# Insurance Fraud?



## bmgilst

Hope all of you guys are doing well.

I'm a contractor in South Carolina and, as of late, my work has been largely reliant on insurance claims. 

In April of this year I dropped in to a community of townhomes to try and drum up some business - I knew the area had hail damage as I lived near there, and the roofs were old anyways. We're a local company that has been run by my family across four generations and, while I don't like to canvass, I do this on bigger jobs because I don't want the chasers to get there first.

I developed a good relationship with the people in the office to the point where they notified me when the adjuster was coming. I had to measure the roofs one way or another, so I agreed to meet with him. Of the 55 townhomes, the adjuster initially approved 38 of them but I insisted that at least 41 of them were damaged, so I took pictures of the other roofs and they were approved. I spent a few full days out there with the adjuster and helped him measure, inspect, and diagram each roof, and when I say "help" I mean that I did all of it. 

Eventually the claim went through and, though I had some assurance from the people in the office that we would receive the business, the higher ups got involved and wanted bids. The total claim was 1100 square for just under $200k which was for 25-year strips and no ridge vent. I gave them a very competitive price of just over $200k which included 3500' of ridge vent and strips. Over $50k was held back in depreciation.

I was shocked to get a call Monday to inform me that the owners met and they would be accepting another bid that amounted to being $139 PER SQUARE which was $30,000 under my bid. This amount included material and labor of the same scope as mine. 

My question is, obviously they would have to falsify an invoice to recover the full amount of depreciation. Have you guys ever run into this, and if so, how did you handle it and what did you do in the future to make sure it didn't happen again?


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## vtroofing

Holy smokes batman that is stupid low! I sold in Charleston County 7-8 years ago and was over $300 then! Wow! 

Okay moving on. To answer your question, the owners should be informed they cannot make money on the roof, that the final $50,000 may not be dispersed as a Invoice will be required to release that $50k. 

Insurance Fraud may be if they use your Invoice to collect more than they are paying out and that my experience they could care less they have a workload and gets shuffled in a "closed file". 

You know the Adjuster, you could bill for a ladder assist. You could (not to say you will be paid) Invoice the owners for your time. You don have a contingency signed stating you get 20% face value of Insurance payout right?


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## Grumpy

Someone made a mistake with that price. Either that or they aren't paying taxes and insurance. That aside, this is why I don't do insurance work, it tends to bring out the worst in people. 

When I do insurance work I do it my way. I think most storm chasers will come in here and tell you that you are dumb for not working on a contingency. While I won't go to that extreme of calling you dumb per say, I will say I personally wouldn't have done it without some kind of formal written agreement. Maybe a contingency though I try very hard to avoid them. I don't want a maybe, I want a defenite. I would have tried hard to presell them before I did any of the insurance red-tape work. "Mr Customer when you hire us, I will fight with the insurance company on your behalf to recoup as much of this investment as possible. Though they are only paying for a minimum code roof and our roofs exceed that scope, you will have to pay a little bit out of pocket, but I am confident I can get most of that back from insurance." If they didn't bite, then we would *consider* a contingency agreement.

As for being competitive, well that was your first mistake. Why? When you lay down with pigs you get dirty. When you lay down with dogs you get flees. When you try to be competitive you get shot in the foot. Make sense?


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## bmgilst

For whatever reason, the market price in Upstate South Carolina has been pretty low as of late. In March 2010 we had a major hail storm that drove in 40-50 more contractors into the area. Some have left, but a lot of the storm work has died down and there are more contractors than the workflow can support. Even worse than the storm chasers are the opportunists with no roofing experience who decide one day to just become a roofer - the result is people bidding way too low for jobs. I honestly feel fortunate if I can get $200/square for a 1 layer tear off and architectural shingles anywhere in the upstate.

