Property insurance carriers seem to be in a war with contractors and their customers regarding the amounts to be paid for restoration construction. They use various tactics trying to eliminate overhead and profit margins. Many contractors either go out of business, do shoddy workmanship or fight to be paid what is fair. The contractors that give up and do shoddy workmanship for the lowered payments often do not have such work noticed by usually ignorant policyholders. The policyholder problems often show up years later leaving policyholders holding the bag caused by insurance company claims tactics and new policy language designed to pay as little contractor profit and overhead as possible.

April Hall has done a fantastic job putting together a seminar later this month in Dallas regarding the never-ending claims topic of Overhead & Profit. Steve Patrick, Mike Klem, and I will help provide those in the insurance claims and restoration business with an in-depth discussion about the law of overhead and profit, the current new landscape of changed policy language, and practical suggestions on how to deal with these issues.

For me, I plan to go over the overhead and profit legal issues from a number of different perspectives and how they are being challenged. These perspectives will be:

  • Historical Development of The Overhead and Profit Issue
  • The General Definition
  • Insurer Techniques of Withholding Payments Based on Actual Cash Value
  • The Fight Over Depreciation of Labor
  • New Policy Language – Changing What Is Paid and Actual Cash Value
  • Implications For Policyholders, Restoration Contractors and Public Insurance Adjusters

This is a fight policyholders advocates need to inform various departments of insurance. For example, over a year ago in, Colorado Overhead and Profit Issues—Merlin Law Group Files a Response for Colorado Policyholders, I noted how insurance company lobbyists are pushing this pay-as-little-as-possible agenda in Colorado:

The Colorado Department of Insurance has proposed eliminating one of its long-standing bulletins requiring insurance companies to pay contractor overhead and profit rather than deduct the amount until incurred. Such an elimination is obviously against policyholder interests and is the result of insurance industry lobbyists making inroads with Colorado insurance regulators who are supposed to be guardians of the public interest.

We, policyholder advocates, prevented this in Colorado. In other states, the Departments of Insurance simply do not realize it is an issue and approve changes to forms or policies.

As a refresher on the topic, I would suggest that readers take the time to go through Merlin Law Group attorney Ed Eshoo’s paper on this topic, Overhead & Profit: Its Place in a Property Insurance Claim, published in Adjusting Today.

This is an important issue and hope that you can come to April Hall’s event and learn what you can do. Here is a link to her event.

Thought For The Day

The pursuit of excellence is less profitable than the pursuit of bigness, but it can be more satisfying.
—David Ogilvy