
I agree with the legal aspect of the fight from Alan Jackson’s side. If the carrier did not pay for the repairs that “their” adjuster wrote and agreed to and, “their” contractor repaired based on that estimate, then sued the insured for what they wouldn’t pay, since they had a contract with the insured based on those figures, every court in the land would require the carrier to pay it. Those that don’t think so, haven’t been involved in to many cases where the “Big Bad Carrier” was the defendant.
I agree with Sandra too. Most carriers would think that way and certainly would never use the preferred contractor again. I am not and have never been a proponent of that program. I feel it is like “Letting the Fox run the Hen House.” I like many of you, have worked all three sides of the fence. The only time I loved that program was when I was a contractor. Sandra’s theory would work if the contractor wanted to stay a “preferred contractor.” I don’t think he would throw away that kind of business for $9,000.00.
I agree with Jim Flynt too. He looks at it as a “good adjuster” should and believes that we must “adjust” the claim. I can also attest to the fact that as an ex-contractor, if I did not make 50% or better on a job, I was not satisfied. If Jim Flynt were adjusting this claim, I can guarantee you that it would not have been over estimated by $9,000.
That brings us to Mark (Olderthandirt). I believe that he touched on the right nerve and came closer to the right answer. Lets ask the following questions:
“What adjuster would write an estimate that is that much out of line?”
“Is it the carriers fault that he overwrote the estimate if they were led to believe that he was a “qualified” adjuster?”
“Is it the contractors fault that the adjuster offered to give him a gift and didn’t turn it down?”
“Is it the insured’s fault that he used the company that the adjuster and carrier recommended?”
I won’t answer all these questions since I know you all know the answer anyway. I will say, if there were a “qualified” adjuster handling this loss it would not have happened and the carrier would not have been in this predicament.
Oh, by the way, “Who is Newbee?” I think I know but will not answer that question either. We need more of these type discussions!! Thanks Newbee!!
National Catastrophe Director
RAC Adjustments, Inc.
|alan jackson (Ajackson)
|Posted on Wednesday, July 18, 2001 - 9:47 pm: |
Three years of Law School, 17 years in the business and it's all shot to hell. I give up. You guys win.
|Jim Flynt (Jimflynt)
|Posted on Wednesday, July 18, 2001 - 9:38 pm: |
Alan, to clear up any misunderstanding about what perhaps it is you are saying, please define for me more carefully and with more detail the exact nature of where the price setting is suggested within the example given which you feel rises to meet the legal threshold for a RICO indictment. Who do you suggest is or may be or could possibly be setting prices and where is your example?
I will be making another post momentarily to discuss the policy provisions regarding this situation which will hopefully provide more guidance to several adjusters here who are not seeing the forest for the trees.
|Tom Joyce (Tomj)
|Posted on Wednesday, July 18, 2001 - 6:51 pm: |
Open the policy and review what is owed under the contract.
Somewhere I remember the term actual loss sustained, nowhere did I ever see the term agreed figure.
Much of this goes to companies and vendors wanting losses closed immediatly, cost be damned,except the fee schedule.
|Posted on Wednesday, July 18, 2001 - 3:14 pm: |
Let's take this to the next level.
The adjuster feels that Allfarm is being taken adavantage of and that the loss is being overpaid.
The contract to repair the home was between the homeowner and the We Fixum Construction.
The DRP contract is between AllFarm and We Fixum Construction.
We Fixum subcontracted the work to I. Bee Construction who had a contract with We Fixum.
The amount actualy spent to repair or replace the damged or destroyed property was 9895.55.
The Adjuster paid the loss ACV, pending repair or replacement. As well as set the original scope for the damages and applied the price guidelines he uses in the normal course of business.
