Fair Contractor Markets - Xware GC Overhead and Profit Facts

There is much debate as to HOW General Contractor overhead and profit calculations are factored into Replacement Cost Values of structures and premiums, and, conversely, as to WHEN is it naturally owed as equitable base insurable values in RCV-to-ACV payment calculations.

Here is one example from the ISO-Xactware as to how GC O&P, and local building code, is necessarily and naturally factored into Replacement Costs and Insurance Policy premium dollars.

iso.com/Products/SPI-Plus/Sa … eport.html

After a insurance covered “event” some in the insurance industry claim GC O&P is only owed towards an insured loss “when incurred” by a policyholder, or when a structure has a certain “damage complexity” or repair requires “two-three trades or more”, or if a General Contractor is licensed, or some other post-underwriting rational that, by design, eliminates GC O&P calculations from base ACV payment.

Pseudo-indemnification construction/consumer market practices are widespread, and are openly perpetuated by misinformed or willing adjusters, by their handlers. Whether a General Contractor is used or not after an event does not determine natural base loss values. The predetermined and insurable GC RCV / damaged physical structure values do.

To assume each and every Premium-to-ACV payment should not naturally and equitably contain General Contractor Labor, Overhead, Materials, Sales tax, and Profit VALUE, is to knowingly charge consumers for one thing of RCV value, and then illicitly short change them when it is time to return innate base loss values.

tdi.texas.gov/bulletins/1998/b-0045-8.html
tdi.texas.gov/bulletins/2008/cc70.html

In insurers Replacement Cost Calculations - Fair Market General Contractors business models are naturally factored into the whole process for replacing a structure - and when only roofing systems are to be replaced by a covered event - General Contractors are already prepaid for by RCV dollars, and naturally afforded by a loss claimant as their Contractor-of-Choice.

Insurers contrived “repair complexity” and “three trade rule” and “A GC is not necessary” market indemnification lies against contractors and consumers creates illegal windfall profit for themselves, and also builds up a record against themselves regarding financially defrauding consumers.

This topic has been covered over and over again on this forum.
If overhead and profit was put on every claim weather a GC was involved or not and the homeowner could do the repairs without dipping into the overhead and profit wouldn’t the homeowner and or contractor be unjustly enriched? Wouldn’t that be considered betterment.
The examples are from (1998, 2008 TDI) and 2007. This is 2013 do you have any recent publications? and has ISO changed the business model since 2007.
Special contractor overhead and profit is included in the line items in (xactimate 27 and 28) and 28 has done away with base service charges.
The 2007 example has mentions that code upgrades are included in the replacement cost, why do you think that there is code upgrade coverage is an optional endorsement? I’m sure that every state in the union would have identified that the code upgrade already existed in the premium and wouldn’t allow the insurance companies to charge for it.
I don’t know, I’m not a armchair attorney or PA nor to I attempt to be one. But what I don’t do is extract 1 item or piece of information and stretch it out of context to push my own agenda on un-educated homeowners, adjusters or anyone reading this forum or any forum for that matter.
You seem the combative type so I fully expect you to disagree with this post without posting any concrete answers of your own. Reading your previous posts I should also expect you to say something smart azz to deflect your inexperience in the contractor,insurance remodeling areas. I guess what I am asking is for you to answer the betterment and overhead profit questions that I asked from this post.

Roof Pitch,
I am fairly well familiar with Xactimate; can you tell me where to find any allowances for profit in any line items in any version?

I am well aware that some (but far from all) overhead costs that can be directly tied to the project are detailed in Xactimate line item cost calculations, but I am unaware of any line item detail tied directly to profit.

And I agree with you that adding any money to an estimate that already covers the insureds known and agreed costs would enrich the insured at the expense of the insurer.

The problem comes in two forms. First, when an estimate is created out of thin air in Xactimate (for a roof lets say), then that estimate becomes an estimation of an imaginary roofers bid. Since the insurer is relying on the accuracy of the Xactimate database, the insurer should use the database exactly as Xactimate intended it to be used. Not doing so creates many of the conflicts we have all experienced between what we know is a fair market price for the work and what we see estimated by the insurer.
Secondly, when O&P is owed on an estimate the insurer often deducts O&P prior to making ACV calculations. This is unfair to the insured, and a practice condemned by many courts.

