This is a guest blog post by Ryan Carey, of My 3 Quotes.
I don’t know what’s worse, the storm damage itself or what follows after. Many of you have been through it- hunkered in the basement 
hoping a tornado doesn’t drop, when all of a sudden you hear something that sounds like Tiger Woods hitting rapid fire 2-iron shots at your house. But you don’t live near a golf course. Is your car outside? How is the roof holding up? Did a tree just snap? Was that breaking glass?
When the last wave of awful weather finally passes and you’re out inspecting the damage, the first wave of storm-chasers starts to hit. In some cases, they are knocking on your door before the last rain drops have stopped. They have been driving around, listening to the radio and getting hail reports sent to their phone. They have been cheering for the largest hail possible and this storm looks like a winner! In this post, we will be talking about what to look for and what to avoid in the multi-billion dollar game that is storm damage restoration.
Knock, Knock!
First of all, just because a company knocks on your door does not mean that they are a bad company. Local companies that got fed up with losing business to out-of-towners have jumped into door-knocking as well, even if it isn’t part of their normal M.O. The important thing to remember is to NOT sign anything until you’ve done your homework. Many companies that do primarily storm damage follow storms around the country, so you want to make sure that someone will be around to service your roof if starts to leak or if any other problem pops up.
The process is this: you will get a knock on your door by someone offering to do a free inspection on your roof. This sounds pretty good to you, since you don’t know exactly what hail damage on a roof looks like. When he comes back down, he’ll tell you that there is damage up there and he happens to be an expert when it comes to working with insurance adjusters. He then takes out an insurance commit form and explains what it means. He says that this form gives him permission to work on your behalf with your insurance adjuster. By signing it, you agree that if the damage gets covered, this is the company you will use. If it doesn’t get approved, then you aren’t committed to anything. This seems like a reasonable request to you, since he was nice enough to go up and do a thorough examination of your roof. And after all, no money out of your pocket besides the deductible so why not?
Hire Local
I’ll tell you why not. The company is headquartered out of state, and when this storm is tapped out they are moving on to the next one. I can’t stress this enough. Choosing a storm damage contractor should be no different than choosing a contractor for anything else. My advice is to use a local company with longevity who will be around to help if anything needs fixing. Examine the contractor’s labor or “workmanship” warranty. Read reviews and check out the BBB. Go look at jobs they have done. This is too important a decision to just sign with the first person that knocks on your door, but you would be surprised at how many people do.
Over the years, more and more homeowners have started to ask if the company is local, so the storm-chasers have adjusted. Some out-of-state companies will come in and set up shop with a local and do business under that company’s name. The local company gets a cut and will be here to do the service if needed. When the person who knocks on your door has a southern accent but is “working” for a company that has been in Minnesota for 20 years, that just might be the case. There is also the possibility that it’s a Minnesota company that does work nationally, and they bring in all the resources from around the country when the big one hits here. The way to find out is to ask more questions and do your research.
Get A Quote
You will get a ton of funny responses if you ask the contractor a certain question. “Can you please give me a quote on what the job will cost?” Most will refuse, because they know the final price tag will be much higher through working the insurance process than they would normally bid if they were in a competitive estimate situation. In the My 3 Quotes process, almost every time I’ve had the contractors I work with bid on an insurance job that includes asphalt roofing, the bids come in thousands less than what the insurance companies pay out. Normally, the chosen contractor would be working to raise the initial pay-out another 20%; most of them have a specific person in the office who’s job it is to work the insurance software program (called Xactimate) for more money. And people wonder why the premiums go up. Insurance companies don’t require competitive bids, so every contractor is free to work the system for as much extra money as they can get once they get selected as your contractor.
You can hardly blame the storm chasing contractors for this, as the insurance companies have left doors open for knowledgeable contractors to raise the price to very high profit margins. This is why so many companies ONLY do storm damage. Competing against others on price and quality? Way too much work! This is so much easier. Get the customer to sign the commit form and watch the dollars come rolling in!
