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M. Hillis
Posted on Sunday, October 15, 2000 - 3:56 pm:   

As most adjusters have posted, the adjuster must know the policy and also how the company wants O&P to be applied to their claims if any. I have not seen any mention of comulative or noncomulative O&P. I for one write the adjustment with non comulative O&P if there is more than three trades, depending on circumstances and if thats how the company wants them written. I have never written O&P comulative. I have reviewed numerious adjusters estimates and have seen comulative O&P included in their estimates. I know that the difference is not usually that much in residential losses but if you add up the number of losses that has comulative O&P or commercial losses that adds up to quite alot of overpayment.10% & 10% actually comes to 21%.Thats just another thought on this issue.
Rj (Rj)
Posted on Sunday, October 15, 2000 - 2:21 pm:   

P Franco;

As you can see from all of the replies there are many situations that will virtually make every answer correct. Knowing how to interpret any specific policy with respect to overhead and profit or any other coverage question is what separates the beginning adjuster from the seasoned adjuster. The best reply to your question that I read basically advised you that each loss must stand on it's own merit according to the policy, carrier and state laws.

Even the same commercial or residential policy on an exact same type of building having the same cause of loss and damages could have the same policy provisions applied in a different way depending upon which state you happen to be in. So not only do you need to be able to understand and interpret policy well you have to be somewhat familiar with the state insurance laws, rules and regulations that you happen to be in at the time. All of these things may or may not effect how you would apply overhead and profit in addition to the loss itself.

As a note to new adjusters there is a lot more to adjusting a loss properly that just writing a repair estimate. As with any profession as you learn more about the laws and become better at interpreting policy provisions the process becomes easier to do. That is why when you are watching a seasoned profession at work adjusting a loss has the appearance that there is nothing to it. On the contrary when a adjuster makes this job look easy then and only then are you observing a seasoned professional very hard at work. Don't forget just one other point even seasoned adjusters have to ask coverage questions from time to time. So when in doubt never hesitate to ask a question.
JimLakes (Jimlakes)
Posted on Sunday, October 15, 2000 - 2:03 pm:   

Not to agree or disagree with any of your posts, but we have to accept one fact.

We have never, worked for a carrier that did not dictate whether or not we could add O & P. We all know why some do and some don't. But always, the client is the one that states if O & P is added to an estimate or not.

Being an ex-contractor I always wanted it, however, I never always got it.

As to the original post, no where does it state in the policy the wording about O & P. However, all contracts do state that the insured is entitled to be put back to their pre-loss condition. This means that if O & P is part of that monetary loss then they are entitled to it.

Damages, is the key word. If an adjuster can get an A/P with a contractor that does not demand O & P vs one that does, then it is a mute point. O & P is not like the scope of damage. It is not part of what it takes to put the insured back to pre-loss condition, unless of course it is the only way to obtain the A/P. Then it becomes part of the damages in a monetary since, which of course is what is owed to the insured.

Jim Lakes
National Catastrophe Director
RAC Adjustments, Inc.
Chuck Deaton
Posted on Sunday, October 15, 2000 - 11:46 am:   

Tom Joyce is correct, "every loss has to be based on its merits."

Generally small residential losses do not require a General Contractor.

Larger residential losses may require a General Contractor. The need would be determined by the status of the insured, unions, the number of trades involved, building codes and the materials needed. Generally special situations require consideration.

Generally small commercial losses do not require a General Contractor. Again special situations require consideration. There are times that the work being done is some specialty and requires special expertise.

Large Commercial losses can go both ways. My experience is that hands on companies run by a founder/owner tend to be more likely to complete repairs/rebuilding without a General Contractor and large multi location risks then to need a General Contractor.

Again, "every loss has to be based on it's merits."

I know that my ramblin' is just that, but the coverage an independent encounters handling commercial losses is varied and each loss is different.
Dale Strain
Posted on Friday, October 13, 2000 - 5:06 am:   

Do you guys have an opinion regarding general conditions, such as onsite supervision and construction management?

In some large losses, the insured may not have the expertise to administer the repairs. Especially with condo associations with, or without "professional management". Leaving that up to the GC puts the reins in the hand of someone with interests which may be contrary to the insureds.

If a construction manager is used, some of the duties of the GC may be performed by the CM. Should you consider reduction in 10/10, for this reason as well as economy of scale issues? I have seen contracts at 7/7 for a project over 5 mil.

These questions have produced a wide variety of responses, and I would appreciate your input.

Please ignore misspelled or mistyped words. They may just be a word puzzle meant to hold your interest.
Tom Joyce (Tomj)
Posted on Thursday, October 12, 2000 - 10:08 pm:   

Chuck, I argee, every loss has to be based on it's merits. Gale,thanks, we do need to move along with the profession and without people like Linda, yourself, Jim F, Dale, TomT, Roy, Dave H, Tom W. and many many others it would be hard.
There has been talk regarding the actual full time professional adjusters available for duty.
Just a thought, could we have a poll as to how many are availavle on 48 hours notice this week.
Chuck Deaton
Posted on Thursday, October 12, 2000 - 5:52 pm:   

Overhead and profit are components of the cost of everything sold.

It is the addition of overhead and profit, to an estimate that already includes overhead and profit in the line items, that is the base of the orginal question.

Generally, overhead and profit is added to compensate a general contractor to oversee a construction job.

Small jobs that don't require a general contractor should not have overhead and profit applied as a seperate line item.

I understand requiring 3 trades to be involved before applying overhead and profit. Generally a job has to be big enough to require 3 trades to justify a general contractor and the application of overhead and profit as a seperate line item. What I have never understood is the seemingly arbitrary decision to refuse to pay overhead and profit to a general contractor for his supervision of the work of some selected trades.
Tom Joyce (Tomj)
Posted on Thursday, October 12, 2000 - 3:20 pm:   

Gee,here we go again with BS spelling mistakes. I am sure RJ you as all others understood the post so the reply was for what reason? I'm going to have to just stay away.
Roy, I like many others that got tired will send the dues, stay in touch.
If find the time rj, please reply.
Rj (Rj)
Posted on Thursday, October 12, 2000 - 2:50 pm:   


Just curious, what are carpters? If you meant carpet then it was just a type error so don't worry about it. If you meant carpenters then your answer appears to have been incorrect. Also if I get around to it before others do, this is a topic that is much more involved and requires a lot of explaining so a new adjuster would be able to fully understand how Overhead & Profit are taken into consideration. I just don't have the time right now or I would go in depth on this topic.
Tom Joyce (Tomj)
Posted on Thursday, October 12, 2000 - 2:09 pm:   

It has become an arbitrary issue. For several years NFIP and others excluded carpters from O&P as they felt that it was a separate entity doing the work. Same with roofers.
Long standing rule was three trades, but use reason when adjusting, you should know if the job involved is small enough and being completed by Joe Pickup. Part of what the problem was some IA's adding on 10% to jack up the fee schedule companies cut back.
There are no exclusions in the policy and in some states the holdback of O&P has been ruled illegal as the premium or cost of the policy has been calculated on the loss including it.
Best rule of thumb is to estimate the damages and ignore the second guessing
P Franco
Posted on Thursday, October 12, 2000 - 12:44 pm:   

Is the application of O&P written in any Insurance Contract. How is it applied i.e. Mobile home repair, Signed or not signed contract with restoration contractor or GC. 3 trades,insured doing work. 3 trades, work being done by handyman (non licensed contractor or licensed single trade) O & P paid based on signed contract,reinspection reveals insured did work. 10% plus 10% vs 10% & 10%. Is roofing or carpeting included. Are there any exclusions?????

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