Did the contractor commit fraud when he submitted his invoice for the agreed price with the adjuster, knowing that the cost to repair or replace was much lower.
|Posted on Wednesday, July 18, 2001 - 3:57 pm: |
A few thougths here, did the contractor provide the specified materials and do all the specified work (whether the insured is happy or not). Did the insured pay his deductible? If these were not done then there may be fruad and not by the insurer! If tests are met then the money is owed, but as the supervisor I would wonder about the estimate (Joe may need some serious retraining) and I would make a note of the contractor, he would no longer be consistered trustworthy to provide services. The contractor would be offered a chance to adjust the bill in a friendly way, but he could not be forced to reduce his bill.
|alan jackson (Ajackson)
|Posted on Wednesday, July 18, 2001 - 3:29 pm: |
Once again here we go. Jim, RICO usually involves racketering, ie price fixing. Most contracts are for what the insurance company agrees. In this case contractor writes the contract for the adjusters estimate. For a contract to be valid it must be specific when it addreses consideration ie amount of agreed estimate. Joe contractor agrees to repair garage for x amount, (amount specified in adjusters estimate excatly) dollars. Not "whatever the insurance company agrees to pay".
The homeowners policy agrees to indemnify the insured homeowner for the actual cost to repair or replace. This amount was tendered by the insurance adjuster, agreed to by the contractor and homeowner. The contractor and homeowner use this very specific line by line estimate as the basis for their contract. This contarct is between the homeowner and the contractor not the contractor and insurance company.
Two seperate contracts exist. Insurance contract which agrees to indemnify the homeowner and another between the contractor and the homeowner. As much as we would like, these are vert two different and seperate contracts. One does not add to or take away from another.
The homeowner could very easily say the relied upon the good faith repersentations of the adjuster when they entered into the contract with the contractor. We all review, RCV and ACV correct. In this case senerio the adjuster brings in approved vendor.
Sorry Jim and the rest of the gang. The contractor can enforce the contract with the homeowner. Homeowner can enforce payment based upon adjusters estimate and RCV.
P.S. Jim, A contractor buddy of mine went through this same thing last year and won. When I get the RICO cases and statutes I will e-mail them for your review.
My whole goal was to show that their are two different contracts going here. The contract between the homeowner and contractor is totaly enforceable regardless of what the insurance company pays or does not pay. In real life we would have been given more facts that what was given. Please forgive me for applying real life facts to a limted scenerio.
|Posted on Wednesday, July 18, 2001 - 11:50 am: |
If an agreed price falls within the price guide,
and is accepted by the Claims Supervisor, it should be paid as agreed. Carrier owes for the damage at the time of the loss.What a Contrator
and an Insured agree to has no bearing on the amount owed.The Contractor may have used a leesor grade of material, or may have left things for the insured to finish(paint). Our estimates are
line item estimates.If something was ommitted from
the original estimate or further damage was done
a supplement is in order as long as it was documented and photographed.Down with Prism!!!
Have a great day!!!PLEASE WORK SAFE.
|Jim Flynt (Jimflynt)
|Posted on Wednesday, July 18, 2001 - 11:39 am: |
As Alan said the other day in another post on the CADO Bulletin Board, sometimes he and I agree and sometimes we don't. This is one of those times when we don't.
For the life of me, I cannot begin to fathom how Alan can take the situation as described and attribute price fixing to it. As far as this even closely approximating a RICO offense, perhaps Alan can cite a few cases where RICO has been imposed in any situation even remotely similar to this involving insurance claims handling. A judge would laugh this case out of the courtroom for anyone foolish enough to begin to suggest RICO.
I'm sure Alan is as aware as Sandra and I, that many (much more than a few) times, the contractor has entered into a contract with the insured to effectuate the repairs for (whatever) the insurance company allows. That is not the same as having a contract for an agreed price with the insured.
There is an old saying in real estate, that the first person to throw out a number loses, and I do think the adjuster made some error in showing his estimate prior to receiving the contractor's estimate before reaching an agreed price.
There are some "gray areas" in this particular situation as described, but I fully support and endorse the method which Sandra has suggested as the right way to handle this particular situation. What she is doing in choosing this method is ADJUSTing the claim as compared to just being a claim respresentative. That's why they call us ADJUSTERS folks. And for those who don't know the meaning of ADJUST may I suggest a quick trip to the dictionary.
And if anyone wants a more detailed description of what the policy says about the way this should be handled, please let me know. Sandra got it right.
As far as price "fixing" is concerned, no evidence is presented here which even closely meets the legal threshold for such. Any carrier has the right to say that they will only pay what is customary for overhead and profit, and then only when O&P conditions are met (three or more trades). Nowhere within the policy is O&P even mentioned and all too often adjusters are recommending O&P when it is unnecessary as well as inappropriate.
