Fair Contractor Markets - When Insurance Companies Attack!

To all - This information is not a plug for Craftsman Publishing - It was forwarded here as I received it just minutes ago. It is a timely topic for protecting our families, markets and our clients.

Please contribute practical forward looking opinions and comments. Thanks. -CC
Storm Damage Repair in Thirteen States
by Gary Moselle**

This isn’t about the storm that happened on October 29 [2012] last year. It’s about another storm, the rising tide of states that regulate contracts for repair of storm damage. A little more than a year ago, no state had special rules for insurance repair contracts. Now there are thirteen (by date enacted):

May 24, 2011- Minnesota Statutes § 326B.811
June 30, 2011 - Missouri Revised Statutes § 407.725
July 1, 2011 - Official Code of Georgia Annotated § 10-1-393.12
August 26, 2011 - Oklahoma Statutes Title 59 § 1151.21
January 1, 2012 - Illinois Compiled Statutes, Title 815, § 513/18
April 10, 2012 - Arizona Revised Statutes § 32-1158.02
May 22, 2012 - Louisiana Revised Statutes § 37:2175.1
July 1, 2012 - Indiana Code Annotated § 24-5-11-10
July 1, 2012 - Tennessee Code Annotated § 62-6-601
July 1, 2012 - South Dakota Codified Laws § 37-24-51
July 12, 2012 - Kentucky Revised Statutes § 367.620
July 19, 2012 - Nebraska Revised Statutes § 44-8603
August 1, 2012 - Alabama Code § 8-36-2

If you repair storm damage in any of these states, your residential contracts have to comply with the new law. All thirteen states:

Require a notice in the contract if any part of the work may be covered by insurance.
Give an owner the right to cancel the job if any part of the claim is denied.
Require a full refund within ten days if the job is cancelled.
Impose serious penalties for failure to comply.

Storm repair law is different in each of these thirteen states. But the following four states are typical:

Arizona - Covers all repairs to a residence damaged by a “catastrophic storm” in a “specific area.” The owner has three days to cancel after an insurance claim is denied. Work can’t start until the three-day period has expired. The contract has to include a copy of the repair estimate showing damage to be repaired or not repaired and any emergency repairs already completed. If repair of the roof is included, the contract has to describe the work and how the roof was inspected. The contractor is barred from negotiating settlement of the insurance claim. The penalty for non-compliance is revocation or suspension of a contractor’s license.

Kentucky - Applies only to repair of the roof system. The owner has five days to cancel after any part of the insurance claim is denied. The contract has to include a detachable notice of cancellation in duplicate. Prohibits any payment before the end of the cancellation period. Work done to prevent further damage is exempt. The contractor is barred from negotiating settlement of the insurance claim. Prohibits reimbursement of the insurance deductible.

Louisiana - Applies only to repair of the roof system. The owner has three days to cancel after any part of the insurance claim is denied. The contract has to include a detachable notice of cancellation in duplicate. Exempts emergency work if acknowledged in writing by the owner. Prohibits doing any work before the contract is signed. Violation of the law risks a fine of up to $1,000 plus costs and attorney fees.

Missouri - Applies only to repair of the roof system. Prohibits any offer to rebate the deductible. The owner has five days to cancel after any part of the insurance claim is denied. Exempts emergency work if acknowledged in writing by the owner. The contract has to include a detachable notice of cancellation in duplicate. A contractor who doesn’t comply can be slapped with an injunction, restraining order and a civil penalty up to $1,000.

And Then Along Came Sandy

Expect to see similar laws enacted in many of the 24 states affected. If your state hasn’t acted yet, stay tuned.

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Fore warned is fore armed. -CC

In Louisiana this legislation was pushed by state farm it is being pushed by the insurance industry,because they dont like paying claims

Robert - You are right.

I do not mind laws designed to protect consumers, contractors, and honest insurance companies. But laws thinly veiled by design to delay and discourage claims, and mess with even honest contractors markets, and wear out claimants - are unjust bamboozles.

Quasi-Color of Law practices by so-called Insurance Industry “leaders” is pretty clear. Hopefully Judges, Juries, and Consumers will see things more in black and white.

