After the disaster: Not all vendors are created equal

Immediately after a fire, flood or other catastrophe, policyholders are overwhelmed and in shock at the amount of damage to their home or business, and unsure of the next steps to take beyond notifying their insurance company. Since most insureds have not experienced this degree of loss before, they are easy targets for unscrupulous individuals offering their services and making promises they may be unable to keep.

Solicitations may come from companies offering to handle the insurance claim, secure the property to prevent unauthorized entry, set up temporary fencing or power, provide structural drying services, move or clean personal property, remove debris and more. Although some of these services may be necessary for health and safety reasons, and to protect the property from further damage, policyholders should be aware that some individuals are scam artists eager to capitalize on the misfortunes of innocent people.

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Avoiding wolves in sheep’s clothing

Fraud concerning property repair usually involves unethical or incompetent building contractors. Consumers and insurers should be aware of some red flags involving building or repair contractors:

• The contractor does not maintain a local work office, does not have a local telephone number, and relies exclusively on cell phone communications.
• The contractor is not able or willing to provide local references.
• The contractor handles all business in person, avoiding the use of mail or email.
• The contractor requests a large cash payment upfront.
• The contractor does not have adequate equipment to perform the job.
• The contractor arrives at the loss site (home or business) without being solicited.
• The contractor’s estimate is very general.
• The contractor is unwilling to provide a certificate of insurance from his/her general liability or workers’ compensation insurance carrier.
• The contractor’s estimate is far below the bids received from other contractors. (The old adage, “If it sounds too got to be true, then it probably is” applies here.)

Encourage policyholders to solicit bids from multiple companies for comparison and remind them to read the fine print, especially disclosures and exclusions in all estimates and contracts. They should also confirm that contractors carry the appropriate insurance coverage including workers’ compensation and general liability at a minimum.

Public insurance adjusters (P.A.s) are typically required by law to be licensed by the state(s) in which they work. A P.A.’s license can be confirmed by contacting the state insurance department or the agency that governs insurance adjusters.

Some contractors who work with public adjusters may encourage policyholders to sign a contract with a P.A. immediately. Insureds should never be pressured into signing contracts with a service provider or supplier. Get sound advice before making important financial decisions or signing contracts prematurely. Encourage them to do their homework and work with their insurance company before signing away their insurance proceeds.

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Contract red flags

A contract should be detailed and spell out the specifics of the job to prevent a contractor from performing work that exceeds the scope of what needs to be done immediately or may be part of the rebuilding process.

Emergency services or temporary repairs may include:

• Boarding up or securing the property (e.g., windows, doors)
• Covering holes in the roof
• Shoring up weakened structural elements
• Mitigating damage from water or sewage
• Cleaning up debris (fallen trees, broken glass, etc.)
• Repairing fencing

Tasks that comprise the rebuilding process may include:

• Complete demolition
• Obtaining building permits
• Working with architects and engineers as part of the reconstruction process
• Abating hazardous materials
• Deodorization
• Reconstruction

The contractor should provide the policyholder with a written contract that clearly states the tasks to be performed, all associated costs, the payment schedule, start and completion dates, and any other elements required to comply with state, local or federal laws. The contract should clearly state any guarantees including what is guaranteed, who is responsible for the guarantee and how long it will be valid. Keep in mind that a guarantee is only good for as long as the contractor is in business, so be sure the contractor is financially strong and doesn’t have a history of lawsuits or mechanics’ liens.

The contract should not require large down payments or full payment before work begins, and should include a notice of cancellation.

Keys to vetting contractors

A contractor who offers emergency services for free or tells an insured that there will be no out-of-pocket expenses may have other motives such as preying on the emotions of the homeowner who may feel obligated to hire the company for the rebuild later. Keep in mind that when anyone offers you something for free, it instills in you a feeling of obligation, so avoid accepting freebies.

Insureds should also beware of sales people soliciting business by going door-to-door, telemarketers, or responding to mailers or flyers left on the door.

Qualified restoration contractors who specialize in fire and water damage are usually more familiar with restoration methods than home improvement contractors or builders. Their workers may have specific training in water damage mitigation and drying, mold remediation, or fire damage restoration and deodorization.

Questions to ask a contractor include:

• Is the contractor licensed in this or any other state?
• How long has the company or contractor been licensed?
• Is the company or contractor associated with licenses that may have had problems in the past?
• What types of training or certifications do their employees hold?
• Are there any complaints filed with the local Better Business Bureau?
• Is the contractor’s/company’s license in good standing or has it been suspended, revoked or expired?
• Does the contractor have any disciplinary actions pending?
• Does the contractor have a physical street address or only a post office box?
• Does the contractor perform background checks and drug testing on their employees?
• Does the contractor have employees or do they use temporary laborers?

There are many excellent contractors who specialize in disaster restoration. They are licensed; may operate in multiple states or have independent franchises; have the tools, equipment and supplies required for the job; and have knowledgeable personnel trained in mitigation and restoration. Encourage policyholders to do their due diligence so they hire the best company for the job and consider a company that has some level of accountability in case something goes wrong.

Sean Scott (Sean@TheRedGuideToRecovery.com) is a fire restoration contractor with over 39 years of experience in the restoration and construction industry and works with fire departments, emergency management agencies, Tribal governments, and relief organizations across the U.S.  The information presented here has been adapted from The Red Guide to Recovery – Resource Handbook for Disaster Survivors. For more information, visit www.theredguidetorecovery.com.