Consider:
clausen.com/index.cfm/fa/fir … _Claim.cfm

To sum, the Clausen Miller Law Firm wrote:
"The Sixth Circuit affirmed the district court’s entry of summary judgment in favor of Harleysville on Parkway’s bad faith and TCPA claims but vacated the district court’s deduction of expenses related to the contractor’s overhead and profit from the insured’s actual cash value claim. The Sixth Circuit recognized that Tennessee courts “have not determined what repair or replacement costs include.” Relying on courts from other jurisdictions, however, the Parkway court stated that “[r]epair or replacement costs logically and necessarily include any costs that an insured reasonably would be expected to incur in repairing or replacing the covered loss.” Therefore, because the repair efforts necessary at Parkway’s hotel were extensive, the Sixth Circuit stated that “the actual cash value of a loss is the repair or replacement costs less depreciation, and since the cost of a contractor would reasonably be incurred in repairing Parkway’s damaged property, then the costs of contractor’s overhead and profit would be included in the actual cash value of Parkway’s loss.” Furthermore:

Parkway contracted to receive the actual cash value of its loss … What Parkway actually spends to repair its property does not affect its right to recover the actual cash value of its loss, as the actual cash value is not calculated based upon what the insured ultimately pays to repair its property. Indeed, even if Parkway chooses not to repair its property at all, it would still be entitled to what it bargained for: the actual cash value of its loss, which includes contractor’s overhead and profit where a contractor would reasonably be utilized to make repairs. Id. at 962-63. (Emphasis added)

Learning Point:
Parkway is the fourth in a line of cases from across the country that have allowed recovery for contractor’s overhead and profit in the calculation of an insured’s actual cash value property damage claim. See also, Gilderman v. State Farm Ins. Co., 437 Pa. Super. 217, 649 A.2d 941 (1994); Salesin v. State Farm Fire & Casualty Co., 229 Mich. App. 346, 581 N.W.2d 781 (1998); and Ghoman v. New Hampshire Ins. Co., 159 F. Supp. 2d 928 (N.D.Tex. 2001)."

Good catch on the profit for speciality contractor. I put that in there to see if catcontractor would catch it since he posted that he has 22 years experience. You are correct on the overhead is included in each line item and it is located with the price button, this can be changed to what the overhead is for your company.

Agreed that O&P when warranted should be included on the ACV payment however, it shouldn’t make a difference unless the policy holder isn’t going to do the repairs and wants to pocket the ACV check (which is their decision, but the insurance company isn’t going to pay for the same item again should another a covered loss damage that same item.)

Roof Pitch, you’ve come this far, walk with me just a bit farther!

My contention is that when thin air estimates are produced in Xactimate by insurers for 1-2 trade projects, then by not applying O&P to those estimates they are potentially shorting the claim.

Think about it…the Xactimate line items contain some soft overhead items in the line item pricing detail, but no accommodation for hard overhead or any profit…even for the single trade contractor! Single trade contractors, a roofer for example, have hard overhead costs, such as an office, a secretary/office manager, advertising, etc. They also are in business to earn a reasonable profit.

The notion that the O&P at the end of an Xactimate estimate is for a GC only doesn’t add up to me, and if you think about past disagreements you may have had with insurers (as long as the insurer estimate is well written with all the appropriate line items), the addition of the O&P would probably erase much of the differences between your estimate and the insurers.

My estimates are consistently more then the insures and I don’t separate the O&P on a single trade or claims that are not “complex” enough. I just add them to the line items, (Xactimate) is geared so that the individual or company can input their own price for any item.
Insurance companies almost always approve my estimates the first time as I give the homeowner all documentation that is required with my estimates. It may help that I have the homeowner on board and educated in the insurance process. If there is a call to the adjuster that needs to be made the phone is on speaker with me and the homeowner present or the call is 3 way. I don’t communicate to the adjuster without the homeowners knowledge. This may be the reason that I stay busy but I don’t know. For me its not worth the extra hours, my aggravation, homeowners aggravation, phone calls etc. to do it any other way. I consistently have a 32-38% profit on each job and even more on repairs. I don’t do a ton of insurance work anymore and I wouldn’t have it any other way.