Maybe it will help if contracts contain command language that points to federal law that trumps insurers and insurance adjusters attempts to do “the next illicitly profitable thing” to consumers and contractors in individual states.

Maybe the NAIC and OAG’s will feel the need to fall in line with public protection principles -

8.2 Suits Against Public Officials in Their Individual Capacity
Updated 2012

Quote - [T]he public interest requires decisions and actions to enforce laws for the protection of the public . . . . Public officials, whether governors, mayors or police, legislators or judges, who fail to make decisions when they are needed or who do not act to implement decisions when they are made do not fully and faithfully perform the duties of their offices. Implicit in the idea that officials have some immunity – absolute or qualified – for their acts, is a recognition that they may err. The concept of immunity assumes this and goes on to assume that it is better to risk some error and possible injury from such error than not to decide or act at all./129/ - End Quote


It’s better for public servants to err by honest open endeavor - then it become apparent they are dutifully sleeping with anyone that harms innocent others.

Our laws are being enforced by the state licensing contractors board and when they were enacted i contacted them and questioned the ruling and found out it was done through our state legislators in baton rouge.Im on the fence on this so far as i see postive and negative in it.But if i do find that this hurts me in the long run, i know where my legistlater offices are and will be there fighting back.So if they plan on using negatively against legally,licensed contractors to beat them out of money on legitmate claims i will fight back.I never take a deposit on insurance claim,when i start i take the first check.

And im not waiting on your deprecation or carring your job anymore ive had to wait to long for payment to many times and submitting lien releases before your paid by the mortage company is the biggest ripoff out there.Iwill do insurance work on my terms not anyone elses!

Robert - I feel your angst. No one should able to deprive another of feeding their family by making their living…you would think.

Can ones recover - by “Quantum Meruit” principles - labor and overhead for pre-contractural services should a slick client or adjuster find something “wrong” to cancel the 25K contract?

Surely one is entitled to all payment on all services rendered, especially if labor/overhead payment was known by all parties (adjusters, clients, etc.) to be contingent on insurance proceeds being properly held in trust by the client for the contractor’s entitlement…no?

Can ones recover for lost opportunity and profit - should a slick client or adjuster finds one something “wrong” to cancel the 25K contract?

Just because one cancels a contract does not mean they did not break/breach a state or federal law in doing so. Right? Aren’t contracts to favor both parties?

People can waive their right to cancel…can’t they?

Aren’t insurance adjusters now at higher risk for committing tortuous acts against a construction business owner / contractor, or acts of error, omission and neglect toward insureds?

Non-negotiable replacement offers by adjusters better be based on the best construction business model in town…right? And not just “one Xactimate type “average” price fits all” price…no?

Will an initial simple contract be prudent before a master contract is in place?
One could discuss construction technicalities with an adjuster on their business behalf only…like automotive repair shops and people repair shops do…and then go from there…yes?

Will the same type contract language that auto and doc shops have be a Master Contract Language option?

What about policy benefits/dollars [not policy coverage] being assigned to contractors?

What about contractors having relationships with attorneys who will politely inquire in writing - to slick adjusters or clients - about if they have any questions or concerns regarding fair/unfair trade practices?

Can unintended consequences - due to beauf like manipulation of the legal system and free-markets for illegal windfall - happen?

Just thunkin’ out loud.

The same legislation is being pushed in all states.

Sections of the template legislation make sense. Consumers need protection from the occasional unscrupulous contractor who guarantees the insured that they can/will get the insured’s ins co to pay for everything the unscrupulous contractor says is damaged. Contractor then succeeds in convincing insured to sign a contract for $25,000 but ins co (in the case where there is no damage) denies the claim. Even though the claim was properly denied, the contractor demands that the insured perform per the terms of the contract that, BTW did not include a provision that allowed the insured to cancel (null and void) if the insurance company denied the claim. Even if there was a 3 day recission clause, it is likely the 3 days (business days) had long since passed when the insured realized what had happened.

Another scenario would be where the above contractor attempted the same stunt (at $25k)
on a job that, even at pro contractor RTA pricing, would only be, for example, $18,000. Insured then realizes that the estimates, once finalized after the fact - $15,000 from their ins co and $18,000 from a pro contractor at RTA don’t come close to the crooked guy who committed the insured to the $25k and are “stuck” with the $25k contract the contractor is demanding they perform under possible threat of a lien. Those are the guy’s we all read about occasionally who properly are being sued by the authorities and insured’s who have been wronged.