While I like to get insurance contingencies, they weren't going for it. I was able to get one on a $400,000 project in 2010 and a $300,000 one in 2011, but it is fairly hard to do now with all the rip off artists in the area. It seems I see another roofing scam on the news every month. People everywhere are charging extremely low prices, and while they almost all are going out of business it seems it does cost me money in the process. Our business is still very steady, as we're a local contractor that has a lot of repeat business and a good reputation in the market ( we've been in business over 75 years ), contractors are dropping like flies around here because they mismanaged their cash flow, financed material, and the storm damage has dried up for the time being. 

As for homeowners, I will often get a contingency only to be called within the 72 hour window because, though I try not to cover deductibles, all my competition makes this their go to strategy.

I read on here that a lot of people are getting $300/square, but you really just can't get that down here unless it's a complex roof and very steep with a premium shingle.


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## dougger222

With a permit, dump fee's, proper ice and water shield, proper venting, shingles, felt, etc. my cost is about $150 a square. 

At $139 a square with 3 tabs what's labor paying? Even $181 a square is too low...

As far as insurance fraud? If the contractor or owner of the buildings submits an invoice greater than the contracted amount to recover additional RCV it would be considered by many insurance fraud. 

Put a bid on a 350sq insurance job a few years ago and they told me the winning bid amount. Was took back as the difference between the insurance price and winning bid was about $50,000. The owners of the gold course were very very greedy and they had all intentions of comming insurance fruad.


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## larryb

If you only provided an estimate, they can do whatever they like, fraud or no fraud. If, however, they signed a contingency agreement which is, by the way, a legally binding and enforceable contract, and they back out of it, they have breached the contract and still owe you - not just a 20% "cancel" fee, but the whole amount of the job that you should have figured at RTA pro contractor pricing rather than the ins co's low ball "survey" pricing.

If you did have a signed contingency agreement, give them the option of either paying you a 10% to 15% "cancel" fee on the total (your total estimate) or having a lien placed on their property for the full amount.

Out of the small number of problem customers I ever had over the years who did try to back out, I only let one totally off the hook (she was nut's and much more trouble than it was worth and I felt sorry for her husband and kid's), another paid me a fair cancellation fee and the others, under threat of a lien and/or court, decided to do the right thing on perform per the terms of the agreement. 

Several of those customers became my best customers over time and even sent me good referrals on occasion. They performed because I was not willing to let them off the hook and they, although initially and reluctantly, respected my approach.


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## LCG

Sorry to hear your in such a bad market. I guess you live in the heart of the storm chasers dream. Even the good times are hard times.

That sucks!


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## Roofmaster417

Wow,,,That six big butt.A contract whether contingency or otherwise would have been handy.Another lesson learned I assume.Never rely on someone's word or that "Feeling" you had about the customer.

I have had dinners,BBQ's,Golf and boating and even met the family.But when that claim is approved and that check comes in homeowner or a Corporate office those wheels start turning in their brains.The more zeros in the claim the more likely they will retreat leaving you holding the bag.


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## qejustin

*Wow*

$139 a square is crazy low. I dont understand why several people on here are so against insurance deals. In our market we get about $265 a square on 1 story walker 3 tabs and if its a dimensional with some steep charges, 2 story etc (which is very common here) we get a little over $300. If its really complex its more. You never have to worry about getting paid and you know what your getting into up front. Its a system, either learn it or fight it. Most old timers "know everything" so they fight it....hey, its your checking account. Those prices are not a home run but not bad either. We wont even install a 3 tab unless there is no option, we do less than 1% 3 tab. If you do a good job of selling yourself, your company, and the product then the customer never shops around.....deductable wont be an issue and you can upsell them. By the end of the process they want you to marry there daughter!


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## Grumpy

dougger222 said:


> With a permit, dump fee's, proper ice and water shield, proper venting, shingles, felt, etc. my cost is about $150 a square.
> 
> At $139 a square with 3 tabs what's labor paying? Even $181 a square is too low...


Magic word: Seconds. I can buy seconds shingles for like $40 a square. I can get ice shield for $40, or less a roll. 15# felt $20 a roll or less. Seconds. Readily available and I compete with it every day.


