Premier Contractor Issues

January 23, 2009

If one thing will kill the largest insurers in America, other than their folly in investing those collected premium dollars in a market they may have participated in sinking, it is Preferred or Premier Contractor programs.

Like many people of the solid middle class who save money by doing their own income tax returns or cutting their own hair, some people simply want to adjust their own claims. After all, they have had a brother who sold insurance for Farmers or a sister-in-law who was the right arm of a State Farm agent or another relative who did data entry for Allstate (hyperbole here, but you get the point), and these supposedly insurance-wise people can give their friends advice on how to settle their insurance claim. Such insureds wait to retain an advocate until they have done all they can do and their claim is a mess. Such is a claim that came across my desk this last week. Here is the sad thing that happened in this claim.

The insurer introduced a "Friendly" contractor to this insured. Between the friendly contractor and the insurance company's claim representative, a price to repair the fire damaged house was reached. The insurance company properly issued an Actual Cash Value payment that included the name of the mortgagee as well as the insured on the check (I am not certain if the Friendly Contractor's name was one the check). The check was sent to the insured and included with a letter telling the insured that the mortgagee's name was on the check because the mortgagee had a right to have this done. (Mortgagees have the right to monitor their investments and nothing that an insured does binds the mortgagee).

After and insurance payment, the mortgagee generally takes the insurance check or draft after it has been signed off and deposits it into an account (non-interest bearing in most cases, but that is another story) and then issues the check in thirds: one-third to begin construction, the second one-third at fifty percent construction and the final one third upon completion.

At any rate, this insured signed over the check and gave it to the Insurance Company Friendly Contractor. Six months, seven months, eight months went by. The amount of construction work that was accomplished in this time was pathetic. The insured called the mortgage company and asked how much the contractor had been paid. She was told that the mortgagee had not issued a check to the contractor at all.

It turned out that the Friendly Contractor had deposited the money in the contractor's bank without the mortgage company endorsement. How did it get paid by the insurer without a proper endorsement? That is a good question. The insured realized that it was fool hardy to continue the path she was on. She fired the Insurance Friendly Contractor who wrote her back a check for work not done. She did not think the amount was quite right. We signed up the client$mdash;ten months after the loss!

I asked another contractor professional to tell me how much the contractor should have issued back a check to the insured and he came up with a number that was wildly different. I am now going to ask the insurance company to pay the difference. After all, the insured relied on the insurance company's referral. We will see what happens.

We are still working on a claim in which another insured initially tried to go it alone without an advocate before we were retained months after the loss. It involved a Farm Bureau Insurance Company claim in which a Friendly Contractor for Farm Bureau Insurance Company was paid over $120,000.00 in ADVANCE for CONTENTS WORK (no structure payment$mdash;just contents) BEFORE work was done WITHOUT the insured's name on the check! And this was for a WATER damage claim! I thought I had seen it all.

Another example of the Friendly Preferred Contractor issue involved a home in Payson, Arizona in which the insurance company referred the Premier Contractor. We looked over the issues in this claim but the insureds decided to adjust that claim by themselves. The Preferred Contractor on that claim went out and tore the house up doing much more demolition work than would normally be required. The insurance company refused to pay their OWN Preferred Contractor and when we last talked with this insured, the Contractor was suing the insured because the insurer would not pay as much as the contractor wanted. I certainly wish we could have helped that insured on that claim from the beginning but we understand that we don't sign up all of our potential clients.

Finally, and this is not meant to be any total listing of any kind, I am working on a Fidelity Insurance Company Claim in which a Friendly Contractor was paid for work that the insured alleges was never done. The contractor was paid WITHOUT the insured's name on the check. When I was retained and asked how much was paid to the Friendly Contractor, I was told by the in-house insurance company claim representative that it was CONFIDENTIAL. Ha ha ha.

I have that information as to how much the Friendly Contractor was paid now and the insured is aghast at the amount.

Some people are happy with Insurance Company Friendly, Preferred, Premier Contractors but if it were me, I would be very cautious signing a document with these people. Get an advocate to help you.

At Brown - O'Haver, we are applying to be your advocate.