Should Your Contractor Negotiate Your Insurance Claim for You?

(Words in this article that are underlined are links that will open up other pages that are relevant to this article. While this post contains links and references to legislative actions concerning this topic, it is not intended to be nor should it be considered as “legal advice”. Policyholders and contractors wanting to know how this information may or may not apply directly to them should consult with a licensed attorney.)

I have been asked … “Should my Missouri contractor, who is doing the work on my home, negotiate my property claim with my insurance company on my behalf?”

 The answer is a simple “No”. 

First,  your insurance company has no duty to your contractor as it pertains to your claim for damages.  While the insurance company cannot refuse to negotiate in good faith with you or with your licensed public adjuster hired to represent you — they have no duty at all to negotiate with anyone else.  Instead, they are free to ignore your contractor or to present him with whatever “take it or leave it” proposal they care to make.  Your contractor’s arrangement is with you and NOT your insurance company.  

It is important to you to know that just because the insurance company said “no” to your roofer or other contractor — it does not mean that they can or will say the same to you, or to someone who is licensed to represent you.

You may negotiate your own claim with the insurance company or you may hire an attorney or a licensed public adjuster to negotiate with the insurance company on your behalf.  No one other than yourself, your lawyer or your licensed public adjuster can represent you to your insurance company regarding your insurance claim (click “here” for Missouri reference).  

Additionally, in Missouri a residential contractor shall not represent or negotiate, or offer or advertise to represent or negotiate, on behalf of an owner or possessor of residential real estate on any insurance claim in connection with the repair or replacement of roof systems, or the performance of any other exterior repair, replacement, construction, or reconstruction work.  Any violation of this section by a residential contractor shall be considered an unfair practice pursuant to the Missouri merchandising practices act. (Click “here” for Missouri rules regarding this prohibition).

The discussions that take place between a contractor and your insurance company is a process where the insurance company is addressing their financial interests and the contractor is addressing his financial interests.  The property owner’s interests are not a part of the negotiation since the contractor working on your home cannot represent anyone but himself.

Sometimes, contractors who repair or remodel homes will become licensed public adjusters.  In Missouri and many other states, if your contractor is a licensed public adjuster, he is prohibited from contracting to provide repair or remodeling services regarding the damages associated with a claim he is negotiating.  If your contractor is not a licensed public adjuster, he is prohibited from negotiating your claim on your behalf with the insurance company without a license to do so.   

On certain rare occasions, some contractors will misrepresent themselves as being public adjusters and offer to negotiate their work with the insurance company when they, in fact, are not licensed.  This is not compliant with most state rules, can adversely affect the home owner’s rights under their insurance policy and can sometimes result in the contractor’s arrest.  Always ask anyone representing themselves as a public adjuster to show you the license that was issued to them by the state.  They should be able to present it, immediately, upon your request.

Any “negotiating” that a contractor may be doing is only in regard to the specific matter of his work on your home which, frankly, is something that he should probably be negotiating with YOU … not your insurance company.  Negotiations and compromises concerning the choices of materials and methods of completing the work, which can affect the cost of a project, should be decisions made by the home owner and NOT his insurance company.

Again, it is also important to understand that, just because the insurance company said “no” to your particular contractor, it does not necessarily mean that “no” is the final answer.

Sometimes the insurance company’s adjuster, who represents the best interests of the insurance company (and NOT those of the property owner), will “estimate” the costs of repair and may recommend contractors willing to comply with their “estimates”.  Such contractors may erroneously consider themselves working for the insurance company under those circumstances, and answerable to them instead of to the property owner – and sometimes without regard for the home owner’s expectations or satisfaction. 

In my opinion, a property owner should be selecting a contractor based upon ability, experience and reputation to restore the property to its original condition.  The contractor should be accountable only to the property owner for decisions affecting the project – and the insurance company should be paying the amounts necessary for restoring that property, as provided for under the insurance contract (aka “policy”).

When their client has difficulty with the insurance company concerning restoration issues, contractors  should consider referring a licensed public adjuster to assist the property owner with the claim.  

This article contains opinions of the author and is not, nor should it be construed, as legal advice.  For professional legal advice concerning the use of a contractor to represent an insured home owner with an insurance claim, the reader is advised to consult with a licensed legal professional.

Copyright 2013 James H. Bushart

4 responses

  1. Pingback: Insuring Our Rights Away | Grumpy Opinions

  2. Pingback: Missouri House Bill 1086 — New Restrictions Concerning Contractors and Insurance Claims | Missouri Public Adjuster

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