Indiana Insurance Contract

A severe spring storm damaged the home of Jason Jenkins in Boone County, Indiana. On June 11, 2017, Jenkins agreed to have Mcgraw Property Solutions make repairs. Mcgraw promised to complete all storm remediation work for the price approved by Jenkins' insurer. The contract provided that "[i]f the insurance company does not approve your claim, this agreement automatically terminates." The contract also required Jenkins to pay Mcgraw 20% of the replacement cost as liquidated damages if Jenkins refused to allow Mcgraw to finish the work.

After the contract was signed, Mcgraw did a nine-page scope of loss estimate, setting the repair cost at $170,559.63. A month later, Jenkins' insurer approved the claim, but only for $109,371.97. Jenkins got a check for $64,597.37. Obviously, this wasn’t working the way Jenkins had hoped. 

Before work started, Jenkins decided to sell out, take the insurance money and move to Florida. That left Mcgraw out in the cold. Mcgraw wanted to either do the work at the agreed price or collect from Jenkins for breach of contract

Jenkins checked over the June 11 contract and found some problems. It didn’t comply with Indiana’s Home Improvement Contracts Act (HICA):

• The starting and completion dates were listed as “TBD”.
• There was no notice of the 3-day right to cancel on insurance jobs.
• There was no written signature by Mcgraw.
• The signature date was missing.

The Replacement Cure Contract

Jenkins wanted out of the deal with Mcgraw. But the 3-day right to cancel had expired long ago. So Jenkins demanded that Mcgraw submit a corrected contract. On August 24, Mcgraw wrote up a new agreement – but relating back to the June 11, 2017 agreement. This new contract included the Indiana cancellation notice that should have been in the original agreement:

You may cancel this contract at any time before midnight on the third business day after:

• (A) The date of this Agreement.
• (B) You have received written notification from your insurance company that all or any part of the claim or contract is not a covered loss under the insurance policy.

Jenkins accepted the replacement cure contract on August 27, 2017 – and on the same day sent Mcgraw a notice of cancellation. That didn’t end it. Mcgraw filed suit for breach of contract.

You Decide

The original June 11 contract was defective. Everyone agreed on that. And no one disputed that the August 24 agreement was valid as an entirely new agreement. The question for the court: Did Jenkins still have the right to cancel two months after the original contract was signed? 

Boone County Superior Court Judge Petit heard the case, ruling in favor of Jenkins:

The original contract entered into between the parties improperly and in violation of statute omitted the right to cancel within three (3) days of receiving notice of insurance denial. That right was contained within the 'cure contract' and [Jenkins] exercised that right. The [c]ontract was not voided, it was cancelled pursuant to its terms.

The appellate court agreed: Mcgraw Prop. Sols. v. Jenkins, Nov. 18, 2020. Mcgraw lost out. 

But there’s another point here. What if the original June 11 contract had been letter-perfect – including the 3-day right to cancel? Would Mcgraw have had a case for breach of contract? I believe Mcgraw would have won that case. Mcgraw agreed to do the work for the price approved by Jenkins' insurer. The insurance carrier approved the claim and paid Jenkins $64,597.37. Failure to have Mcgraw proceed with the work would probably have been breach of contract. Mcgraw could have collected damages.

I’ve said more than once in this space: When a job goes bad, you better have a good contract. Mcgraw didn’t. That was an expensive mistake. If you need letter-perfect contracts the first time, no matter where you work, have a look at Construction Contract Writer. The trial version is free.