With all this extra money available, many contractors offer to “pay” the customer’s deductible to cement the deal. If the insurance company asks for an invoice, they will actually send them one for the full amount including deductible but charge the customer for less. If you do this, both you and the contractor are engaging in insurance fraud, plain and simple.
Getting Out of a Contract
So what do you do if you signed the commit form and find out later that it is NOT a company you want to do business with? If you are beyond the 3-day right to cancel, many customers feel they are stuck. The fact is, if you only signed the commit form but did not sign an actual contract for scope of work with a down payment, very few companies will ever fight you on it if you tell them you want to cancel. They may try to scare you and say they will, but most won’t. Many of these commit forms say they are entitled to 25% of the job total if you cancel after the 3 days.
The question for them is, 25% of what? If you no longer communicate with them on whether the job got approved or not by insurance (and if it did, they won’t know for how much), how will they arrive at a 25% fee? Again, unless companies have down payments from you (or have ordered material on your behalf), they are in an uphill battle trying to do business with a homeowner that wants nothing to do with them. Most will give up pretty quickly.
Are You Signing a Permission Slip or a Contract?
Some salespeople are deceptive when it comes to getting that original signature. They will tell you it is just for permission to talk to your insurance company, but they will gloss over the part where it says you must to do the work with them. My best advice would be to ask them to leave behind their form so you can look it over. If they are not willing to do this, send them on their way. The second option is to avoid all door-knockers and simply call the company you would like to inspect your roof so YOU are in control of making this important decision.
What About Windows?
Another important question to ask any contractor is if they will handle damaged windows in your insurance claim. Many are up for the quick score of roofing or siding, so they ignore damage to the windows. Windows are more work to identify, take more time to order for custom-sizing (thus delaying the final payment), and for many contractors it is not their expertise. If you have aluminum clad windows, make sure to have them inspected. In some storms, the hail and wind are so severe that the seals of the double pane window fail. This results in a cloudy look to your windows that you can’t get clean, sometimes with visible condensation between the two panes. Make sure everything is looked at during the inspection.
Contractor vs. Adjuster
One last thing to remember is that many of these storm-chasing contractors will tell you that you have damage even if you don’t. They are simply playing the odds that maybe one of the adjusters who comes out might be new and could be bullied into approving the job. The 
insurance adjusters usually know who these companies are and shake their head when they see who you signed with. If the adjuster does not approve the job, the contractor may ask you to threaten the insurance company with losing your business if they don’t approve it, and things can get ugly from there.
There are many battles between adjusters and contractors, and many times they play out right in front of the customer. If you see this happening, have the contractor show you what damage he is seeing. Have him take pictures of it if you don’t feel like getting up on your roof. There are certainly times when the contractor is right and the insurance company is not being fair about obvious damage. Just be aware that some contractors practice the “every house has damage” angle.
Insurance Company Shenanigans
Now that you know some of the things contractors may try to pull, be aware that the insurance companies have their moments as well. Sometimes they low-ball the estimate and the contractors have to work hard for supplements that are needed just to make the job turn a profit (getting multiple quotes would let you know pretty quick if your insurance company is over-paying or under-paying). Sometimes their first adjuster doesn’t cover obvious damage, and it takes the contractor to schedule a re-adjustment to get the repair to go through. Sometimes they change the terms of your coverage without you knowing it.
Minnesota has been a state that required full house replacement for siding or roofing if some product is damaged and the product is no longer made by the manufacturer. However, some companies will hide a change in the 20+ page document they send each year which states that is no longer valid unless you add a low-cost rider to your coverage. Most people would pay the small extra charge to cover this, but they don’t even know that it has changed. When you receive that booklet, call your agent and ask if anything is changing that you should know about (or take the time to read the whole boring thing). Otherwise, you may be in a situation where you have to find the “closest match available” for only the siding or roofing that is damaged. This could mean a checker-board look to your house as your insurance company only covers individual shingles or siding panels.
Also, good luck finding a contractor who will put a warranty on a roof that they are only doing part of. No contractor wants to be held responsible for a leak in part of the roof they didn’t do. Now is a great time to call your agent to go through these questions, before the storms hit.