RP & CC -

Excellent dialog guys!

Ok…When you look at the TDI Bulletin B0045-98, and reaaaly chew on it, Elton Bomer was pulling together “irreducible” historical and actuarial/statistical probability indemnification protocol norms that indemnification principles are ALWAYS, apples-for-apples, based on.

It is not the age of the bulletin that is important - but rather - insurable values/indemnification math principles that are emphasized.

In other words - To properly insure/potentially indemnify someone against suffering financial loss, (to a structure), you have to calculate the potential loss value based on provable economic factors.

Provable General Contractor costs, utilizing specialty trade contractors, to build and rebuild structures, from the roof to the foundation, is the appropriate core construction business data.

Premiums ALWAYS have to account for those natural anticipated costs/financial loss values…and General Contractor overhead, labor, materials, sales tax, and profit values do not “disappear” somehow in single trade work issues.

The insurance industry’s clever and deceptive manner in inventing why GC O&P is only owed in certain construction business situations, after they have naturally and necessarily charged consumers for it, brazenly defies true and objective indemnification calculations, and actual dollars owed a claimant.

Paying specialty sub-contractor labor, overhead, materials, sales tax, and profit dollars ONLY in initial GC RCV-to-ACV loss value financially cheats claimants…everytime.

The age of the bulletin does matter in my opinion. Items get revised, outdated, deleted etc… Its just a bulletin, if its permanent to your specific state then it will be added to the states insurance division website. My state doesn’t update every year that I know of but it has to more often then 15 years (TDI bulletin dated 1998).
Get current and quote from the Insurance Division Website and not a bulletin that may or may not be current. If a homeowner that knows nothing about the insurance procedure and you find one sentence on a 15 year old bulletin and say that it is the truth. Then it would appear that you are preying on them.

If you showed me the bulletin that is dated from 1998 and if I was the adjuster I would ask you if has changed since then, if it has made its way into the insurance division website. Has it been updated etc…

I don’t live in Texas so your state may do everything different.

RP - After 1998 Insurers in Texas continued to charge consumers for General Contractor Replacement Cost Value premiums - and then skim off, in Actual Cash Value payments, General Contractor Overhead and Profit values.

They still try to financially cheat the general public and have been partially successful only by inventing false and misleading construction market misinformation like the “three trade” hoax, damage “complexity” hoax, and “one to two trades does not require General Contractor involvement” hoax.

The Texas Department of Insurance even appeared to turn its head regarding these intrinsic financial indemnification issues during the relatively short period where Eleanor Kitzman, a seemingly pro-insurer commissioner, was in office.

Proactive contractors and consumers have helped to reverse that trend.

The most recent TDI bulletin B-0068-08 mandates that the TDI position has not changed since 1998. General and Specialty Contractor overhead and profit is to still be objectively assumed in initial base RCV/ACV payment dollars owed claimants. Whether a contractor is hired, or not.

GC O&P values openly included in ACV payments does not unjustly enrichen a loss claimant who does not have a contractor, it simply pays them equitably for actual base GC RCV value naturally woven into the structural loss value.

Despite that mathematical fact, insurers/adjusters continue to try to financially defraud consumers, and also contractors, that provide fair and fully formed construction estimates and supplements that account for GC RCV overhead and profit calculations.

tdi.texas.gov/bulletins/2008/cc70.html

[quote=“CatContractor”]RP - After 1998 Insurers in Texas continued to charge consumers for General Contractor Replacement Cost Value premiums - and then skim off, in Actual Cash Value payments, General Contractor Overhead and Profit values.

They still try to financially cheat the general public and have been partially successful only by inventing false and misleading construction market misinformation like the “three trade” hoax, damage “complexity” hoax, and “one to two trades does not require General Contractor involvement” hoax.

The Texas Department of Insurance even appeared to turn its head regarding these intrinsic financial indemnification issues during the relatively short period where Eleanor Kitzman, a seemingly pro-insurer commissioner, was in office.

Proactive contractors and consumers have helped to reverse that trend.