Right to cancel if any part of the claim is denied? That may or may not be helpful.
That would be helpful to the insured who made the mistake of signing up with the unscrupulous contractor mentioned above. On the other hand, the honest contractor would not have committed the insured to pay for any part of a claim that was later denied and would have made it clear to the insured that, although their price may be higher than the typically low ball ins estimate, there would be no actual binding contract until the contractor was certain what was and what was not approved and at what price.

Then there’s that No Negotiating nonsense moving across the country which is nothing more than an attempt to prohibit contractors from doing what they have been doing better than anyone else for decades, making sure all damage is accounted for and paid at rates relative to the premiums paid.

The source of all the nonsense?

The key parties: American Legislative Exchange Concil (ALEC) - specifically, Commerce, Insurance and Economic Development, ALEC member and leader/funder, State Farm Ins and their Associate General Counsels, Ronald Spies - ALEC Private Enterprise Board, and ALEC Private Chair Emory Wilkerson, state legislators who are members of ALEC and easily identified, and others.

Note: Liberty Mutual is also listed as an ALEC member but when any connections are made between P&C ins and ALEC, SF usually pops up as the major player and the company behind the shenanigans.

The process: Major P&C ins co/ALEC member designs template “model” legislation that includes cancellation provisions, cancellation provision in case “if any part of claim is denied” and the big one - No Negotiating by contractors. Keeping in mind that “negotiating” is not the same as quoting policy language…

Template “model” legislation is approved by P&C ins co general counsel then presented to certain state legislators who are also ALEC members at annual ALEC meetings or otherwise. Those state legislators/ALEC members then submit proposed legislation as bill as either a new law or model language inserted into existing law - such as MN’s attempt to add same language to the existing PA statute in 2012.

Alec member legislator likely does not take position as Chief author but may sign on as a co-author. Legislative “leaders” - often also employee’s of P&C ins - GA’s No Negotiaing bill’s five main authors are all employed in the P&C biz with one being an Allstate attorney - get behind bill and sign on. With CO’s bill (essentially the same “model” language as all other states), Representive Glenn Vaad who is also ALEC’s Colorado Public Chair, signed on as a sponsor.

Respective states legislative leaders hold hearings and promote bill to committee members. Bill is then read and considered by other legislators, many who will support the bills in order to keep valued committee positions and still many others who are essentially clueless regarding the substance of the bills yet agree to vote on them because, in their limited thinking, the bills provide “consumer protection” and voting for consumer protection makes them look good to their constituents. Votes are held and then the bill gets passed and sent to the Governor who, except in MN, signs it into law - and the tax paying voting citizens in each state where the “model” template bills are signed into law by clueless Governors continue to get “screwed”.

In MN, No Negotaiting was defeated in March of 2012 as a result of the aggressive actions by 3RSystems, LLC, Minnesota Association of Exterior Specialists (MNAES) and a good number of licensed contractors in the state who stood up against the bill. Because of their actions, the offending language was removed by the Chief Author (an insurance agent with AmFam) at a Senate hearing filled with contractors and the news media. As far as I know, MN is the only state so far to defeat No Negotiating.

If more contractors educate themselves on the subject and take action against such attempts, more state reps and senators will do the right thing and pass on it.

ALEC Commerce, Insurance and Economic Development at: alec.org/task-forces/commerc … velopment/

State Farm Insurance Claims “No Fault” in Bankrolling ALEC: prwatch.org/news/2012/04/114 … lling-alec

Associate General Counsel at State Farm Insurance Companies Emory Wilkerson: linkedin.com/pub/emory-wilkerson/4/a45/146

Associate General Counsel at State Farm Insurance Companies Ronald Spies:

Colorado Representive and ALEC Public Chair behind CO No Negotiating legislation, Glenn Vaad:

The law in Indiana was actually reformation of the existing law. All in all, I find little objectionable to the Indiana law as it presently exists. It makes paying deductibles illegal. It doesn’t say anything about negotiating with the insurance companies.

