Insurance Work in Indiana

Storm damage repair can be good business for home improvement contractors. Two reasons: (1) It’s easy to find homes that need repair after a storm. (2) Owners with insurance coverage are a good credit risk. That makes the industry ripe for abuse. If you do work in Tornado Alley, you’ve heard the stories.

In response, twenty states have enacted laws that regulate casualty loss repair. AL, AZ, GA, IL, IN, KY, LA, MI, MO, MS, NE, NY, OK, SC, SD, TN, TX, UT, WI, WV. All of these storm damage repair laws are similar: Any contract for an insured loss must include specific disclosures, including a statement that the owner can cancel if the insurance claim is denied, either in whole or in part.

Fine. Laws like that put an end to the worst abuses. Storm damage specialists have to write bullet-proof contracts and be especially careful when developing the scope of loss. But contractors aren’t the only problem. This street runs two ways. The Indiana case of Hoosier Contractors v. Sean Gardner offers an example.

Damage to Gardner’s Indianapolis home was covered by a Cincinnati Insurance Company policy. Gardner had Hoosier Contractors inspect the roof and write an estimate for repairs. Before doing the inspection, Hoosier required Gardner to sign a contract titled "Replacement Work Agreement." The contract included the language required by Indiana storm repair law. If Gardner’s insurance company didn’t agree to pay, the contract would be "null and void." Hoosier inspected the roof and wrote an estimate of loss – $50,619.46 (later adjusted to $59,489.78).

Gardner submitted his claim to Cincinnati Insurance. Cincinnati issued a "Scope of Work" to both Hoosier and Gardner, listing the work Hoosier would perform and the estimated cost for each item. Cincinnati settled the claim, paying Gardner in several installments. So far, so good. But this is where traffic started to run in the other direction.

With proceeds of the claim in hand, Gardner paid another company approximately $18,000 to repair his roof. Hoosier was left out in the cold. They had estimated the job, advanced several thousand dollars to a claim service to negotiate with the insurance carrier – and had nothing to show for it – except a signed contract. Hoosier did the only thing they could, file suit for breach of contract.

Gardner’s attorney insisted the contract violated Indiana’s Home Improvement Contractors Act and was a "scheme, artifice, or device . . intended to mislead Indiana residents into executing home improvement contracts.” That would be a violation of Indiana’s Deceptive Consumer's Sales Act (DCSA) and entitle Gardner to three times actual damages plus attorney fees.  Gardner’s attorney moved to certify a class action on behalf of:

All persons who entered into a Home Improvement Contract with Hoosier Contractors, LLC from February 12, 2014 until such time that Hoosier stopped utilizing said Contract(s) and began utilizing a Home Improvement Contract that was in compliance with the [HICA].

Obviously, the fat was in the fire.

By any account, Hoosier’s contract with Gardner had problems. There was no price and no description of the work. Both are required under Indiana’s Home Improvement Contracts Act (HICA).

This case is still in the courts. Issues yet to be decided:

• Does Hoosier’s contract violate Indiana’s HICA?
• If so, is that violation an incurable deceptive act under the DCSA?
• Is the Gardner contract null and void because Cincinnati didn’t approve the full scope of work?
• Did Gardner breach the contract when he gave the work to another contractor?

For Hoosier Contractors, the Gardner job was a financial black hole. But it’s easy to imagine another result. Suppose the Gardner contract had complied in every respect with Indiana law. Hoosier Contracting would have escaped years of litigation and mounting legal bills.

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