Ed Cross – The Restoration Lawyer | Pete Consigli – The Restoration Industries Global Watchdog | Special Report Harvey, Irma and Maria: The Legal Perspective and an Update on Restoration Progress

RadioJoe provided an update from Addison Christian in St. Croix. St. Croix was hard hit and Puerto Rico is devastated by Maria. Most electric still remains out after 8 days. Addison, a lifelong resident of St. Croix who has seen and been through prior weather events says this is the worst he’s ever seen or experienced. Hospitals and government buildings are still running on emergency back-up generators.

• Do you have the financial resources to work out of state? Be prepared to wait 6 months or more for payment.
• Do you have relationships and credit lines with suppliers?
• Food and housing for staff?
• Do you have work to do?
• Who is your customer?
• You’re an outsider, be aware of the local culture and customs?
• Temporary CAT adjusters who are onsite at the outset of the project may vanish and when the claim is then turned over to a desk jockey, the question becomes are the “rules” the same?
• Do you have a local strategic partner? [The value of association membership and networking relationships.]

CAT Adjusters- Ed

CAT losses are a time of great chaos. Failure of communication causes most problems on insurance claims. As an attorney he untangles communications and often acts a bit like a mediator to bridge the gaps. Ed advises his clients to create a clear and organized paper trail of documentation. Understand that if it isn’t written down and documented, it’s like it didn’t happen. Take photos before, during and after the work. As you may be receiving instructions from multiple claims personnel, ask the Claims Manager or VP of Claims who is in charge and who’s instructions to follow.

CAT Adjusters- Pete

CAT adjusters are the initial eyes and ears of the insurance carrier. Temporary and/or subcontract CAT adjusters have limited authority. When CAT adjusters hand off the claim “understanding” may be lost in the transition; resulting in the contractor being blindsided months after the work is done by a desk adjuster or TPA who attempts to slash their bill and renegotiate the scope of work or policy coverages or limits.  Since emergency response and structural drying is more profitable contractors can better afford to take potential payment risks on these tasks rather than on lower margin and higher material cost repairs and reconstruction.

Lien Laws- Ed

Lien laws are highly technical. They change over time. Do not attempt to prepare them yourself unless you are very well-versed in the latest requirements.  It may only cost several hundred dollars to have an attorney file a lien, or at least counsel you on the rules. Rules regarding lien laws are strictly interpreted because they affect the owner’s property rights. Improper filing or technical defects of a lien can result in liability for damages. A lien puts a cloud over the property’s title, which can result in the owner losing an opportunity to refinance the property at a lower rate. The property owner can then sue the lienholder for damages. A lien begins as a notice of a claim of a lien, and a lawsuit must be filed to perfect the lien. It does not become an actual lien, at least in some states, until the court adjudicates the lien claim.

The American Rule says that each party in a contract must bear their own attorneys’ fees. A contractor may be entitled to collection costs and associated expenses when included in a properly-worded contract.

Lien Laws- Pete

Costs to file a lien are part of the costs of doing business and are not necessarily recoverable.

Assignment of Benefits- Ed

Many mistakenly believe they have an Assignment of Benefits (AOB) in their contracts, when they actually only have a Direction of Payment.  A Direction of Payment is an administrative provision that instructs the insurance company where to send the check.  It is not a transfer of legal rights to the insurance policy benefits.  A properly-worded Assignment of Benefits actually transfers ownership of part of the claim to the contractor.  It can also transfer the right to sue the insurance company for bad faith.  It allows the contractor to step into the shoes of the insured and become a claimant.

Most insurance policies have provisions that purport to prohibit assignments.  Those Anti-Assignment provisions are enforceable in some states such as Texas, but are not always enforceable in states such as Florida and California.  In some instances, a Florida contractor may be entitled to reimbursement of attorneys’ fees when pursuing a case against an insurance company to enforce an AOB.  Again, one must be familiar with the local law to operate without significant peril.

Assignment of Benefits- Pete

Mortgage companies can also get involved in insurance claims and use insurance proceeds for past due mortgage payments. Fee shifting in FL is more important than AOBs because fee shifted legal expenses are in addition to property repair/replacement costs.

The one thing there is in surplus on  CAT losses is GREED! RIA President Chuck Violand sent an email to association members thanking them for the service they will be providing after Hurricane Harvey and reminded them to remember the group’s Code of Ethics and the need to treat people fairly.

Advice for consumers from Ed Cross:

• There are consumer protection resources and websites in each state, use them.
• Have an attorney review any contract before signing. Don’t sign what you don’t understand.
• The contract should detail the obligations of both parties.
• Time and Material Contracts are illegal for residential work in many states.
• Demand both a fixed price and a list of all suppliers and subcontractors. To avoid paying twice if general contractor fails to pay suppliers and subs, it’s preferable for the property owner to arrange to pay the GC’s suppliers and subcontractors directly.
• Never issue partial payment without receiving a partial lien release.

Considerations for Consumers, from Ed Cross

Each state has one or more consumer protection Web sites, with lots of helpful information about contract law and the process of hiring a contractor.  If you are asked to sign a contract you do not completely understand, have it reviewed by an attorney.  Do not allow a contractor to rush you into signing a contract.

The contract should clearly explain the obligations of each party.  Do not sign a contract with empty spaces.

Many states require contractors to commit to a specific price for residential work, rather than hourly or “time and materials” contracts.  The price must be stated in dollars in cents in a writing signed by the customer before work must begin.  “Time and materials” contracts are illegal in those jurisdictions.

Owners should ask for a list of subcontractors and suppliers and require that it be updated whenever there are changes.  Pay the subs and suppliers directly and never make a payment to any contractor without a release of the lien rights for that payment.

Pete’s Comments about Pricing Structure

Pete is a longtime advocate of Time and Material billing and a Written Price List.

Large commercial losses have greater oversight (clerk of the works, etc.) than residential losses.

Change orders can be used to modify pricing on a fixed price contract.

Further Comments from Ed about Pricing Structures