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## Grumpy

I've had friends of the family do this very same thing to me. I didn't make them sign my contract before I started negotiations because for God's sake they were guests at my wedding. I got them $10k more than the insurance was offering and they hired someone cheaper. 

Don't trust anyone ever. Period.


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## Grumpy

qejustin said:


> $139 a square is crazy low. I dont understand why several people on here are so against insurance deals. In our market we get about $265 a square on 1 story walker 3 tabs and if its a dimensional with some steep charges, 2 story etc (which is very common here) we get a little over $300. If its really complex its more. You never have to worry about getting paid and you know what your getting into up front. Its a system, either learn it or fight it. Most old timers "know everything" so they fight it....hey, its your checking account. Those prices are not a home run but not bad either. We wont even install a 3 tab unless there is no option, we do less than 1% 3 tab. If you do a good job of selling yourself, your company, and the product then the customer never shops around.....deductable wont be an issue and you can upsell them. By the end of the process they want you to marry there daughter!


Some people like me?

I won't get out of bed for $265 a square. I will be backwards meaning losing money, at least $10 a square. Have you done the math? How can you install a roof properly using quality materials, taking the time to do it right, paying proper insurance, paying proper taxes at $265? You simply can NOT, period. I have posed this question to dozens of storm chasers throughout the years, and now I ask you. Show me I am wrong. numbers do not lie. Nobody has yet been able to show me how profit can be achieved in storm work WITHOUT cheating something. So show me. I drew my line in the sand years ago and said then and still say now, it can not be done, certainly not at $265! 

Why am I against it? Storm work brings out the worst in people, and when you lie down with dogs you get fleas. Insurance companies won't pay what a good roof costs. I won't give a $500 sign discount, I'm not paying deductibles, and that's what you have to compete with in insurance work. I don't come to work to argue with adjusters, it's not good for my health. I don't come to work to help conniving property owners commit insurance fraud. I don't see the point in doing twice the paper work, waiting twice as long to get paid, and doing that for LESS money. I don't think minimum code is acceptable, and that's all you're going to get from the insurance company most of the time. I refuse to cut corners so the insurance company can save money because it will come back to bite me in the ass, and how does it help me that these large corporations save money? 


Enough reasons?


I'll put it to you like this. I'll chase the cream of the crop and leave the cream of the CRAP for everyone else to fight over.


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## bmgilst

It just amazes me to see people getting $265 a square. In South Carolina you cannot get that unless it's steep and complex. For a walkable 3 tab insurance is paying $190 and if you're bidding outright you see everything from $165-$190. I lost a bid the other day on 23 squares with architect's ( not insurance related ) and came in at $4,350 and the bid that they accepted was $3,800. Blows my mind. 

What do you guys think accounts for this difference between regions?


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## Grumpy

Cost of living. Cost of insurance. Taxes. 


My house will probably cost less than half in South Carolina. My insurance for roofing is one of the highest in the country (42% without modifier). Taxes in Crook County Illinois are some of the highest in the Country across the board from sales to property and everything inbetween.


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## qejustin

*hmmm*

Grumpy, you make a lot of good points and I dont totally disagree with you but it may be a difference in region and business models. First off, we do a lot of insurance work but are not storm chasers; meaning, we dont leave our service area to chase anything. So, we still have to stand behind our work and maintain a good reputation as you do. I have noticed by reading many of your previous post that all of your installers are staff, ours are not. I know this is often frowned upon but in our case we have subcontractors that work exclusivly for us and have been the same crews for over 5 years, meaning we maintain the same quality control as if they were staff and get to take advantage of a lovely loophole our state turns its head to. They are legal and maintain all the necessary insurance. I only know of 1 roofing company in our area that installs asphalt shingles that has staff installers. 

