Why is choosing a contractor such an important decision?
Nearly all insurance agents and CSRs have heard contractor horror stories from their policyholders. Here is a classic example. The insured wasn’t home at the time, but his neighbors tell him the next day some large hail came down the prior evening. Concerned, the homeowner decides to give his agent a call to see what his next steps should be. He leaves a voice mail with the office.
An hour later a contractor shows up unannounced and proceeds to tell the insured that he no doubt has hail caused roof damage, based on the storm the prior day, and is available to represent him in negotiations with the insurance carrier. This “door knocker” then shows the owner a very official-looking meteorological map of the area indicating that one-inch hail fell in their neighborhood. It looks very convincing. The contractor says with confidence: “I will fight to get you a new roof with the insurance company, who we all know doesn’t like to pay out on claims.”
The roofing salesperson then asks if he can get up on the roof and do an inspection. Afraid of heights and slopes, the homeowner watches from the ground while the rep proceeds. He pulls out a piece of chalk and starts circling areas up on the roof. He comes back down and says: “Just as I thought, you’ve been pelted all right. I circled areas where there were hail hits and there were enough of them that I’d say you are deserving of a new roof.” Hearing this good news on his 15-year shingled roof makes the homeowner feel nearly giddy. He realizes he can save thousands of dollars.
The contractor rep sees the approving look of the homeowner and realizes this is a great time to close the deal. He further mentions that the homeowner shouldn’t hesitate to decide since there are a lot of people with damage who will need new roofs. By waiting it may take weeks if not months to get his roof scheduled.
The homeowner agrees and asks what the next steps are. The roofer pulls out a contract and says, “We need authorization to proceed with the work.” The homeowner asks about the commitment, and the roofer responds, “This is a standard contract for the industry. This authorizes me to start working and gives me the right to represent you in discussions with the insurance company. It also gives you prioritization. We can get this roof replaced soon without risking further interior damage from subsequent rainstorms. As for your commitment, you do have some time to rescind the contract if you don’t want to go ahead. Very few of our customers cancel.”
It all seems plausible. The homeowner signs the contract. Meanwhile, your agent’s CSR calls you back to tell you the agent was in a continuing education class and was thus unavailable. Her client then instructs the CSR to set up a hail claim, as he has signed a contract with a roofer. The CSR warns that because of post-pandemic issues and busy schedules the adjuster may not be able to get to them for a while.
Because this was such a widespread weather event, and the homeowner and contractor have such a busy schedule, it takes 4 days to set up an adjuster inspection. Days later the company adjuster shows up and gets up on the roof. A few minutes pass and she comes back down with bad news for the insured. “I saw a couple of legitimate hits up there but not enough to warrant a full roof replacement. I am not sure what your roofer was seeing, but in my opinion, your roof is not compromised by any damage.”
The very disappointed policyholder asks why other neighbors got approved for new roofs and he didn’t. The adjuster, realizing she has an upset client, asks whether the homeowner signed a contract. “Yes I did because the guy seemed to be honest and trustworthy, “the owner explains. “Also, we have a very busy summer and I wanted to do this sooner than later. The backpaddling adjuster responds: “Generally in these situations, we recommend that our clients get more than one opinion from legit roofers before filing a claim. I am not saying your contractor isn’t reputable, but there is a disconnect here. I would recommend asking the roofer if they can release you from the contract.”
The homeowner, now confused, says goodbye to the adjuster and decides to call a good buddy who used to work in insurance. His friend tells him that insurance companies sometimes have inexperienced adjusters looking at roofs. He recommends asking the carrier if they can send out a second adjuster to inspect the roof. The insured calls his new roofer and asks the same question, and the rep agrees with his friend that a second adjuster opinion is needed. The roofer argues that the first adjuster was definitely wrong in his opinion and that this is fairly common. The client calls the CSR back and tells her he’d like a second adjuster to give an opinion. The CSR tells him she will bring that up to the agent when he returns.
