Storm Damage Repair in Thirteen States

This isn’t about what happened on October 29. It’s about another storm, the rising tide of states that regulate contracts for repair of storm damage. A little more than a year ago, no state had special rules for insurance repair contracts. Now there are thirteen (by date enacted):

• May 24, 2011– Minnesota Statutes § 326B.811
• June 30, 2011 – Missouri Revised Statutes § 407.725
• July 1, 2011 – Official Code of Georgia Annotated § 10-1-393.12
• August 26, 2011 – Oklahoma Statutes Title 59 § 1151.21
• January 1, 2012 – Illinois Compiled Statutes, Title 815, § 513/18
• April 10, 2012 – Arizona Revised Statutes § 32-1158.02
• May 22, 2012 – Louisiana Revised Statutes § 37:2175.1
• July 1, 2012 – Indiana Code Annotated § 24-5-11-10
• July 1, 2012 – Tennessee Code Annotated § 62-6-601
• July 1, 2012 – South Dakota Codified Laws § 37-24-51
• July 12, 2012 – Kentucky Revised Statutes § 367.620
• July 19, 2012 – Nebraska Revised Statutes § 44-8603
• August 1, 2012 – Alabama Code § 8-36-2

If you repair storm damage in any of these states, your residential contracts have to comply with the new law. All thirteen states:

• Require a notice in the contract if any part of the work may be covered by insurance.
• Give an owner the right to cancel the job if any part of the claim is denied.
• Require a full refund within ten days if the job is cancelled.
• Impose serious penalties for failure to comply.

Storm repair law is different in each of these thirteen states. But the following four states are typical:

Arizona – Covers all repairs to a residence damaged by a “catastrophic storm” in a “specific area.” The owner has three days to cancel after an insurance claim is denied. Work can't start until the three-day period has expired. The contract has to include a copy of the repair estimate showing damage to be repaired or not repaired and any emergency repairs already completed. If repair of the roof is included, the contract has to describe the work and how the roof was inspected. The contractor is barred from negotiating settlement of the insurance claim. The penalty for non-compliance is revocation or suspension of a contractor’s license.

Kentucky – Applies only to repair of the roof system. The owner has five days to cancel after any part of the insurance claim is denied. The contract has to include a detachable notice of cancellation in duplicate. Prohibits any payment before the end of the cancellation period. Work done to prevent further damage is exempt. The contractor is barred from negotiating settlement of the insurance claim. Prohibits reimbursement of the insurance deductible.

Louisiana – Applies only to repair of the roof system. The owner has three days to cancel after any part of the insurance claim is denied. The contract has to include a detachable notice of cancellation in duplicate. Exempts emergency work if acknowledged in writing by the owner. Prohibits doing any work before the contract is signed. Violation of the law risks a fine of up to $1,000 plus costs and attorney fees.

Missouri – Applies only to repair of the roof system. Prohibits any offer to rebate the deductible. The owner has five days to cancel after any part of the insurance claim is denied. Exempts emergency work if acknowledged in writing by the owner. The contract has to include a detachable notice of cancellation in duplicate. A contractor who doesn’t comply can be slapped with an injunction, restraining order and a civil penalty up to $1,000.

And Now Comes Sandy

Expect to see similar laws enacted in many of the 24 states affected. If your state hasn’t acted yet, stay tuned.

I’ve got a suggestion for any contractor with too little time and patience to deal with every new law that comes along. Construction Contract Writer makes it easy to stay legal. And the trial version is free.

 

Contracts for Insurance Restoration

Last week I had a chance to interview Paul Bianchina, author of the book, Insurance Restoration Contracting. Excerpts from that interview:

Moselle: What's different about insurance repair contracts?

Bianchina: Insurance carriers expect nothing but professionalism from their contractors. If you want to do insurance work, plan to comply with every local, state, and federal law. Insurance policies comply with the law. Insurance carriers expect restoration contracts that are just as good.

Moselle: Restoration contractors work for the property owner, not the insurance company. Is the insurance company involved with the contract at all?

Bianchina: Not directly, but just about everything the restoration contractor does reflects back on the insurance company.  So the contractor - and the contract - has to solve problems, not create them.

Moselle: Any other differences in insurance work?

Bianchina: Sure. Insurance restoration is complex. Nearly everything should be in writing.

Moselle: You better explain that.

Bianchina: For one thing, insurance companies initially want bids for just the visible damage. Supplemental damage estimates may come later, after work starts. Every change in the scope of work requires a contract change. If you expect to get paid for supplemental work, you better document every change and get a signature.

Another difference: Insurance losses create opportunities for an owner - a chance to make improvements. Nothing wrong with that. But insurance carriers won't pay for "betterment." So you have to break out covered losses from what gets done on the owner's dime. Done right, these changes are good work for a restoration contractor. Done wrong, you're in a dispute or worse. Documentation is the key. Separate everything that's insurance-related from what's done at the owner's request. Good documentation guarantees payment.

Moselle: Insurance restoration jobs have a higher profile than other types of work. Any thoughts on that?

Bianchina: True. You have the homeowner watching, the insurance company watching - sometimes more than one insurance company.  City and county officials tend to keep a close eye on fire loss jobs.  If the site of the loss is a crime scene, law enforcement personnel will be involved.

Everyone has their own interest to protect. Everyone can hire their own lawyer: the insurance company, the real estate company, the driver who hit the house, the owner, the city, the building department. When lawyers get involved, you better have the best possible notes and paperwork - including your contract.

Another caution: Many states now require that a seller disclose any significant damage to a home. If there's been a fire or water loss or mold remediation on site, that has to be disclosed at the time of sale.  As a restoration contractor, expect to be asked about repair work you've done. And plan to show that all work was done by the book.

Moselle: What else can go wrong?

Bianchina: Owners don't always play by the rules. Some can't resist temptation when the settlement check arrives. Again, a legally enforceable contract can save the day.

Moselle: Any more advice for restoration contractors?

Bianchina: Don't think of yourself as just a guy who's banging nails. Never lose sight of who you are.  You're called a contractor for a reason.  Don't start any job without a legally enforceable contract. In my opinion, anyone doing work on a handshake - or even a two-page boilerplate contract form - is simply asking for trouble.

Moselle: Good advice, Paul. Thanks.

Paul's book is available as a PDF download for under $35. Recommended.

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