For a home or business owner, dealing with insurance companies when damage occurs to their property is an uncommon – and frequently frustrating – occurrence in their lives. Rather than reap the benefits of their premiums when they finally need them and get their damage taken care of painlessly, far too often insurance companies find a way to part with as few dollars as possible.
Insurance companies have made a habit of holding back contractor’s overhead and profit when they pay out on insurance claims, a problem that can hit companies engaged in mitigation services or emergency repairs especially hard . This tends to make insurance work a difficult business, and it often results owners don’t get full satisfaction after a loss. A recent court decision in Florida could change things up though, according to Remodeling (“Game Change for Insurance Work” by Jim Cory).
Samuel Bergman, president of Rolyn, a Rockville, Md., contractor with offices in six states and licenses to work in 35, says that the decision helps clarify how restoration companies are paid for what they do. “I’ve found that if you’re performing GC services, you will be paid for your overhead and profit,” Bergman says. On the other hand, he points out, companies engaged strictly in mitigation services, such as drying or cleaning, bill for rates and services and expect to earn their profit in the markup on their work since they perform no GC service. It’s the middle ground—where a company might have a few subcontractors involved to, say, clean, install drywall, and paint—that is ambiguous for insurers. And for restoration contractors, Bergman says, such situations can be bad financial news. “If you have unburdened rates and you’re not able to charge profit and overhead, you’ll make a little bit of cash flow, but at the end of the day you’re not going to be able to survive.”
Though Trinidad v. Florida Peninsula applies to companies doing business in Florida, some feel it may have insurance companies rethinking their remuneration policies across the board. “It will change the way these losses are paid all over the U.S.,” says Jim Thompson, a Florida contractor specializing in commercial disaster reconstruction. Its point, he says, is that “the overhead and profit of the contractor is just as valid an expense as his labor and his 2x4s.”
This is a ruling that could easily influence insurance work across the country. Read the original article here.