If you have never been involved in a dispute with your insurance company, consider yourself lucky. Once an insurance company digs in their heels, it is tough to get them to budge. When you think about it, it’s really not that surprising. There is the potential of a pretty severe conflict of interest on almost every insurance claim. When you have what you believe to be a covered loss, you report it, then a representative (most likely an employee) of the company that is ultimately going to write the check and take the financial hit gets to come out and determine how much they owe you. Unless you are well versed in coverage, construction and line item pricing, it is hard for you to make a cogent argument on your own behalf.
If a dispute escalates, there are a couple remedies usually available. The first is what is generally known as the appraisal process, in which an independent umpire is hired to resolve the dispute. The other, even more difficult option is to sue your insurer for what you believe to be the amount of the loss. The problem with both these options is still that, if you aren’t familiar with what can be a fairly complicated process, you won’t be able to do a lot to help yourself.
To get some knowledgeable people on your side, again you have a couple options. You can hire a contractor who specializes in doing the type of work you need to have done on an insurance restoration basis, or you can hire a public adjustor. Both of these people can help you to determine the scope of the loss and the cost of repairs. Both can work with your insurer to settle that scope, so you can begin your repairs. While they may seem interchangeable, here are three reasons why you are better off working with the insurance restoration contractor rather than the public adjustor.
The insurance restoration contractor can specialize. Because of the nature of their business, a public adjustor has to deal with all types of claims. They may be working on a fire claim one day and a flood claim the next. They need to take work wherever they can find it. This prevents them from really understanding the intricate details which may be involved with your project. A contractor who has done this type of work many times before knows what complications may arise and what additional expenses may be incurred on the project. He knows what his costs will be to complete the work and he knows what he has to charge to cover those costs. He can work before the repairs are done to make sure every aspect of a project is addressed on the initial statement of loss. This way there are less surprises and less time is wasted in the middle of the project and afterwards, arguing about change orders and supplements.
The public adjustor wants to settle with the insurance company. Because the public adjustor works on a percentage, is no longer involved once the claim has been settled and has no responsibility as far as getting the repairs done, his goal is to get as much money as he can while investing the fewest amount of resources he can. That has to be his business model. If he can get “x” amount with little to no effort and it is going to take a tremendous amount of time and exertion to get another 15%, he is going to settle for “x” and tell his client what a great deal this is, whether it is enough money to complete the repairs or not (chances are, he doesn’t even know if it is enough). Once the claim is settled, the insured is on his own to find a contractor to do the work for the amount of the settlement. Yes, the public adjustor’s commission will be a little higher if he can get the extra money, but he needs to look at it on a rate of return for time invested basis. If he can settle one claim quickly and move on to another claim, at the end of the day it will be more profitable for him than using the same time to fight for just a little more on the first claim.
An insurance restoration contractor in this same position doesn’t have this luxury. He needs to settle the claim for an amount which will allow him to complete the project profitably. If that means fighting like mad for that last 15%, then that is what he must do. When your contractor agrees on a scope with your insurer, you know that you are getting the amount you need to complete the approved repairs. When your public adjustor settles, you won’t know until you start getting bids.
A contractor will do the same work for free. No matter what amount your public adjustor settles for, he is always going to charge you for his work. Typically this is going to be 10% of the amount of that settlement. So even in the rare, best case scenario where your public adjustor gets you the full amount for the loss, when you start interviewing contractors, you will only have 90% of the money to which you were essentially entitled to complete your repairs and you will have either come out of pocket to make up the difference, find someone who is willing to do the job for less and run the risk of getting inferior materials or workmanship or omit part of the scope and live with the damage which you can’t afford to repair.
A contractor, in most states, is prohibited from charging anything to work with your insurance company. His only financial gain comes from performing the work. He will only make money if he is successful in both settling the scope and completing the repairs. Obviously it’s important to select a contractor in which you have confidence both to settle the scope accurately and complete your repairs in a professional manner.
It is not the intention of this article to vilify public adjustors. Most are competent and trustworthy. They certainly have their place in this market. If the dispute with your insurer is one of coverage rather than scope, you must hire a licensed public adjustor. In most cases a contractor is not allowed to argue coverage issues. However, as is the case with most hail and wind claims, where the dispute is more one of scope, it will always be my opinion that an insured is better off engaging the services of a contractor who specializes in the insurance restoration of that type of work.