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Learn from the mistakes of othersBy Phil McLaughlin
I was recently retained as a consultant by a well-intentioned general contractor, based in a major U.S. city and specializing in commercial renovations.
Having had a claim in his own home and intrigued by the price charged by the local contractor, he decided to diversify into the water damage restoration/structural drying.
He ordered more than $300,000 in assorted drying equipment, including a large trailer-mounted desiccant dehumidifier.One of his first jobs was to tackle substantial water damage in a high-end residential home.
Mistake No. 1Having made a substantial investment in rental and assorted restoration equipment, the contractor and his partner decided to meet the crew at the house in order to assist with the project.
The insured’s rental property job was referred to her by one of the largest agents in the area (the policyholder was out of town).
They both pulled up to the loss in their brand new Mercedes vehicles.
Agents, tenants, adjusters and everybody got to hear about their expensive new cars. Sooner or later someone was going to wonder if he (she) was paying for those cars.
Mistake No. 2Since the insured lived out of town, they met with the tenant who signed the insured’s name on the authorization form.
Since the tenant described the house as an “unlivable disaster,” the insured (who never saw the loss, and never signed a document agreeing to pay for the work) instructed the restorer to do whatever emergency service was required to mitigate the damage.
The contractor proceeded, as per the insured’s request, to make her happy. No ballpark or reserve price (e.g., “not to exceed …”) was ever quoted.
Mistake No. 3The bill for approximately two days’ work, labor, debris removal and rental equipment came to approximately $12,000.
Much of the debris were the tenant’s contents which, while unrestorable, required coverage by the tenant’s policy, but such coverage did not exist.
The contractors, who were not yet my clients, billed the tenant’s contents debris removal to the landlord’s insurance company.
Mistake No. 4The tenant never approved payment of this work as both he and the contractors assumed it would be covered by the landlord’s policy.
Always find out who is paying for what and insist that those in authority “sign off” on the agreed work and its estimated price.
Mistake No. 5The charge for the entire debris removal was combined into a single, lump-sum price, as opposed to charging an hourly rate or a rate based on the cost per yard of debris.
The tenant’s contents were combined with the landlord’s sheetrock, insulation and delaminated glue-down carpet into one price.
When two or more people have vested interests in the bottom line, and the bottom line has two or more separate totals, you must treat them as two separate jobs, each with its own accountability, estimations and billing.
Mistake No. 6During the initial damage assessment, no “before” or “after” photos were taken to show the extent of the damage, or the end result of the restoration work.
Once a job is done and everything is restored, it is very difficult to produce evidence that each stage of the job was necessary.
Photographs and video recordings are strong, irrefutable evidence.
Mistake No. 7Removal of building materials requires a contracting license in the name of the restoration company. In this case, such did not exist.
The new restoration contractor assumed that since he was referred by the agent, the insurance company would pay his bill for “emergency service.”
He never inquired about the deductible amount which always should be collected at time of service. The deductible was $10,000.
Mistake No. 8Since the insured had never personally seen the loss or the labor and equipment involved, and had not received an approximate “ballpark” price, she never dreamed that the project would cost $12,000.
Mistake No. 9To add insult to injury, an estimating software program was used that is not recognized by most insurance companies.
The estimate was further exacerbated by the contractor who charged unit cost for some work and time and materials for other services. This gave the insured the opinion that he was “double dipping.”
Mistake No. 10The equipment rental charges were questioned as moisture readings were never taken. Nor was thermal imaging used to justify job scope, before and after.
Lessons learnedSo here we have an honest, hard-working restoration contractor with a $300,000 investment in equipment and with the best of intentions to please the insured and obtain future referrals, now being called a “thug” by the insured, who does not want to pay the bill.
I am now trying to negotiate the claim with the insured and agent.
The contractor filed a mechanic’s lien to protect his company’s interest.
The insured’s position is: “I’ll see you in court.”
How do you think the judge will find us two years from now with the insured, tenant and agent testifying against us?
After running one of the largest restoration companies in the New York Metro area for more than 30 years, I have “been there, done that” on more than one occasion — the only good thing that came out of it was a priceless education.
It all comes down to …There is no reason to “reinvent the wheel.”
Everyone who is successful in this business has walked in your shoes at one time or the other. Mistakes, however, can be very costly.
Had this job gone well, the single agent involved would have been in a position to refer more than $200,000 in business, over a year, to my client.
That’s $2 million during the 10 years.
As they say in the business, “You’re only as good as your last loss.”
So what’s the solution? Education, education, education! Go to: http://www.advantagecleaningteam.com/ or http://www.janiservu.com/