I stand with every adjuster in believing that vendors and carriers have bid the fee schedules down to the point that making a viable living as cat adjusting is not easy. But that is not reason nor excuse to overpay, exaggerate, or misrepresent the value of a claim, with or without O&P.
For those of us who are and came from development and construction backgrounds, please know that contractors more than adequately make much much more than the 20 or 20 percent overhead and profit that is allowed on agreed price estimates, but that is a whole 'nother topic for another day.
|Posted on Wednesday, July 18, 2001 - 10:37 am: |
Now I know why I rarely log onto this site anymore. A discussion is what the original poster intended. And, as usual, someone jumps in and makes all sorts of accusations about what he feels the poster is saying and then attacks viciously.
If these sorts of things make a lawyer happy to get up in the morning why don't you go back to practicing? Because it's obvious you know it all.
I will not be visiting this site any longer.
|alan jackson (Ajackson)
|Posted on Wednesday, July 18, 2001 - 9:07 am: |
If you proceed as you just described, please explain the following. Homeowner and contractor enter into a written aagreement for the repairs. Most if not all contractors will not touch a house with out a signed contract. If you add 10% to the sub price and add 20% for OH&P, then you place the insured in a bad postition.
The homeowner is now in breach of contract. Are you going to defend the homeowner in court? Contract law is pretty straight forward stuff. Did the parties enter into an agreement, ie contract? Did the contractor make the repairs per the contract? Then why didn't he get paid. Ohhh insurance company refused to pay the full contract price. Remember, the adjuster is the one who wrote the estimate and generated the "agreed cost to repair or replace". Judgement for contractor. Homeowner has to pay difference, court cost, legal fees etc....
The insurance company is not part of the contract between the contractor and the homeowner. I hope you are not signing contracts on behalf of insurance companies to get insureds homes fixed. It is actions like those described by you that make ever lawyer get up in the morning. It is the things that CLASS ACTION LAW SUITS ARE MADE OF. Or really good individual suits.
After you write the check and take the file to the Vendor Supervisor, please tell them you are attempting to fix prices. You can't do that. Also, have the supervisor refer you to the in house lawyer. Ask him or her to explain RICO, price fixing, bad faith and monopolies.
Alan L. Jackson
Adjuster at Large
|Sandra Thompson (Workingstiff)
|Posted on Wednesday, July 18, 2001 - 6:40 am: |
Neither the hamburger restaurant nor Bell computers has a contract with each person they sell to for weeks/months/years before the sale is made. These are one-time sales, but maybe (if the savings these companies realized are passed on) the one-time sale turns into a regular customer. I saw a Carl's Jr. special, starting today, for a $.60 Big Star with a limit of 10 per person. Maybe they got that deal on the hamburger meat!
An agreed price for an "estimate" is just that. If the contractor discovers additional damage, that neither he/she nor the adjuster found on initial and perhaps 2nd or even 3rd inspection, does the insurance company owe for it? That question could possibly be answered yes or no depending on the company for whom the adjuster is working. Is the additional damage owed under the policy? I believe it is.
The policies, in general, state that we owe actual cash value of the claim until repairs are completed. Many companies are now adding O & P up front and paying ACV with O & P. The depreciation is paid after the work is completed. The percentage of O & P is not written into the policy. The original question did not address whether we owe the O & P nor how the percentage is set so I will not elaborate on that portion of Alan Jackson's post.
I am sure that many contractors are able, at times (won't get into what percentage of the time here), to complete the repairs for less than the AP. I wouldn't think it would be such a large difference generally, but hey. We never see those invoices. Sometimes the AP might be a little higher than the actual cost and sometimes a little lower (use of subjective words is intended). But $9000ish difference is not "a little". And if the insurance company, for some reason, requested a copy of the sub invoice/invoices and this contractor did not provide a copy of the invoice they could lose their DPR "privelege". The companies who have DPR programs have rules and regulations that the contractors have to follow. Providing sub invoices on request is usually a requirement for these programs. Just because of certain things like this. If the contractor provides something other than that actual invoice he/she might be committing insurance fraud.