I mentioned $265 a square for a 1 story walker, we rarely do these as we focus on high end areas so we get the more complex higher priced roofs. The insurance game isnt something you can casually dabble in. You have to learn it, play it, and master it. You chose not to, appear to not like it, and I respect that. You are right that it brings out the worst in most roofing companys and we take pride in not falling into that crowd. If you learn to master it, you can do well. Sometimes you have to take the good with the bad; for example on Monday I had a State Farm claim, 1 story, 10/12, Arch shingle $305 a square (not so good) on Wednesday I had a Firemans Fund claim 1 story, 8/12, Arch shingle $585 a square (not too bad!). Never cover a deductable or you will never stop, sell upgrades.

The math:
Shingles (CertainTeed AR or GAF HD) $69 sq
Felt 30# (we never use #15) $8 sq
GAF Storm Guard (we never use the off brand) $58 roll
Labor (The going rate is $50 sq in our area) we pay $65


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## buildpinnacle

Larry, it is illegal in Texas to collect a 'cancellation fee' on a contract. The attorney general has been hammering contractors down here. In fact, unless you have a contingency I haven't seen, they would never stand up around here. Most are drafted as a contract to enter into a contract and don't have the proper consideration to be enforceable.


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## larryb

buildpinnacle said:


> Larry, it is illegal in Texas to collect a 'cancellation fee' on a contract. The attorney general has been hammering contractors down here. In fact, unless you have a contingency I haven't seen, they would never stand up around here. Most are drafted as a contract to enter into a contract and don't have the proper consideration to be enforceable.


Depending on a states laws, and this is for a contractor attorney to ultimately advise on, whether titled as a cancellation fee or a "for services rendered" fee, there is a way to make sure that a contractor who has done their work gets paid for their time and effort - in the case where a contractor has processed a claim and gotten the insured paid and the customer then attempts to cancel. I'd argue that one Pro Se against any attorney in any court all day long - and win.


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## buildpinnacle

Larry, I do not disagree. I come from that side of the business and used representation agreements, letters of assignment and the like for years. We did not use them to necessarily promote our authority on the claim to the carrier so much as protecting our investment of time and knowledge with the insured by assisting in the loss settlement and getting them the monies. I, for one, am one of the few PA's who has chosen not get involved in the 'no negotiating' battle. Our work is primarily commercial and mostly by referral so it doesn't affect our business. I find it unnerving when a contractor has invested their time and knowledge in a claim, gets a fair and equitable settlement, and is given the high hard one when an insured starts seeing dollar signs. I've been there. I have felt the sting, personally, and a loose interpretation of the word 'negotiating' should not keep that man from being paid his keep.


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## larryb

buildpinnacle said:


> Larry, I do not disagree. I come from that side of the business and used representation agreements, letters of assignment and the like for years. We did not use them to necessarily promote our authority on the claim to the carrier so much as protecting our investment of time and knowledge with the insured by assisting in the loss settlement and getting them the monies. I, for one, am one of the few PA's who has chosen not get involved in the 'no negotiating' battle. Our work is primarily commercial and mostly by referral so it doesn't affect our business. I find it unnerving when a contractor has invested their time and knowledge in a claim, gets a fair and equitable settlement, and is given the high hard one when an insured starts seeing dollar signs. I've been there. I have felt the sting, personally, and a loose interpretation of the word 'negotiating' should not keep that man from being paid his keep.


Well put!


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## tparnell39

You should ensure you use an appropriate insurer & having a dedicated broker always helps.

http://www.northernalliance.co.uk/business-insurance/roofers/


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## kam13

qejustin said:


> Grumpy, you make a lot of good points and I dont totally disagree with you but it may be a difference in region and business models. First off, we do a lot of insurance work but are not storm chasers; meaning, we dont leave our service area to chase anything. So, we still have to stand behind our work and maintain a good reputation as you do. I have noticed by reading many of your previous post that all of your installers are staff, ours are not. I know this is often frowned upon but in our case we have subcontractors that work exclusivly for us and have been the same crews for over 5 years, meaning we maintain the same quality control as if they were staff and get to take advantage of a lovely loophole our state turns its head to. They are legal and maintain all the necessary insurance. I only know of 1 roofing company in our area that installs asphalt shingles that has staff installers.
> 
> I mentioned $265 a square for a 1 story walker, we rarely do these as we focus on high end areas so we get the more complex higher priced roofs. The insurance game isnt something you can casually dabble in. You have to learn it, play it, and master it. You chose not to, appear to not like it, and I respect that. You are right that it brings out the worst in most roofing companys and we take pride in not falling into that crowd. If you learn to master it, you can do well. Sometimes you have to take the good with the bad; for example on Monday I had a State Farm claim, 1 story, 10/12, Arch shingle $305 a square (not so good) on Wednesday I had a Firemans Fund claim 1 story, 8/12, Arch shingle $585 a square (not too bad!). Never cover a deductable or you will never stop, sell upgrades.
> 
> The math:
> Shingles (CertainTeed AR or GAF HD) $69 sq
> Felt 30# (we never use #15) $8 sq
> GAF Storm Guard (we never use the off brand) $58 roll
> Labor (The going rate is $50 sq in our area) we pay $65


QE justin,

Is that labor rate tear off and install or just install ?


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## nmarshall603

Labor for us is $55 install only. $10 per layer tearoff and removal. $8 per sheet for re-decking. We also are looking at a safety bonus for the subcontractor.

Our crews are required to have their own trailers or dump trucks. We only rent haulaways on commercial jobs and usualy retail residential for anything requiring a 30 ton dumpster.


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## Grumpy

Prices are regional.

I couldn't find a quality sub to work for those rates. Add about 15% to everything Marshall said and that's what I would be paying my subs.


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## larson1951

here in ND we do almost all insurance re-roof
when we get a call for that type of work we simply tell the homeowner to stop in with their statement of loss and pick out a replacement shingle and a color
we have someone in the office making a copy of the statement of loss and transferring the numbers onto a proposal for them to initial while we explain how the recoverable depreciation process works.......then we are ready to schedule......they are responsible for their deductible.........if an issue arises we have the claim number and can do any legwork or requests for supplements or necessary code upgrades.......we do this to help the customer as they are usually inexperienced about the whole process this has been working for us for many, many years


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## Kimberly

*same thing here..........*

Recently went through the exact same thing. We put in work and effort, got up on roofs for adjusters, and at the end of the day...got the job approved for someone else to do. Confronted the man in charge and said it was up to some others/investors to also decide, but did say "i'm a man, and you did get this done for us, so write up an invoice for your time and we will decide on a fair number for your help...and suites on us for the season" Lost out on a great job but at least we made out with some kind of benefit :wallbash:


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## JeffO

I feel like its my job to inform and educate the potential client of the reason why they shouldn't accept the lower bid on insurance jobs. There was a recent hail storm here in Omaha and we are seeing some companies paying $300-$330 a square for a typical 3-tab asphalt residential roof. Way different market. When I go to give a free roofing estimate in Omaha, I try to sell on value and principle.


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## larryb

larson1951 said:


> here in ND we do almost all insurance re-roof
> when we get a call for that type of work we simply tell the homeowner to stop in with their statement of loss and pick out a replacement shingle and a color we have someone in the office making a copy of the statement of loss and transferring the numbers onto a proposal for them to initial while we explain how the recoverable depreciation process works.......then we are ready to schedule......they are responsible for their deductible.........if an issue arises we have the claim number and can do any legwork or requests for supplements or necessary code upgrades.......we do this to help the customer as they are usually inexperienced about the whole process this has been working for us for many, many years


If all you are going on is the loss reports the HO's bring you and then, maybe, supplement some items after the fact, you are leaving $1,000's of dollars that should have gone to your customers and then ultimately to you, on the insurance company tables. That process may have been working for you for many, many years but it has likely cost you many, many thousand's of dollars in lost profits and income.