The most recent TDI bulletin B-0068-08 mandates that the TDI position has not changed since 1998. **General and Specialty Contractor overhead and profit is to still be objectively assumed in initial base RCV/ACV payment dollars owed claimants. Whether a contractor is hired, or not.
**
GC O&P values openly included in ACV payments does not unjustly enrichen a loss claimant who does not have a contractor, it simply pays them equitably for actual base GC RCV value naturally woven into the structural loss value.

Despite that mathematical fact, insurers/adjusters continue to try to financially defraud consumers, and also contractors, that provide fair and fully formed construction estimates and supplements that account for GC RCV overhead and profit calculations.

tdi.texas.gov/bulletins/2008/cc70.html[/quote]

Deja Vu. CatContractor, you were wrong before and you are still wrong on this issue. My policy pays what is reasonably incurred. If a GC is not involved in a project, GC O&P is not owed on the claim. These Bulletins say nothing to the contrary. They only state that when a GC is involved and O&P is part of the claim, it cannot be excluded when calculating ACV and the RC holdback. That’s it. Nowhere does it state it is owed on every claim. To continue to wrongly spew that it is owed “[w]hether a contractor is hired, or not” is wrong and irresponsible. It also demonstrates the problem with your approach – your focus is not the reasonable incurred cost to put the insured back in the same position he was before the loss, but to maximize the claim amount and put as much money as possible in your pocket.

[quote=“InsurerPerspective”]

[quote=“CatContractor”]RP - After 1998 Insurers in Texas continued to charge consumers for General Contractor Replacement Cost Value premiums - and then skim off, in Actual Cash Value payments, General Contractor Overhead and Profit values.

They still try to financially cheat the general public and have been partially successful only by inventing false and misleading construction market misinformation like the “three trade” hoax, damage “complexity” hoax, and “one to two trades does not require General Contractor involvement” hoax.

The Texas Department of Insurance even appeared to turn its head regarding these intrinsic financial indemnification issues during the relatively short period where Eleanor Kitzman, a seemingly pro-insurer commissioner, was in office.

Proactive contractors and consumers have helped to reverse that trend.

The most recent TDI bulletin B-0068-08 mandates that the TDI position has not changed since 1998. **General and Specialty Contractor overhead and profit is to still be objectively assumed in initial base RCV/ACV payment dollars owed claimants. Whether a contractor is hired, or not.
**[/quote]

GC O&P values openly included in ACV payments does not unjustly enrichen a loss claimant who does not have a contractor, it simply pays them equitably for actual base GC RCV value naturally woven into the structural loss value.

Despite that mathematical fact, insurers/adjusters continue to try to financially defraud consumers, and also contractors, that provide fair and fully formed construction estimates and supplements that account for GC RCV overhead and profit calculations.

tdi.texas.gov/bulletins/2008/cc70.html

Deja Vu. CatContractor, you were wrong before and you are still wrong on this issue. My policy pays what is reasonably incurred. If a GC is not involved in a project, GC O&P is not owed on the claim. These Bulletins say nothing to the contrary. They only state that when a GC is involved and O&P is part of the claim, it cannot be excluded when calculating ACV and the RC holdback. That’s it. Nowhere does it state it is owed on every claim. To continue to wrongly spew that it is owed “[w]hether a contractor is hired, or not” is wrong and irresponsible. It also demonstrates the problem with your approach – your focus is not the reasonable incurred cost to put the insured back in the same position he was before the loss, but to maximize the claim amount and put as much money as possible in your pocket.[/quote]

always been my goal.

Note - From the Texas Department of Insurance -

“The purpose of this bulletin is to state the Department´s position that… Indemnity is the basis and foundation of insurance coverage. This objective requires that the insured receive a payment equal to that of the covered loss…”

  1. “The value of contractor´s overhead and profit, as well as sales tax on building materials, has been included in the limit of liability for which the insured has paid premium.”

  2. “The deduction of prospective contractors’ overhead and profit and sales tax in determining the actual cash value under a replacement cost policy is improper, is not a reasonable interpretation of the policy language, and is unfair to insureds.”

  3. “The calculation of this payment results in under-compensation if an insurer deducts prospective contractors’ overhead and profit and sales tax in determining the actual cash value under a replacement cost policy.”

  4. …“the inclusion of contractor´s overhead and profit and sales tax on building materials does not over-compensate an insured for the amount of the loss because these items represent part of the insured´s loss.”*.