Insurance companies do not owe the agreed price as part of the policy contract. They might owe the agreed price as part of their agreement with a given contractor. What they do owe is actual repair costs (if paid from sub invoices some companies will add 10% mark-up on the sub invoices and then add O & P at the end).
Were I the adjuster who had gotten the second invoice from the DPR contractor I would've headed straight for the person running the DPR program and turned the matter over to them. After adding 10% to the sub invoice, adding O & P and issuing a check for the difference of the ACV and this new amount.
|alan jackson (Ajackson)
|Posted on Tuesday, July 17, 2001 - 9:13 pm: |
The contract price is between the homeowner and the contractor for x amount of dollars. This contract between the homeowner and contractor is the agreed price to repair or replace and is the controling document between the parties. Joe adjuster wrote the estimate for x amount of dollars and as a repersentative ie agent of such agreed to the total cost of repairs.
Where does it say in any insurance policy that a contractor is only entitled to 20%? It doesn't matter what it actualy cost him to do the job. Pay the entire amount of witheld dep. and move on. I hope no one really thinks that contractors are only making 20% on these jobs.Most contractors shoot for 40% to 50% contribution margin after they pay their subs. Out of that they pay their job salesman overhead etc..
If you tried to control their profit to a strict 20% you would be guilty of price fixing and maybe breaking a RICO STATUTE or two.
|Posted on Tuesday, July 17, 2001 - 7:33 pm: |
Cost incurred plus o&p. Billy Boss should have hidden the invoice from the secretary. This is the normal payment when a sub contractor is used. Bubba Billy hired I BEE Contruction as a sub and is acting as a general contractor. Carrier owes for a fair price and a fair profit, not a free vacation to Disneyland.
|Posted on Tuesday, July 17, 2001 - 12:04 pm: |
Joe Adjuster is a staff adjuster who works with vendors as direct repair contractors. A garage is burned completely to the ground. Joe jumps in his Plymouth Breeze and inspects the loss. Joe Scopes the loss and prepares an estimate on Z-Mate. The insured asks if there is someone that the company can get to do the repairs so she does not have to deal with it. Joe makes a referral to a vendor, We Fixum Construction, a direct repair contractor. The line item estimate prepared by Joe is 18,525.00. The contractor agrees to this. An ACV payment of 9,000.00 is made. The loss is not a limit of liability.
As the process goes along and it is time for the replacement cost claim. The Contractor calls the adjuster on Thursday and asks for the replacement cost money. Joe asks the contractor to fax in his completed invoice. Joe was hoping to wrap this up before the weekend.
Friday comes and no fax. Joe calls the contractor again. This is a friday at 4:30. Memorial Day Weekend. The only person at the contractors office is Jane, a receptionist that started this week. She pulls the file and faxes an invoice to the adjuster.
Tuesday morning, Joe returns to his desk and finds the fax from the contractor. He is surprised to see, I Bee Constructions lump sum invoice for the repairs, paid in full for the entire sum of 9,895.55.The fax also contains the the standard completion letter and a demand for the payment of the replacement cost, based on the estimate that was submitted, and agreed to as within the price guidelines.
He calls We Fixum and discusses the job cost with Billy Boss. Billy is unaware of the fax. he proudly proclaims that the garage repairs are completed, the customer is satisfied. The adjuster being the sly fox he is, asks the contractor to submit his paperwork for the replacement cost claim. Billy faxes him the We Fixum invoice, as well as the completion letter for the agreed price of 18,525.00, less the insureds deductible.
What is Joe to do?
Q. 1) Is there an obligation by Joe Adjuster to pay the replacement cost claim, based on his agreed price?
Q. 2) Or Does he only owe what was incurred by We Fixum Construction. Plus overhead and profit. As the line item estimate was within the price guidelines, and was written by Joe Adjuster and agreed to by We Fixum Construction?
A few thoughts to ponder:
A hamburger costs 2.79...the restaurant gets a good deal on some hamburger and cuts it's normal cost in half. Do they reduce the cost to the consumer?
Bell computers buys 2000 pentium chips from a new supplier, for a net savings of 600.00 per chip, do they reduce the cost to the consumer?