DORA - B-51 Regarding O & P
REGARDING: Bulletin B-5.1 - Calculation of actual value: Prohibition against deducting contractors' overhead and profit from replacement cost where repairs are not made.
It is my opinion that Colorado has sold out to billion dollar insurance companies already... and it is the home owner and people with small claims that have suffered.
In essence Colorado has already passed laws that make small insurance claims be settled in favor of the insurance company. Small for the state, small for the insurance company, but not small for a home owner or any property owner.
When Colorado passed the laws limiting what the insurance company can be sued for, it made it improbable that attorneys would sue the insurance companies when the claims were in their opinion too small. The insurance companies are powerful and have billions of dollars and they make lots of profits. It is not easy to sue them, even when it is clear they have done wrong.
Indulge me and maybe I can show you what I mean.
Let's look at the example of "The poor little old lady's claim". A roofer comes tells the old woman that she has hail damage to her roof, gutters, siding, and some windows. The roofer explains that he used to be an adjuster and he can meet with her insurance company to work out the repairs. The old woman files a claim and the adjuster meets her roofer. The adjuster states he is a supervisor and will be training a new adjuster while inspecting the old woman's home. The adjusters estimate is sent to the old lady and it is less than $7,700. The old woman is told by the roofer that since the adjuster is a supervisor this is the most she will get. Fortunately for the old woman her son had a very bad experience with his own home insurance claim and asked her not to sign a contract with that roofer and he would send someone more knowledgeable over to help her. That person works for a construction/restoration management company. For this example, we will call that person Andy. Andy tells the old woman that he was trained by manufacturers, by forensic engineers, by the best in the insurance industry to be a damage assessment expert and that the construction management company he works with is an expert at managing the properly restoration. Andy explains to the old woman that if her insurance coverage allows for it, they will pay Overhead and Profit to the construction management company so they can manage her restoration. She asks why she was not told this before from her insurance company and Andy tells her that there must not be a law that makes them. She hires the construction management company and Andy writes an estimate based on his expert opinion of what was and was not damaged by hail. He delivers that estimate to the old lady and reviews it with her. He explains he is not a Public Adjuster and nor is the construction management company he works with. He and the company will NOT be discussing her policy or coverages with the insurance company, and she states she understands. The little old lady calls her insurance company to inform them she has hired XYZ Construction Management Company and gives the insurance company and their representatives permission to discuss the damages directly with XYZ. She explains that XYZ has walked her property with her and shown her damages that were not included in the insurance adjuster’s estimate they sent her and that the real damages are much higher than her adjuster lead her to believe. Andy sends the insurance company his expert estimate, photos showing damage some included and some not included in the insurance company estimate, and documents from the municipality showing the relevant codes that must be met and manufacturer's instructions stating how the restoration needs to happen using their products. Andy informs the insurance company he is available to meet with them, re-inspect with a different adjuster, or discuss by phone with the adjuster supervisor.
The insurance company does send out a second more seasoned adjuster and the result is that the new adjuster agrees to the damages and most of the manufacturer's instructions for proper restoration. The new amount agreed to is more than $24,000. That is 3 times more than the initial supervising adjuster’s and his trainee’s estimate sent to the little old lady.
This example is real, taken from an actual project. The example illustrates not the uncommon but the very common insurance inability to properly train adjusters, pay properly for damages, and their tactics. This little old lady would have been screwed out of thousands of dollars without recourse.
I know what you’re thinking, she can hire an attorney. Maybe politicians can do that but not many little old ladies. There are attorney’s that take cases on percentage when the attorney believes the case will win enough money, but most attorneys are not interested in these cases just for attorney's fees. The attorney is taking the risk of losing a case, and it is a real risk. The attorney is facing a billion dollar behemoth that can afford many attorneys and can cause many delays and can run up the attorney's hours.
You might be thinking, well that's why there are Public Adjusters (PA's). The problem is PA's don't work for free. They want a reasonable fee for their expertise. That fee is by law not paid for by the insurance company that made it necessary for the PA to get involved and the fee paid to the PA is taken from the little old lady’s pocket and since she has no money it will be taken from the amount the insurance pays her to repair the home. This kind of defeats the purpose... don't you think?
