We should always mean what we say and say what we mean.
All too often, I hear order takers talking as if they were sales professionals. These are precisely the same folks who “boast” about having “sold” x number of roofs or any other catastrophic losses. This has been on my mind for a while, and the recent opinion on 33 Carpenters is the catalyst many will need to actively start changing their terminology. Once it is understood, it is understood to be correct, and what one of the largest issues are when dealing with insurance proceeds. (In 33 Carpenters, their terminology was used to find them guilty of UPPA. Article.)
In short order, I will define a few words that seem interchangeable, but are not.
- Insurance Claim – What occurs after a Covered Loss, beginning the process of reaching Indemnity.
- Insurance Proceeds – What an insurer owes to reach Indemnity. (The insured does not owe the contractor these funds. They do not even have to perform the repairs. However, they are only eligible for the ACV portion, and are barred from RCV payments. Items will no longer be covered.)
- Proof of Loss – What is required of the insured in order to fulfill their contractual agreement. (A few policies will state at carrier’s request. This is misleading on multiple fronts. Insurance carriers are aware, and use the well-known fact, their duty hinges upon the insured’s duty… after a loss.)
- Retail – What a normal person would pay to get exactly what they wanted, at the going rate. (If you are a contractor, of any type, and you perform work for “Insurance Proceeds”, I urge you to cease and desist, immediately.)
- Indemnity – The act of putting an insured back to the exact place they were, prior to the covered loss, less their deductible. This is precisely why the insured pays a premium in “ADVANCE” of an occurrence that may or may not happen.
- Deductible – The insured’s financial participation required by the policy. The insured should cut a check, at the onset of the claim, to cover this. There is no exception to this. (Carriers have the ability to “waive” deductibles. Once you understand it cannot be waived, then you understand an insurance company “saying” they are waiving, is no different than “Chuck in a truck” saying it. It would mean that they are literally paying, money from their own pocket, for you to do what you are supposed to do… Where on earth does this “extra money” come from? It doesn’t. Insurance is dollar for dollar. If money was waived, it came from somewhere… that somewhere is correct lines items that were owed and never paid…) My favorite saying to carriers who profess they are “giving” anything. “How about you get to zero first, then we can talk about anything you may want to give.”
- Order Taker – One who relies solely on an “event” in order to sign contracts that had to be signed…
- Sales Force – One who builds value in a product and service they provide. (While events occur often, this person does not “need” one in order to sell/survive.)
- Public Insurance Adjuster – Navigates the Insurance Claims Process on behalf of the insured, free from any Conflicts of Interest. (Should not be confused with a change order writer. The PIA should perform the claim from the bottom up, and provide the completed POL.)
- Supplement – Would only apply to damage that could not have been known at the time of valuation. Applies only to insurance claims and should be done by the PIA. (Pipe Jacks, Overhead and Profit, Steep Charges, Decking. All known items prior to commencement and should have been in the PIA’s “Reasonable Demand”.)
- Change Order – Would only apply to retail jobs performed by a contractor. This would be for hidden/unforeseen damage once exposed, or the retail clients wishes on adding something, or changing something that did not exist. This would be performed by the contractor.
- Overhead and Profit – What EVERY single business must have in order to operate and accomplish the bare minimum of the definition. (Insurance is one trade. Their attorneys… one trade. They both demand a profit.)
- Contingency Fee Contracts – A contract that allows for zero compensation, unless there is a payment made. In most states, only two entities can enter into a contingency fee contract with insurance proceeds. An attorney or PIA duly licensed in that state.
- UPPA – Unlicensed Practice of Public Adjusting, or… the carrier’s baseball bat of choice. (When a contractor jumps from retail to negotiating, the carrier will allow… until the contractors argues that any part of it is unfair or does not address. Then the carrier threatens, resulting in contractor backing off, and carrier saving money. This is the Achilles heel of the entire arrangement. The insured was not in this discussion, and neither was the policy, nor the difference in Retail/Indemnity… Ultimate consequence is damage to them, contrary to what the meaning of the pre-purchased policy dictated.)
Let us use a few sentences to sum up what we have gone over:
- There is no such thing as Insurance Proceeds for a contractor, of any type. Insurance proceeds belong solely to an insured.
- All contracts for services from a contractor are “Retail Contracts”. (Insurance Proceeds derived from a claim, cease being that when they are issued as payable to the insured.)
- Supplements are for items found after work commences, not known items, and only pertain to an insurance claim.
- Change orders are modifications to the original “retail contract”. They are billed to and paid by… the property owner.
- Retail is what we pay to get exactly what we want, when we want it, regardless of the cost.
- Indemnity is replacing what we already paid retail for, with insurance proceeds…
If 33Carpenters had followed this simple methodology, they would not be in this situation.
If you, as a contractor, regardless of how it “makes you feel”, follow this simple methodology, you will steer clear of many of the pitfalls of both Lon Smith Roofing and 33 Carpenters.
Whether we like it or not, the parameters are set. We either work inside of them or risk the unthinkable.
What does that have to do with us… Plenty.
The Boot Camp distinguishes between the two parallels. Graduates leave understanding exactly where the line begins and ends. Most of them would agree, after the fact. They prefer it that way.
Show me the parameters/rules, and I will not only work inside of them, I will make them work for me, instead of against me.
The more you know.
As always… #ProtectTheInsured!
I don’t believe in UPPA. That being said, it does not matter what I believe. It matters what the law, and the precedents set are. Parameters… Know them, use them.
Next class… Process IS the Silver Bullet:
April Session: April 13-17, 2020