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## larryb

JeffO said:


> I feel like its my job to inform and educate the potential client of the reason why they shouldn't accept the lower bid on insurance jobs. There was a recent hail storm here in Omaha and we are seeing some companies paying $300-$330 a square for a typical 3-tab asphalt residential roof. Way different market. When I go to give a free roofing estimate in Omaha, I try to sell on value and principle.


JeffO,

If you are giving free estimates on insurance work, you are missing out on $1,000's in legitimate profits and income that should have ultimately been paid to you for your services.


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## jon Wright

*If You Want an Honest Roofer Be Honest Yourself*

If you've done the ground work, met with adjuster and helped determine the price of the project and the property owner decides to go with a lower bid, inform the adjuster of the new price and wwhy you didn't get the job. Call the aattorney general or the insurance commissioner.
Read the blog I wrote last week on my website: www.jonwrightindusties.com.
Go yo the blog and read the title above.


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## larson1951

larryb said:


> If all you are going on is the loss reports the HO's bring you and then, maybe, supplement some items after the fact, you are leaving $1,000's of dollars that should have gone to your customers and then ultimately to you, on the insurance company tables. That process may have been working for you for many, many years but it has likely cost you many, many thousand's of dollars in lost profits and income.


hey hey larry thank you for the kind and informative words and thoughts.....i completely understand what you are saying 
however the fact is we do rework many and most residential work we do end up at the 355 too 585 dollar per square prices and we have always done ok with that with cedar shake and shingle prices of 700-1000 per square...which is a good majority of what we do and purchase direct premium label CSSB labeled stock from the same reliable inland mills by the full truckload many many times each season
as the owner i have a personal income of well over 200k for 7 month working season and 10 employees (7 experianced roofers, a secretary, a field superintendent, an office superintendent that gets the jobs and schedules......i feel when a customer brings his SOL to your place of business he is genuinely interested and wants to have you do the work.....you know some of these prices i see quoted would not even come close to being workable....i mean 200-250 per sq?.....i think one thing about being local and honest for over 30 years helps.....we are personal friends with all the adjusters in our area including the independents.....we are always helping adjusters settle tie-breakers and help with appraisal processes....in return for our honesty we get what we need and it works well.....we are constantly helping adjusters with claims....because they know and trust that work is done correctly with all flashing and c/f work ade in our shop by us 'old school' architectural sheet metal experts...it is satisfying to be able to say this to you
i have always followed your posts and can tell your knowledge and respect it much.......and want to thank you for all the valuable information and value and appreciate your advice and all your posts
larson1951
owner and president of bismarck roofing and sheet metal in central ND


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## larryb

larson1951 said:


> hey hey larry thank you for the kind and informative words and thoughts.....i completely understand what you are saying
> however the fact is we do rework many and most residential work we do end up at the 355 too 585 dollar per square prices and we have always done ok with that with cedar shake and shingle prices of 700-1000 per square...which is a good majority of what we do and purchase direct premium label CSSB labeled stock from the same reliable inland mills by the full truckload many many times each season
> as the owner i have a personal income of well over 200k for 7 month working season and 10 employees (7 experianced roofers, a secretary, a field superintendent, an office superintendent that gets the jobs and schedules......i feel when a customer brings his SOL to your place of business he is genuinely interested and wants to have you do the work.....you know some of these prices i see quoted would not even come close to being workable....i mean 200-250 per sq?.....i think one thing about being local and honest for over 30 years helps.....we are personal friends with all the adjusters in our area including the independents.....we are always helping adjusters settle tie-breakers and help with appraisal processes....in return for our honesty we get what we need and it works well.....we are constantly helping adjusters with claims....because they know and trust that work is done correctly with all flashing and c/f work ade in our shop by us 'old school' architectural sheet metal experts...it is satisfying to be able to say this to you
> i have always followed your posts and can tell your knowledge and respect it much.......and want to thank you for all the valuable information and value and appreciate your advice and all your posts
> larson1951
> owner and president of bismarck roofing and sheet metal in central ND


Sounds like you've got things under control! and, you are welcome.


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