Let’s say the little old lady finds a PA and that PA gets her the same $24,000 the construction management company had agreed to had gotten. Colorado law makers, in their infamous wisdom made it so PA's cannot charge a percentage which when they obtained an agreed upon scope with the old lady’s insurance company. The PA by law cannot lock in a flat fee or charge a percentage. The PA must charge an hourly fee. No doubt something some politician put in to law because they wanted insurance companies money on their side for the next campaign. The PA MUST by Colorado law charge an hourly rate. The little old lady has no idea what it will cost her. It could be thousands of dollars. The PA could easily have many many hours and in fact the insurance company will most likely use every trick to take up as much of the PA’s time as they can, costing poor little old lady much more than it should. Even if the insurance company does play nice and the PA ends up charging a very reasonable fee of say $2400. That amount is subtracted from the money paid to the little old lady to restore her home. In Colorado, many PA's will charge much more and most, and especially the best PA's, prefer commercial and large losses so they can collect the amounts they feel they are worth. But for this example, so you can feel a little better about the old lady, we will say she does find a PA and he does complete his services for $2400. The PA now subtracts $2400 from the $24000 and the little old lady gets $21,600. Not enough to restore her home. As a local Denver area attorney says in his TV commercials, "Get The Picture". She cannot afford to pay a public adjuster. Colorado law makers could have and should mandate that the insurance company must pay the PUBLIC ADJUSTER if the insurance company has inaccurately estimated damages and therefore caused the PA involvement. I bet they would work really fast to ensure the lowest PA invoice… right? RIGHT!
Why do we talk about manufacturer instructions? The insurance company is not the only problem in this scenario. Manufacturers instruct contractors on how their products must be installed to ensure the longest life and the fewest warranty issues. Plain and simple, that is the proper way to install their products. If you don't install the product per the manufacturers instructions, the product does not last as long and most likely you void the warranty.
Did you know that many municipalities defer to manufacturer instructions when the instructions are more stringent than their own building code.
Since the insurance company knows no lawyer will take them on and defend her for a measly 2 to 3 times her claim (which was the limit Colorado law makers set and in this example would mean the old lady could get $48,000 for an unreasonable delay caused by the insurance company and $72,000 if the insurance company had been found to have used bad faith in their dealing with her). Even new attorneys who are not experienced but want to take on a case like this have big obstacles. Again, new attorney's do not generally have lots of money to spend so they take on cases in hopes to cut a quick deal with the insurance company by threatening to sue and settling for a pittance. Insurance companies know the attorney is new and they know if the attorney has no money. The insurance company will offer a little bit for the attorney to go away because even that works in their behalf. They are effectively training new attorneys to take ridiculously low settlements of which they take a percentage (our opinion and not a statement of fact). And by the way, why can attorney charge a percentage and not the PA? It seems Colorado treats the abuser better than the victim. The fox better than the hens.
I challenge you to go ask an attorney to take that case. Don't tell them you are a politician, or have connections, or even your name. You will have many that will meet with you and once they see the amounts they will pass or go for a quick settlement, one far less than you deserve. Neither truly penalizes the behemoth insurance giant worth billions and billions, so they keep hurting little old ladies.
On the flip side it seems auto claims constantly get taken by attorneys. Look at the amounts they sue for and win just based on the TV commercials that proliferate our airwaves.
Why does the little old lady have to come out of pocket to do it right? Why if she hires a Public Adjuster (to avoid the attorney, which seems to be Colorado's intent, and who probably won't take her case anyway), is the insurance company allowed to stick the little old lady with the bill. She obviously demonstrated, and the PA demonstrated, that the insurance companies initial estimate was grossly inaccurate.
Why should Colorado force its citizens to relay on insurance adjusters who do not have to be fair? Why not make the law so if actually protects the little old lady? Make a law that requires the insurance company to pay O & P immediately once they are informed that a little old lady has hired someone to manage her restoration. The law should state that there is NO minimum number of trades, it doesn’t mater if it is 1 or 21 trades for many insureds and especially many old ladies. If her construction manager shows invoices of contractors they have managed then O & P should be paid on the contraction managed. She cannot manage construction herself. She is not a damage expert, She may not have the ability to understand the proper installation. She probably cannot get on a roof to ensure the roofer is installing correctly. Yes, even for just roofs she needs help to ensure it's done right. Should a roofer get O & P on roofing? Depends, in many states if you are performing the work you don’t manage yourself. So in my opinion no, not unless you manage contractors. The reality is most roofing companies manage crews by telling them the address and ordering the materials. Very seldom do we see the roofing companies out on the job ensuring the installation is done correctly. But, if a roofer manages and takes responsibility for installation and errors and carries insurance then YES! O & P should be for managing other contractors. As a state we should find ways to protect property owners from bad contractors and one of those ways will be made clear soon. Remember the roofer’s portion of the restoration is often the highest profit of the job. What the old lady needs is XYZ who makes sure the roofer and other contractors are doing the work properly and PA's to ensure she is paid properly and a law that does not limit her attorney so even a claim for $5000 can cost the behemoth insurance glutton a penalty that will stop their egregious behaviors.