With that said, the real issue is enforcement. The revised Indiana law was effective July 1 this past year I believe. There was a fairly sizable hail storm on the West side of Indianapolis in the August/September time frame. There were door hangers and flyers pasted everywhere advertising paid deductibles, free upgrades, etc. and to my knowledge, ZERO Enforcement.

Try getting the Indiana Department of Insurance to take a definitive stand or do anything to oppose the insurance companies. Same is true in Alabama. My limited experience in SC says they’re even worse. I say limited because after a couple of experiences there, it was obvious the SC Dept of Insurance had no intention of doing anything to oppose the P&C Insurance Companies.

I’ve spoken to several experienced and high powered attorneys in Alabama. Their advice was similar. Unless the claim is quite large, there is little to no justification in pursuing relief in court against the P&C Insurance Companies. Their opinion was influenced by the political leaning of the Alabama Justice System.

As we all know - Political and market allies can perpetuate unjust actions over others in the U.S. and other markets, and those deeply entrenched relationships can be hard-to-detect, and somewhat hard to expose.

We are not out trying to change any unjust system of things…we just want to help each of our neighbors to understand that they can stand up for themselves. And, in doing so, bring factual evidence to the W3 table showing certain insurers and adjusters fake sincerity immeasurably trumps wrongful acting consumer and/or contractor ranks.

LMB and AD - Great info.

The so-called “War on Hail” here in Texas appears, in part, to be a veiled attempt at harassing construction business owners via disgruntled insurance adjusters, and insurers, that are really feeling the heat from being exposed by their drunken course for more profit, and their bullied grip on the public.

It is hoped that the fairly new administration understands that harassment by abusive use of anyone’s official authority will be publicly addressed, and will not be kept hidden behind closed doors. The time for those parlor games are quite over. This may be Texas - but it is part of the rest of the world.

Please remember that it is the State of Texas Department of Insurance (not Insurers), and Consumer (not Carrier) Protection is the primary mission. Many faithful commissioners have served before the current staff, and any less integrity shown than by former public servants will also be on the W3 forever.

Major Insurers in Texas are openly mistreating consumers on a large scale - and inaction by public servants is being noticed across the State, and outside the State. The predatory and abusive treatment needs to stop, and illegal windfall profit needs to be returned to consumers as cash - not as credit towards continuing to do business with the same unscrupulous individuals who are insurers.

That is not a threatening or ominous message. It is simply truth and reality that we all need to do what we can to faithfully serve each other, with our various natural and/or acquired gifts. Less than that will likely come to the public spotlight, as it faithfully does time and time again.

Like the truth - closed door deals always have a way of surfacing. It may seem to delay - but truth always surfaces. Always.

Please conduct your public service accordingly. And to those that are doing just that…Thank you.

and then, another P&C insurance clueless Governor, in this case, establishment republican Rick Perry, appoints Eleanor Kitzman to head TDI.

“Perry insurance pick has experience, ties to industry”

statesman.com/news/news/stat … ust/nRcw5/

and this…

Editorial: Regulator should be protecting consumers

dallasnews.com/opinion/edito … sumers.ece

and this…

Insurance Chief Answers Industry Bias Charges

nytimes.com/2012/09/07/us/te … d=all&_r=0

and this…

Texas Insurance Commissioner Raises Campaign Money From Insurance Industry

texasobserver.org/texas-insu … e-industry

B as in B, S as in S! Good luck with that one, Texas.

LMB - What’s really cool is the info coming to the TDI, and Cc’d Others. We are going to publish the complaints here - then track their course here. (Minus private info stuff).

Gotta’ get them doors open at the TDI - and let some sunshine in, and fresh air!

Now that the TDI legal counsel is also their Public Information Office something or other, it will be cool to see how new complaints - that really drill down to illegal carrier conduct stuff that the average Texan is dealing with - is handled.

…Stuff that the TDI has consistently stated is wrong according to TX Ins. Code and State Statue. Allstate, AmFam, USAA, State Farm, Travelers, Nationwide, AAA, Farmers, Farm Bureau, Etc. and a whole mess of insurance adjusters and vendors - Got some 'splaining to do!

Never did believe in luck - cuz hard work gets things rollin’ pretty good.