A couple of weeks later a second adjuster schedules a date and time to inspect the roof. The insured asks his roofer to be there when the inspection occurs. He says his schedule is too tight to meet that day. The homeowner has his first real feeling of apprehension. What’s he afraid of? The next day the second adjuster arrives, gets up on the roof, spends even more time than the first up there, and climbs back down. His opinion concurs with the first adjuster. There is no damage.
Depressed, the client calls the agent to ask for advice. The agent tells him to get an opinion from a legitimate contractor who can be objective. The agent gives him three names to check out. Another roofer comes over to inspect. His opinion? Once again, the conclusion is no damage.
The irate homeowner calls his roofer and asks if he can cancel the contract. The contractor says yes, but that he will be assessed a penalty for doing so. The contractor encourages the homeowner to hire a roofing engineer to inspect the roof. When told that will cost the policyholder several hundred dollars to do so, the policyholder realizes he has a decision to make. Either go ahead with the project out of pocket or fork out more money to possibly pursue his case even though three trained pairs of eyes have concluded there is no damage.
Eventually, the client decides he is throwing more good money and time after the bad and cancels his contract with the roofer since he is within the 72-hour period following the claim denial by the insurer.
Just when one thinks it couldn’t get any worse the client asks the roofer to refund his down payment, and suddenly the contractor is nowhere to be found. Repeated attempts to contact the roofer end in failure. It appears he has either left town or is out of business. No one is happy in this scenario. The claim is canceled, but a resulting mark goes on the insured’s file even though the claim was denied. Sadly, the insured loses his down payment.
All this money, heartache, and stress could have been avoided by selecting an ethical, competent, and experienced contractor in the first place. At Lindstrom, we highly recommend being very careful with choosing a contractor. Referrals can be helpful. Many agents have vetted contractors who they know do a great job and are trustworthy. Agents are great sources for this kind of information. You can also do your diligence by going online to the Better Business Bureau.
The Minnesota Department of Labor and industry has an excellent guide to picking a reputable contractor. Check out this link to their site https://www.dli.mn.gov/workers/homeowners/tips-hiring-contractor
We’ll repeat some of the information you’ll find there:
Benefits of hiring a licensed contractor
- A license ensures the company has met requirements that include having a principal of the company pass an exam and having liability and property damage insurance.
- A licensed contractor must complete continuing education classes each year.
- Hiring a licensed contractor provides another very important benefit: access to the contractor recovery fund.
Quick tips
Before you hire a contractor, the Department of Labor and Industry suggests:
- ask for the contractor’s license number and contact us at 651-284-5069 or 800-342-5354 to verify the builder is licensed and to find out if they have a disciplinary history. The status of a contractor’s license can also be checked online.
- ask for references and how long they’ve been in business;
- ask for a Minnesota business address other than a post office box;
- ask for a local phone number, and
- check the contractor’s litigation history on the state court system’s website.
Avoid contractors that:
- arrive in an unmarked vehicle;
- ask you to sign an estimate or authorization before you have decided to hire them. You may unknowingly be signing a contract;
- are willing to do the job at an unusually low price;
- offer to pay your deductible or offer discounts or other rewards for hiring them;
- only provide a post office box for their business address;
- require full or substantial payment before work begins;
- refuse to provide a written estimate or contract;
- refuse to give a license number issued by the state of Minnesota;
- refuse to give references;
- show up unsolicited; or
- use high-pressure sales tactics.
Before you sign a contract, make sure it includes:
- a detailed summary of the work to be done;
- a description of materials;
- the total contract price or how the price will be calculated;
- payment schedule making clear when payments are due;
- specific timelines and exactly what will happen if the contractor fails to meet the deadlines in the contract; and
- a provision requiring that every change to the contract be reduced to a written change order that you are required to sign.
- Regulation is in place to protect homeowners entering into contracts with roofers. With certain restrictions, homeowners are allowed to cancel a roofing contract if their insurance company denies the claim.
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