As citizens we believe Colorado law makers don't really care about us. We believe you care mostly about yourself, your political aspirations, and the money you get from the insurance industry for your political campaigns and personal gains. Junket anyone?
Act like you represent the little old ladies of Colorado and pass laws that protect her from the insurance industry and from the contractors that only care about profit. Make a law that states manufacturer’s instructions must be followed. If they’re not, then contractors are penalized as well. Change the Overhead and Profit law to protect the little old lady. The law should state the insurance company must pay the PA if their adjuster inaccurately estimates damages (which of course is always done to pay less). Make the law state that any number of trades, even 1 trade is enough for Overhead and Profit if the property owner hires a construction/restoration management company that manages her restoration. This will only make the field fair. It does not benefit the old lady in an unsound way. If it seems that way to you, then you are truly lost. She gets her house fixed properly, the contractor is held to a reasonable standard, a reasonable level of care and quality, the insurance company is held responsible to either train their own adjusters better or pay the PA when it is necessary. Then remove limitation on the amount someone can sue the behemoth insurance company.
By limiting the amounts insurance companies can be sued for you remove the safeguard for the people with insurance. Big corporations do not care about people. They care about MONEY! Their money, their profits, not the insureds. If you must limit the amounts some one can sue for, then make it very easy for the little old lady to show the insurance company did wrong. It's easy. If the insurance company initially estimate $7700 when it should have been and was later agreed to be more than $24000, this is obvious and should be an immediate mandated penalty of 5 times the difference. No attorney needed. No clogging the courts, no unreasonable stress and pain for the little old lady. In this case 24000 minus 7700 = 16,300 * 5 = $81,500. The law should state that if the little old lady presents the estimates showing the differences and the insurance company did not immediately fix the problem when discovered, the insurance company must pay the penalty immediately. This will ensure the insurance adjusters pay properly the first time and if a mistake is made the insurance company will work quickly to fix it.
Yes, the behemoth insurance company will in deed pressure law makers and with campaign promises convince you that they are the real victims here. At least it appears they already have. But it's simple enough that passing such law(s) would not be heavy burden for insurance companies. If you want to reduce claims then encourage people to upgrade their property with hail resistant and hail proof materials. Colorado gives property owners down payments, money to insulate for energy, and much more... why not to encourage hail protections that will reduce insurance claim costs significantly and therefor the insured's premiums?
So now you know, and it should now be clear that Colorado has not protected it's citizens at all and in fact put them at risk of the fox regulating itself and deciding which eggs it will take. Make a law that does protect Colorado’s citizens, then you have actually done your JOB!
I know what you are thinking, you can disregard this information based on your opinion that it does not have anything to do with the proposed law change I am writing about. Not True.
By the way, who is the politician that wrote this change? I want to meet this person. Can they disclose what their ties are to the insurance industry? Can they show no insurance company has given them campaign money or promised them anything? Can they prove they actually thought this up and wrote the law themselves and why they think it is a good idea? I will not be surprised if the lawmakers involved with the proposal to eliminate this portion of the protections for Colorado citizens have big insurance contributors. They will gain, and Colorado’s citizens and Colorado loses. Either that or maybe they have no idea what they are doing and relying on their experts (of course we mean the insurance companies) to tell them what is right. Don't let the insurance companies regulate themselves (the fox in the hen house right)!
I have worked both for the insurance industry and for the citizens of Colorado. I am available to any lawmaker that wants to know the truth about wha we experience daily. I can show you the good that has come from O & P and how it has protected Colorado Citizens. I can show you time and time again where insurance adjusters under pay only to raise it later and when pushed raise it again. I can even show you a restoration that involved 8 adjusters, each one giving the insured a little more. Think its not real? You are wrong.
We can find out you know. Let’s choose randomly 100 files from each insurer. NO, the insurance company does not get to choose the files. Let’s select claims from 2017. No not current claim that can be miraculously changed once you say you are implementing this study. Recent enough that damages can be still found if they were not paid for. Let’s also at the same time inspect the work done to see how roofs, siding, etc were installed per the manufacturer’s instructions. We can call it the Fair Colorado for Insured Citizens Study. Fund it with marijuana taxes or something.
Put our lawmaking money where your moth is. Let private knowledgeable citizens of Colorado inspect files. People that have extensive experience. Not the contractors who want you to believe that their cozy relationships with big insurance is just fine. Not the fox, I mean the insurance companies employees and people that benefit from them. People who have demonstrated they know how to determine damage and maybe manufacturers reps that can be assured to note whether something was or was not properly installed. Let's learn the truth together and then act. Or you could just pass the laws I suggested.
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