  5. …“there is no situation in which the deduction from replacement cost of depreciation and contractor´s overhead and profit and/or sales tax on materials will be the correct measure of the insured´s loss.”

  6. "–The insurers’ argument that the cost of contractor´s **overhead and profit *and sales tax on building materials should be excluded from an actual cash value loss settlement because the insured has not incurred these expenses is not persuasive.

Using this logic, an insured who opts not to repair or replace damaged property would not incur any of the expenses necessary to repair or replace the damaged property, including the costs of building materials, and would collect nothing under an actual cash value loss settlement. This result would be contrary to the purposes of the subject insurance policy."

  1. “If the insurer in determining actual cash value excludes costs that are included in the determination of liability limits, on which the insured´s premium is based, the insurer reaps an illegal windfall because the insurer receives premium on insurable values for which loss may never be paid.”

The Department has concluded that an insurer providing property coverage under replacement cost residential policies that allow for the adjustment of covered losses to structures on an actual cash value basis may not calculate actual cash value on the basis of replacement cost with proper deduction for depreciation, less contractor´s** overhead and profit**, nor may the insurer deduct sales tax on building materials.

Any insurer** that determines actual cash value on this basis may be subject to disciplinary action for violations of the Texas Insurance Code, including unfair claims practices pursuant to Article 21.21 § 4(10)(a) and Article 21.21-2."


*Predetermined [General Contractors using Specialty Contractors] replacement costs/insurable values are naturally factored into premium dollars and are naturally owed back to a claimant, whether a Contractor is used or not.

**(Or insurance adjuster).

IP - Besides all of the financial points, (and especially point number 7) - Per the timeless indemnity admonition from Elton Bomer -

It is wrong, irresponsible, and illegal to promote post underwriting pseudo-indemnification schemes after an insurer has someone’s money.

This from Xactimate:

[size=150]Overhead and Profit[/size]

What is and isn’t included in Xactware Pricing

OREM, UT, May 2011 - For individual trades, Overhead is any additional expense not charged (attributed) directly to the work being performed. Overhead is typically classified as an indirect cost. Profit is formally defined as “the excess of the selling price of goods over cost.” Profit is typically added to the cost of a construction-related job to allow the entity performing the work to grow their company through reinvestment. Xactware Solutions, Inc., an industry leader in providing estimating software, services, and building cost data since 1986, has recognized three categories of overhead. While ultimately, the amount of overhead and profit, as well as how and where it is accounted for within the estimate is left to the discretion of the estimator based upon the conditions of the job and the service provider performing the work, the information listed below should provide general guidelines into how Xactware’s published pricing is created and intended to be used.

When Xactware performs market research on unit prices, those surveyed are specifically asked to not include expenses that would be included in the General Overhead and Profit markup percentages (item #1 below).
General Overhead are expenses incurred by a General Contractor, that cannot be attributed to individual projects, and include any and all expenses necessary for the General Contractor to operate their business. Examples (including but not limited to): General and Administrative (G&A) expenses, office rent, utilities, office supplies, salaries for office personnel, depreciation on office equipment, licenses, and advertising.

Including General Overhead expenses in an Xactimate estimate
General Overhead expenses are not included in Xactware’s unit pricing, but are typically added to the estimate as a percentage of the total bid along with the appropriate profit margin. These two costs together constitute what is normally referred to in the insurance restoration industry as General Contractor’s O&P, or just O&P. General Overhead and Profit percentages can be added in the estimate Parameters window within an Xactimate estimate.

Job-Related Overhead are expenses that can be attributed to a project, but cannot be attributed to a specific task and include any and all necessary expenses to complete the project other than direct materials and labor. Examples (including but not limited to):
Project managers, onsite portable offices and restroom facilities, temporary power and fencing, security if needed, etc.

