I wanted to discuss vendors that insurance companies steer policyholders towards today in relatively general terms. This topic can be pretty varied and wide-ranging, so we will do a more detailed series later.
Now, when you are initially suffering a loss, whether it is a fire or a flood, you will most likely to reach out to your insurance company and ask them what you should do. Their response will vary but they usually end up with some permutation of (1) you have a duty to mitigate your loss so you will need someone to come in as soon as possible, (2) you can use anyone you want, but (3) we can send someone out to you right now or call this person right now.
I will cover the duty to mitigate over a series of posts, but it kind of colors the whole discussion here because your duty to mitigate is why you may need someone to come do emergency work on your house right after a loss. This could be as simple as putting a tarp on a roof, boarding windows, or taking up sitting water. It could also be more complicated.
It is going to be very tempting to take whoever the insurance company suggests and run with it. The problem is, many insurance companies don’t disclose the relationship that they have with that vendor and that creates a problem down the road. For instance, if you are suffering mold, do you really want the company that comes out and tells you whether your house is safe or not to be a company that’s absolutely dependent on your insurance company to stay alive? I didn’t think so.
You can say to yourself, “Well, how often does mold come up?” We’ll cover that later … But mold can come up in many situations. Even in a fire, if they used water to put out the fire, mold growth could occur.
Now there are plenty of companies out there that are called preferred vendors with insurance companies. This means that they have jumped through whatever hoops the insurance company requires, which could be little more than wining and dining the right person. They receive assignments from the insurance company to go do remediation, cleaning, or even construction work for you. Sometimes they are less than scrupulous.
We have heard stories where the same vendors that receive the assignment directly from the insurance company would come out and tell you that they were sent by your insurance company and you needed to sign certain paperwork in order to start your claim. Of course, as you’re watching your house in shambles and desperately hoping to get your claim paid, you don’t necessarily read that paperwork very carefully. Often that paperwork is a blank contract that they will fill in the number for later assigning over your insurance proceeds to them. Sometimes these include unfair provisions such as arbitration provisions preventing you from going to court and suing them. Sometimes these include waivers that your damages will be limited if they mess up your home or your belongings. Many times, these include provisions where they can get paid directly by the insurance company without your authorization.
This practice shouldn’t be as common as it is. Yet hardly a claim goes by that we don’t see this type of event. In fact, our firm has had to sue these vendors in the past for large sums because of the damage they did to people’s homes and even the damage they did to person’s health. Meanwhile, these companies absolutely depend on insurance companies so they can stay alive.
Personally, I hate that this is such a regular occurrence. Now the insurance companies will tell you that they advise their insureds that they can hire anyone they want, and they have an absolute right to choose who comes to do the work on their home. Yet, some insurance companies inform these vendors directly that they should go out and try to get your business.
That explanation probably isn’t incredibly helpful as far as knowing what to do next.
What should you do after a claim with respect to vendors? The first thing you should do is tell them that you want to choose the people that come out to treat your home for anything. Then, you should try to hire someone you trust. If the insurance company says that someone is trustworthy, they might be trustworthy, but you do need to consider the source. You have a company that has a financial interest in minimizing your claim as much as possible telling you to trust a company that depends on them for survival. It doesn’t seem to me that either the insurer or the vendor in that situation inherently have your best interest at heart.
Now for instance, if an insurance company informs you that you have a duty to mitigate damage to your home after a storm by putting a tarp on the roof, you could call many contractors to have them come put a tarp on the roof. If you have a pipe burst, your plumber may be able to recommend someone that can help you. I could go on with examples, but the point is very simple, which is you have the right to choose who comes into your house to fix your house, and who touches your belongings to clean them.
Obviously, the insurance company can bring in their own people to work for them, but you have a right to choose who works for you. This is something that somehow insurance companies often conveniently forget to mention.
By the way, when there is a dispute between the insurance company in the vendor about getting paid, who do you think the vendor looks to to payment? Well to know the answer to that question, we have to go back to that form you signed that you weren’t looking at because you were absolutely in the midst of a tragedy. That same form that the vendor said was required to start your insurance claim.
Guess what that form says? Yes, you guessed it. Often that form says that you’re still responsible for payment. We have even seen cases where the vendor turns around and sues the homeowner. Meanwhile, the homeowner has to fight with the insurance company just to get enough money to pay the vendor. At the end of the day, that homeowner feels like no one cares whether their house gets put together. Everyone just cares about money.
In sum, be very careful when people show up at your house after a loss. Make sure they are people you want and make sure that you have read every single page of every single document you signed – front and back.