Wood Roof Shortcomings
While insurance companies can end up over-paying for jobs that include asphalt roofing, there are other items some insurance companies are notorious for underbidding. The Xactimate software has no idea when it comes to cedar shake roofing or windows. I guess I’m really saying that whoever programmed it had no idea. In many cases, the numbers it spits out for those two items are not enough for contractors to complete the work. Most companies will allow contractors to send in their window bid and adjust to it because they know the system is flawed. That gives the contractor another opportunity to inflate a bid with no competition.
Some companies dig in their heels more with cedar shake roofing, and local contractors have had a tough time getting enough money for that unless they can get supplements elsewhere. If there are more than three trades in the job, some insurance companies will give an extra 20% (called 10% profit, 10% overhead) for contracting out all trades and that will usually get the contractors where they need to be, even if the original pay-out was underbid. In other cases, that ends up being some heavy icing on an already bulging cake.
We all know there will be storms every summer. If the big one hits your area, take some time before making any decisions and try to resist the multiple door-knocks. Or you can do what a former neighbor of mine did…he put a sign by his door that said, “Please leave your fliers here!” Underneath was an arrow pointing to his garbage can.
Ryan Carey has 15 years of experience in exterior remodeling for Twin Cities Homeowners and Property Management Companies. He is the owner of “My 3 Quotes,” a company that provides the free service of collecting 3 competitive home improvement bids for customers. For more information, visit www.getmy3quotes.com for free home improvement estimates.
Chris H
March 18, 2014, 7:49 am
Fantastic information here – thank you very much, Ryan!
Steve Kuhl
March 18, 2014, 2:48 pm
I respectfully must disagree with some of what Ryan Carey has to say.
My insights on the insurance claims process are not biased in terms of my preference for insurance work over retail contracting. The fact is that 88% of our work comes through the traditional competitive bidding process (what I call ‘retail contracting’). I simply hate to see bad advice posted on your blog, which has always been a fantastic resource for my clients. I think your readers deserve a more informed perspective on how to deal with storm damage insurance claims.
Here is what Mr. Carey needs to comprehend today: There are huge differences between retail and insurance contracting and not understanding those differences costs homeowners millions of dollars every year. Following his advice will cost homeowners real money because they would be using the wrong lens through which to view the claims process. Let me put it as clearly as possible: Homeowners should NEVER solicit competitive bids for an insurance repair project. That entire concept is predicated on the notion that the insurance company adjuster has done a competent job and provided a fair settlement value in their assessment, which them seldom do. It’s also based on the idea that insurance companies should always be trusted to do the right thing, which is often not the case.
If you think for a moment insurance companies are always looking out for the better interest of their insureds you are wrong. Despite what their marketing claims about being in ‘good hands’ or being ‘like a good neighbor’, most insurance companies underestimate the scope and cost for the repairs to our clients homes. If this was based purely on incompetence I might have a more sympathetic view, but it is not. It’s based in strategic greed and justified through a highly sophisticated model that results in one of the most consistently profitable business structures the world has ever seen. Look it up. Put another way, insurance companies earn tremendous revenue through the intentional undervaluation of property damage claims. Anyone familiar with the industry knows this to be true.
The ‘insurance commit’ form Mr. Carey discussed in his post is more commonly referred to as a contingency contract and is frequently used in the insurance restoration industry. It is used by both good companies and bad companies. It is like any legal contract; if you sign up with a loser you will most likely get burned. The purpose of this form is simple. It allows the contractor to work directly with the homeowners insurance company to clarify the scope and cost of the loss and it specifies that if they do that work for you they will be hired to perform the repairs if/when the claim is approved. If you sign such a form with a smarmy storm chaser you are a dumb person, and frankly, shame on you for not doing your research. When it comes to finding a contractor for your insurance repair project, my advice is simple. Do your research and hire a local, reputable company with a long list of good references. It’s that simple.