Including Job-Related Overhead expenses in an Xactimate estimate
Job Related Overhead expenses should be added as separate line items to the Xactimate estimate. This is done within the Line Item Entry window of an Xactimate estimate by selecting the proper price list items, or creating your own miscellaneous items.
Job-Personnel Overhead represents the non-wage related expenses incurred by a General Contractor that are associated to having their own employees perform the work, or the total G&A expenses incurred by a professional Sub-Contractor when using their services.
Examples: Vehicle costs, uniforms, mobile phones, depreciation on hand-tools owned by the company, etc. Job-Personnel Overhead also includes the portion of General and Administrative expenses and profit that correlate to employees performing billable tasks, and that are not included in the General Contractor O&P mark-up. These expenses will be incurred either by the general contractor
using employees or by a sub-contractor, depending on who is actually performing the work. If the work is being sub-contracted, then these expenses are commonly called Sub-Contractor Overhead and Profit. Including Job Personnel Overhead/Sub-Contractor O&P in an Xactimate estimate.

Job Personnel Overhead (or Sub-Contractor O&P) expenses are included in the Labor Overhead portion of each unit price in the Xactware price list. The Labor Overhead, along with expenses for Labor Burden and Worker Wage (wage paid to the individual) make up the Retail Labor Rate. Updating the Labor Overhead portion of the Retail Labor Rate is done from the Component List of an Xactimate estimate. Once within the Component List, select the option to view Retail Labor Rate components. This list allows you to view and modify all Retail Labor Rates used within the estimate. Price changes to a Retail Labor Rate here will affect prices in all items in the estimate that use this Retail Labor Rate. Xactware, Inc. publishes and makes unit price data available to all customers each month, based off market surveys. Every effort has been made to ensure that Xactware’s users can access, view, and modify all detail within the published unit prices. The building cost data published by Xactware is not designed to be inclusive of sales tax, General O&P, or Job-Related O&P within the unit prices. These can be specified and added at print time after all line items have been listed. However, Xactware has designed flexibility into the system so this is not mandatory. Xactware’s users have the option to add these costs to their line items as they choose. The Xactimate system is designed to provide full detail on all costs that are incurred.
*Merriam Webster Dictionary-new edition

I believe that the difference between insurer and contractor pricing arises from at least two problems. The first is that Xactimate says quite clearly that the line item pricing includes job personnel overhead (known as “labor burden”), but does not include other job specific overhead, such as supervision. Xactimate is clear that these costs must be added to an Xactimate estimate in order for it to be accurate. Xactimate is clear that line item pricing does not include hard overhead costs, and Xactimate is also clear (by omission rather than by statement) that profit is not included in the Xactimate line items FOR ANYBODY, both GC’s and individual tradesmen. Unfortunately, the insurance industry does not read the Xactimate white papers, and largely refuses to recognize this fact. Consequently, when a roofer prepares a proposal that includes his hard overhead and profit requirements, it comes out higher than the adjusters.

Another problem is that although Xactimate purports to include all costs associated with a type of work in its line items, this is in fact not the case. Consider the info Xactimate provides for the line item for removing roofing (from the June, 2013 Macon, GA database):

**Includes: Dump fees, hauling, disposal, and labor to remove composition shingles and felt.
Note: If additional layers are to be removed and disposed of, use additional item RFG ADDRMV. Removal cost is based on hauling done with contractor’s own equipment. If haul off is to be estimated separately or if the removal is being estimated with a dumpster (DMO DUMP
) or other equipment, use item RFG ARMVN.
No life expectancy data


The info is clear that the line item includes the costs associated with getting the roof debris from the job site to the dump and paying the tipping fees. But wait! When we drill into the Xactimate line item pricing detail, we see exactly what costs are included in the removal pricing for 20 year, 3 tab shingles:

Type - Component - Component Price - Direct Yield - Spt Event (%) - Yield - Price Per Unit - Description
EQU - DMOFEE - 28 - 8.000 SQ/TN - None(0.000) - 8 - 3.5 - Landfill charge - per ton
RLB - DMO - 31.45 - 1.582 SQ/HR - DMO2-LAB(33.333) - 1.055 - 29.83 - Demolition Laborer

Now, I see the tipping fee at $28.00/ton. This is very close; the actual tipping fee in Macon, GA is $27.75/ton. Xactimate allocates that in its pricing, providing $3.50/sq for tipping fees. And I see the labor allowed for removing the roofing. What I don’t see is the truck! No allowance for the truck and its related expenses, such as repair/maintenance and fuel. Or for a dumpster, which is often used.

