Insurance Claim/Contractor Question

[jazzhands2]

MINNESOTA
Hello! My Minnesota neighborhood was hit about two months ago with a huge hail storm. We met with our insurance adjuster and filed a claim to have our roof replaced. No work has been done on our home yet, and we're currently looking for a roofing company to do the job.

My issue: We were told by a contractor today that if the total claim amount that we're paid [check from our insurance co] EXCEEDS the amount we pay to repair the damage and we keep the difference, then we're committing insurance fraud.

Is this a correct statement, or is this contractor trying to scare me into giving him the full amount of the claim, regardless of the actual repair costs? Is there harm in having contractors bid the job, work the bids against each other, then put the excess into a different home project? I feel that this contractor was threatening me to give him my business. What are your thoughts? I'd appreciate any comments!

Thanks in advance!

 

[alnorth]

He is correct, but this would fall under the category of "How would the insurance company ever find out?" I'm a little surprised the insurance company didnt ask for the estimates and make the check out to you and the contractor for the lowest estimate or something similar. Sometimes for a big repair the insurance company will make a small initial payment to get the work started and then settle up the rest when the final bill comes in.

If they just wrote you a big check, you are probably legally and ethically required to offer the overpayment back to the insurance company when the work is completed, but you may want to carefully read the policy to be sure. The insurance company is generally only supposed to pay the cost to repair or replace your roof, but they were apparently not concerned with nailing down the cost to the exact dollar.

 

[byrd42]

Usually the Insurance Adjuster will figure the Replacement Cost Net value, but you are issued a check for the Actual Cash value (depreciated).

You would not get the Replacement Cost value until the work is completed. You would then submit the receipts, final bill, etc., to the Insurance Co. for the difference, minus your deductible.

At least that is how my Homeowners Insurance Co., just handled my large HO loss.

 

[jazzhands2]

So am I required to spend ALL of this "Actual Cash Value" payment on repairs? If I don't, does that constitute fraud?


Usually the Insurance Adjuster will figure the Replacement Cost Net value, but you are issued a check for the Actual Cash value (depreciated).

You would not get the Replacement Cost value until the work is completed. You would then submit the receipts, final bill, etc., to the Insurance Co. for the difference, minus your deductible.

 

[las365]

If the adjuster evaluated the claim and paid insurance benefits to you based on that evaluation, you do not have to spend all of that money on the repair. You do not have to offer or return the difference back to the carrier. You could fix the roof yourself, if you have the expertise. You can find the cheapest contractor you can. You could choose not to fix it at all...

Which leads to your real issues: 1) your duty to your mortgage company to use the proceeds to repair and maintain the value of the property; and 2) protecting the viability of possible future claims.

It's a bit surprising that if you have a mortgage, the mortgage carrier is not a payee on the check.

Anyway, ditch this contractor, he is trying to take advantage of you. Don't tell the next one how much your settlement was - it's none of their business - just get the amount s/he will charge to do the work.

 

[jazzhands2]

Good morning! The adjustor did evaluate the claim and the insurance company paid based on the adjustor's findings. The check was paid to my spouse, myself and our mortgage company. The check is in the hands of the mortgage company now, where it will be endorsed and sent to me.

I fully understand I have a duty to my mortgage company to repair the damage, and I intend to do so within the next few weeks.

I have no plans to work with this contractor for this damage or anything else that happens in the future! I am concerned, however, that he's telling other people in my neighborhood (or ANYWHERE), the same thing and that they're believing him. As stated in my original post, I honestly felt that the contractor was threatening to turn me in for insurance fraud if I didn't have him do the work for the full dollar amount of the claim. Do his statements warrant a complaint to his office, our state licensing board, etc.?
I truly appreciate your advice!

If the adjuster evaluated the claim and paid insurance benefits to you based on that evaluation, you do not have to spend all of that money on the repair. You do not have to offer or return the difference back to the carrier. You could fix the roof yourself, if you have the expertise. You can find the cheapest contractor you can. You could choose not to fix it at all...

Which leads to your real issues: 1) your duty to your mortgage company to use the proceeds to repair and maintain the value of the property; and 2) protecting the viability of possible future claims.

It's a bit surprising that if you have a mortgage, the mortgage carrier is not a payee on the check.

Anyway, ditch this contractor, he is trying to take advantage of you. Don't tell the next one how much your settlement was - it's none of their business - just get the amount s/he will charge to do the work.