# Is this legal? PA, Contractor, and Insured Question



## Terminallance (Aug 31, 2013)

Read carefully, this isn't a normal scenario.

Say a PA is representing the insured, and requests the contractor to submit a bid on a structure, then is awarded an amount higher than the bid and his fee combined. The PA wont give the contractor the scope of loss, saying it's illegal for him to do so, and the insured is set to pocket 2000$, yet is still getting roof replacement based on said bid from contractor. Contractor can't get the scope from the insurance co since that's "adjusting."

Is this legal, does it possibly put the contractor in a bad situation, in that in the event of an investigation fingers will be pointed to them? 

Can an insured ever make money on a claim?

To my knowledge the answer has always been no, but I am hearing other wise. 

I've been trying to look up laws and situations specific to this scenario, but can't find any.


----------



## Terminallance (Aug 31, 2013)

Anybody, not asking for "legal" advice just opinions.


----------



## JBB (Jan 28, 2014)

I've been in the insurance industry for 19 years and have held almost every job you can have on the claims side while working my way up to Regional Claims Manager for a large company.

While I usually never post on these boards I'll go ahead and give you my personal opinion on this topic but before I do I want you to understand that this in no way constitutes legal or professional advice. With that said I'll continue.

The situation you described isn't common but it isn't uncommon especially when PA's are involved. 

If the insured has an ACV (actual cash value) policy then the carrier is going to pay the insured the depreciated value of the claim. So if the roof has to be replaced and the roof is 8 years old, then the carrier is going to give the insured the value of the roof today, not the value to replace the roof. Theoretically the insured can do with that money what they want. They can pay to get the roof replaced or pocket the money, the law doesn't require them to fix the roof. But they won't be able to insure the roof with anyone else until it's replaced.

If the insured has an RCV (replacement cost policy) then the carrier is going to pay the insured the depreciated amount on that 8 year old roof (same as acv policy) but with the replacement cost they are going to go one step further. They'll allow the insured to replace the roof and once the repairs are complete they will write them an additional check for the "recoverable depreciation" or the additional amount that it cost to replace the roof. However, they aren't going to pay that additional money until the work has been done and invoices submitted. This is to protect their interests.

If the insurance company pays the insured more than the loss they're allowed to do whatever they wish with the extra. The insurance company may have determined that the loss was valued higher than the cost of work to complete the project, that does happen, although it is rare. If the insured is able to have the work done for less than what the carrier paid they can also keep what they save.

If you're submitting fraudulent invoices or if you're giving money back to the insured to pay their deductible then you're DEFINITELY committing insurance fraud.

To answer your question yes, there are legal ways for the insured to make money off of an insurance claim and when PA's are involved it seems those ways always get exploited which is why they are hated by insurance companies.


----------



## Terminallance (Aug 31, 2013)

Thank you for your reply, JBB.

We've always thought of ourselves as a company that looks out for everyone's interest when handling a claim and structure our contracts as such. We always charge for the claim amount plus deductible. 

I have heard a lot of gibberish lately about "well, charge them the deductible" which I think is ludicris if they make 3000$ even if accidentally.

Another issue I have is what if they decide they don't want to replace an item? From time to time an insured may not want to replace an item, like a shed for example, choosing to take ACV. We always inform them that they can never file a claim on that item again if they choose that. If all RCV has been released is this with the expectation that all work will be done, and if so then how does the insured get the benfit of this option?

Also, how does the insurance co know if work has been done or not if the insure does not file for depreciation? This item seems vitally important considering it then singles out people, contractors or insured, for liability in court. 

First and foremost, I am not and have never filed a false invoice. If I were investigated right now I could provide every invoice with a scope of loss to match it, and could look a judge or jury in the eye and tell them the truth. This helps me sleep at night, knowing I'm not at risk like some of my competitors are. I don't mind losing sales to people I don't even respect as clients.

I may have to tell these people that if they choose a downgrade in material, or choose not to have work done on an item, that my final invoice will show this, and that the insurance co may have the right to ask for money back, and will probably not insure that item again.

I don't consider it my job to bid a project and do my best with engineers opinions etc just to have it conceded finally, then turn around and have the insured want a downgrade and to pocket the difference, with no depreciation. 

My other question is why does the insurance co release all money before work is complete in cases with a PA? Is it just to make them go away?

What measures can contractors take to make sure these scenarios don't take place even accidentally?

I don't trust people once they see a 100k check and see profit$ in it for themselves vs restoring their property to previous value. I'm considering having any future client sign a letter stating I will have all communications between them and the insured, a lawyer, or PA that may come into a claim. I've considered before trying to have the checks issued in all parties names, and this was due to a gambler who just couldn't resist gambling his insurance check away. 


Once again, these are the possibilities that scare me. Nothing has actually happened at this point. I've seen some signs, some red flags, but I'm cutting this shit off at the corner.

I do not believe in insured making money off claims. It'll be a never ending story of people damaging their property in every ghetto in the country. Deductibles prevent this, and establish ownership in the claim.


----------



## JBB (Jan 28, 2014)

*Reply*



Terminallance said:


> Thank you for your reply, JBB.
> 
> We've always thought of ourselves as a company that looks out for everyone's interest when handling a claim and structure our contracts as such. We always charge for the claim amount plus deductible.
> 
> ...


Hope this helps


----------



## Terminallance (Aug 31, 2013)

Thank you for the sobering reply, JBB. Where do you see this market going in the next five years so far as contracting?


----------



## concord-painting (Jan 20, 2014)

Its always nice to have useful information on discussion boards which is very helpful even to others.


----------



## JBB (Jan 28, 2014)

I don't see much change coming for contractors


----------