To add insult to injury, Xactimate provides a pricing option for roofers who want to detail out a dumpster in their estimate. To do that, you use a different code (RFG ARMVN) for roofing removal, and then you add the appropriate dumpster. The insult comes in the pricing. Xactimate allows $33.33/sq if you use your own truck and haul the roof to the dump, but it only allows $23.59/sq if you use a dumpster! That is a difference of $9.74/sq, but the only difference in the detail is that RFGARMVN does not include tipping fees of $3.50/sq. In Xactimate math, removing $3.50/sq in cost results in a $9.74/sq drop in price!

You can easily see that estimating with the Xactimate database is an inexact science, a fact that Xactimate cheerfully admits. This from their 2012 Licensing Agreement:

Definitions
“Xactimate” shall mean Xactware’s estimating structural damage repair software. "Database” shall mean applicable pricing information in an organized format for the specific limited purpose of estimating fixed residential and/or light commercial structural remodel and repair costs, and shall be compatible with the current version of the Licensed Products. This pricing information is provided for informational purposes only. It is your responsibility to ensure the estimates you write include pricing consistent with components including but not limited to actual materials, equipment, and labor pricing.
(emphasis added)

…and this from the same source:

***Summary
Xactware recognizes that individual costs required to repair or rebuild a structure can vary between structures due to differences in size, complexity, accessibility, and location. Additionally, prices charged by contractors and suppliers vary based on company size (overhead), perceived quality of work, and level of service. In the end, the correct price for any job is based on an agreement between the purchaser and the provider: the price the purchaser is willing to pay and the price at which the provider is willing to work. ***(emphasis added)

[quote=“InsurerPerspective”]

[quote=“CatContractor”]RP - After 1998 Insurers in Texas continued to charge consumers for General Contractor Replacement Cost Value premiums - and then skim off, in Actual Cash Value payments, General Contractor Overhead and Profit values.

They still try to financially cheat the general public and have been partially successful only by inventing false and misleading construction market misinformation like the “three trade” hoax, damage “complexity” hoax, and “one to two trades does not require General Contractor involvement” hoax.

The Texas Department of Insurance even appeared to turn its head regarding these intrinsic financial indemnification issues during the relatively short period where Eleanor Kitzman, a seemingly pro-insurer commissioner, was in office.

Proactive contractors and consumers have helped to reverse that trend.

The most recent TDI bulletin B-0068-08 mandates that the TDI position has not changed since 1998. **General and Specialty Contractor overhead and profit is to still be objectively assumed in initial base RCV/ACV payment dollars owed claimants. Whether a contractor is hired, or not.
**[/quote]

GC O&P values openly included in ACV payments does not unjustly enrichen a loss claimant who does not have a contractor, it simply pays them equitably for actual base GC RCV value naturally woven into the structural loss value.

Despite that mathematical fact, insurers/adjusters continue to try to financially defraud consumers, and also contractors, that provide fair and fully formed construction estimates and supplements that account for GC RCV overhead and profit calculations.

tdi.texas.gov/bulletins/2008/cc70.html[/quote]

Deja Vu. CatContractor, you were wrong before and you are still wrong on this issue. My policy pays what is reasonably incurred. If a GC is not involved in a project, GC O&P is not owed on the claim. **These Bulletins say nothing to the contrary. **

Actually IP - The opposite is true. “The insurers’ argument that the cost of contractor´s overhead and profit and sales tax on building materials should be excluded from an actual cash value loss settlement because the insured has not incurred these expenses is not persuasive.
**
Using this logic,** an insured who opts not to repair or replace damaged property would not incur any of the expenses necessary to repair or replace the damaged property, including the costs of building materials, and would collect nothing under an actual cash value loss settlement.
**
This result would be contrary to the purposes of the subject insurance policy.”**
tdi.texas.gov/bulletins/1998/b-0045-8.html

They only state that when a GC is involved and O&P is part of the claim, it cannot be excluded when calculating ACV and the RC holdback. That’s it. Nowhere does it state it is owed on every claim.