Perhaps the most egregious error in his blog post is his suggestion that contingency contracts are not legitimate in the insurance claims process. Speaking as the owner of a highly reputable contracting company with a quarter century of excellent service under our belt, I can tell you these contracts are essential for one simple reason. When working on an insurance-related job we invest huge resources in making sure insurance companies aren’t trying to screw our clients–a situation more common than you would imagine. To do this we employ a former insurance adjuster of 28 years whose daily job is to review claims generated by often incompetent insurance company adjusters. Almost without fail we find gaping holes in their assessment of what happened to the home and what it will cost to fix it. We spend hours and hours haggling with insurance companies to make sure they do the right thing. Readers would be entertained and probably shocked to hear some of the stories from the trenches when it comes to this process.
We are in fact experts in this field and have the credentials to back it up. I’ve never personally met a professional restoration company owner that is willing to invest all of the time and money in the claims settlement process for free, without any reassurance of compensation down the road. If we do our job well and settle the claim fairly and, yes, honestly, we will be paid when we do the repairs to the home. Any company willing to truly invest the time and resources in fighting through the typical insurance claim without a signed agreement from a homeowner is either inexperienced or desperate and should therefore be avoided. Unfortunately, the landscape is littered with such companies. This casts a cloud of mistrust and suspicion over the handful of honest men and woman that work for companies like mine. Mr. Carey’s advice only serves to create more fear and mistrust.
For example, Mr. Carey refers to the process of using Xactimate in pricing an insurance related job as ‘working the system’. Here’s a zinger: Xactimate was developed by the insurance industry–not by contractors–for the singular purpose of suppressing contractor prices. It’s true. The insurance industry developed Xactimate to justify paying lower than industry standard prices across just about every category of residential home improvement. When we price jobs out using Xactimate we are, in fact, using the software and the pricing structure that insurance companies have provided us, not the other way around. To suggest that restoration companies who play by the rules established by the insurance industry are somehow operating unscrupulously is itself unscrupulous.
Another odd bit of logic suggested by Mr. Carey is that his Q3 estimate gathering service often results in estimates coming back lower than the insurance company has offered to pay. So that readers understand what is happening here, keeping one dime of the difference between their insurance settlement and what they pay their contractor to fix their home is insurance fraud. They can not keep a dime of ‘extra’ money. The only party that benefits from hiring a cheap contractor is the insurance company. Also, call me greedy, but I guess when it comes to my house I would like to have the most qualified and experienced company fixing it when something goes wrong. Normally those are not the cheapest guys in town. After all, those guys know exactly what their work is worth.
As a veteran Minneapolis contractor, I’ll leave you with this takeaway. Homeowners with storm damage have two choices. They can trust their insurance company or they can trust their contractor. I will humbly suggest that if you have a storm damaged home you find a qualified insurance restoration contractor and trust him or her to work directly with your insurance company to settle the claim honestly. After all, if you don’t trust the integrity of your contractor 100% in the claims process why on earth would you trust him/her to work on your home?
Steve Kuhl
CEO, Kuhl’s Contracting Inc.
COO, Kuhl Design + Build, LLC
Ryan Carey
March 18, 2014, 6:30 pm
In response to Mr. Kuhl’s comments, I will try to take each point one at a time. First of all, I’ve heard nothing but good things about Kuhl’s Contracting and I agree with many of the things he has to say. I think we both agree how important it is to do your research and pick a good contractor. We also agree that insurance companies have several issues that need to be fought against (see my section on Insurance Shenanigans).
So now let’s talk about what we disagree on. I do not agree that following my advice will cost homeowners money in any way as Mr. Kuhl states. They will be paying their deductible in every scenario. No more, no less. In no way is getting a contractor’s bid before the insurance numbers come out “predicated on the notion that the insurance company has done a competent job and provided a fair settlement value.” Where was that said? I said the exact opposite in the insurance company section. The contractors should be bidding out the job based on the damage that they see. Again, this is why it is so important to find an experienced contractor, a point we agree on. Seeing the detail in the damage that each company has scoped out and the accompanying bid will show the customer some key differences between the contractors in organization, knowledge, and thoroughness of inspection. Shouldn’t a customer be allowed to see more than one company’s process? Every contractor’s website says the same thing: experienced, quality work, storm damage experts, etc… Should the customer make their decision based off of that or should they see it in person? I think the latter.