"The value of contractor´s overhead and profit, as well as sales tax on building materials, has been included in the limit of liability for which the insured has paid premium. If the insurer in determining actual cash value excludes costs that are included in the determination of liability limits, on which the insured´s premium is based, the insurer reaps an illegal windfall because the insurer receives premium on insurable values for which loss may never be paid.
tdi.texas.gov/bulletins/1998/b-0045-8.html

To continue to wrongly spew that it is owed “[w]hether a contractor is hired, or not” is wrong and irresponsible. It also demonstrates the problem with your approach – your focus is not the reasonable incurred cost to put the insured back in the same position he was before the loss, but to maximize the claim amount and put as much money as possible in your pocket.

The value of contractor´s overhead and profitt, as well as sales tax on building materials, has been included in the limit of liability for which the insured has paid premium. If the insurer [OR ADJUSTER]* in determining actual cash value** excludes costs** that are included in the determination of liability limits, on which the insured´s premium is based, the insurer reaps an illegal windfall because the insurer receives premium on insurable values for which loss may never be paid.”
tdi.texas.gov/bulletins/1998/b-0045-8.html

No IP - Overhead, Labor, Materials, Sales Tax, and Profit components have to be honestly calculated in RCV-depreciated-to-ACV calculations presented to consumers by “Indemnification Adjusters”.

Premium dollars accounting for a potential General Contractor to replace the structure naturally means General Contractor profit and overhead costs are part of the insurable values/contingent replacement costs Insurance Companies bill consumers for, and equally owe back every time.

*Added for emphasis.

Xactimate pricing isn’t based on reality.
Xactimate is good at …selling it’s software.

Unfortunately insurance companies and some contractors have put faith
in an estimating program’s pricing.

I keep it simple…

Meet with the homeowner:
-take measurements+pictures
-Review the options with the homeowner
-give them a price for 3 different packages

Homeowner says: Well, I am trying to put this on my insurance…
Me: Well, sometimes your insurance covers it and sometimes they don’t. Some
homeowners think it’s worth a try, and some are worried their premiums may go up.
Some insurance agents are easier than others, etc.
But the fact is they need a new roof or repair.

If our company proposes 10,000.
Some insurance companies may pay the full 10,000
some may pay a %…like 7,500 / 8,000 etc.
Some will say no. Either way, the price stays the same.

They either:
A. Give a down payment and get on the schedule
B. I’m going to talk to my insurance and give them your proposal.
C. I’ll call you back / or No

Propose whatever it costs to provide superior
service and cover your overhead. Not what a software
is telling you your overhead should be.

[quote=“onarooftop”]Xactimate pricing isn’t based on reality.
Xactimate is good at …selling it’s software.

Blah, blah

Propose whatever it costs to provide superior
service and cover your overhead. Not what a software
is telling you your overhead should be.[/quote]

That is a sound strategy. However, it really doesn’t work if you’re trying to do more than 50 to 100 roofs per year with a good percentage of them being insurance work. Who knows, perhaps your market is different and if so, great deal for you. I will say that part of your strategy is dead on, that being, letting the HO deal with their Insurance Company. IMHO, trying to effectively get paid fairly while keeping the HO completely on the sidelines is stressful, time consuming and generally, an epic fail. As a service to our Customer, we certainly will discuss our estimate with the Adjuster(s) but I’m simply not going to get into a heated battle or prolonged battle with some idiot that doesn’t know a shingle from a piece of drywall. We’ll simply turn it back over to the HO, explain and show them what the problem(s) are and ask them to get involved. In many cases, the HO then actually sees how badly their insurance company was attempting to screw them by grossly underpaying the claim. If the Insurance Company wants to piss off their Customers, not my problem.

We do well over 100 a year, but very few insurance jobs. We don’t have hail storms, tornadoes, or hurricane’s in my area. I used to be bummed that we didn’t have storm work…but now I’m glad we don’t. I like working directly with the homeowners like you
described Authentic Dad.

I didn’t mean to imply a company cannot do more than 100 roofs per year without having insurance work. Obviously, there are some very large roofing contractors in many places who do very little insurance work. What I meant to say is it is hard to do 100 or more insurance roof replacements per year with purely that approach. I’m not saying it is a flawed approach by any means. In fact, it is very close to the perfect approach if the Insurance Companies operated as they should. The reality is, they don’t. So you have to find a happy medium.

We keep increasing our cash bid business. I’d not be sad if cash bid business were 100% as long as we could still do the same volume. Not dealing with all the crap, documentation, getting your money faster and making the same or more profit is a nice deal.