In regards to the profitability of insurance companies, I would agree that it is a very profitable industry. I would also say that storm damage restoration is a very profitable industry. Anyone disagreeing with either is not being honest. There is a reason contractors follow storms across the country and its not because they have to scrape and fight for every nickel with the insurance companies to eek out a profit. I’ve worked on a ton of insurance claims over the years when I was working for contractors, and I was always happy to get them. I knew I was going to get a great margin. There were cases when the fight needed to be made for more money or to cover something that was obviously damaged (as I mentioned), but there were very few that didn’t end up more profitable than a competitive retail job.
As far as my “most egregious error” in regards to the contingency contract (or insurance commit form), I never said anywhere that they are not legitimate. I only stated that MOST companies will not hold you to it if you try to get out. I’ve been on both sides of this coin, and the results were the same. I’ve worked with homeowners who felt they were tricked into signing the form by a storm-chaser. They called the contractor after the 3 days and said they don’t want to do business with them. The contractor put up a fight for a while then gave up. I’ve seen that happen numerous times. I’ve also had a customer that I had signed up myself and later he decided he was going to have a relative do the work. The company I worked for (nor I) had any interest in fighting a legal battle trying to force a customer to do business with us when they didn’t want to. It is not the reputation we wanted with homeowners and the situation had way more downside than upside. If a work order was signed with a down payment and material ordered, that would have been a different story. This was the only case in my career when a customer wanted to get out after signing a commit form with me, and I feel we made the right decision. I never said that contractors who try to hold customers to that contract are “unscrupulous.” I just said most let you out, which is true. He then called me “unscrupulous” for suggesting something I didn’t, which is quite offensive. If Mr. Kuhl would have fought the battle on this one, then more power to him. We didn’t see it as good business in that case.
As for me somehow causing “fear and mistrust,” I absolutely don’t see it. This is simply straight talk based on my experience and knowing tons of people in this industry who’s experiences are very similar to mine. I see Mr. Kuhl trying to create a lot of fear and mistrust with insurance companies, when I’ve found most companies and adjusters great to work with. There are certainly exceptions, but based on his descriptions I’m surprised he would ever do insurance work. There are also many great local contractors to work with, with exceptions there as well. Who is creating more fear and mistrust here?
Finally, in response to the fact that competitive bids result in lower prices than insurance work, and if that’s the case, than obviously that must be a “cheap” company. The company I was working for that I mentioned above is a company that has been in business for over 60 years, is A+ BBB, A on Angie’s List, has a lifetime workmanship warranty, has one of the best reputations in the state, and always bends over backwards to take care of the customer. Their competitive bids were less than what they could get through working the insurance process almost every time. Again, every rep for that company is excited to get storm damage claims. So is every other rep I know in this industry. Mr. Kuhl is the first contractor I’ve heard of who laments them so much.
We do agree that keeping additional money is insurance fraud. I will disagree however, that only the insurance company wins if you get a less expensive bid. That is like saying, “Government programs are free.” No, the taxpayer pays for them. With insurance companies, the customers paying the premiums ultimately pay for everything. I just talked to a homeowner who asked, “Why was my roof so many thousands less two years ago (through competitive bid) than my insurance company is paying for it now? That can’t be helping out premiums.” This whole process is a fight for more profitability by the both the contractors and the insurance companies. I simply pointed out many of the things I’ve seen both contractors and insurance companies do along with things to look out for. I stand by everything I wrote. However, I don’t stand behind any of the words Mr. Kuhl tried to put in my mouth.
Dennis & Kim Downey
March 22, 2014, 9:08 am
Great info. I think one important point you made was to know what your are signing. It is amazing what people sign without really reading and understanding what it means.