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ACT Contractors Forms... From The Paper Side of Contracting.

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Contractor Forms: Insurance Restoration Contingency Agreement

     A profitable way to "recession proof" your contracting business is to focus a part of... or even ALL OF your efforts on insurance restoration work.

Insurance Restoration.. FIRE, WIND, WATER, HAIL

FIRE, WIND, WATER, MAN  It doesn't matter what the economy does, most homes and other properties will still be insured and accidents, calamities, natural disasters and destructive acts of man will always occur.  


     One of the most important contract forms, mandatory for any insurance restoration contractor, is an Insurance Restoration Contingency Agreement such as our Authorization of Insured Form. This form creates an agreement with the insured that states that he authorizes you to negotiate as his agent, with the adjuster. The AOI states that you will do the job for whatever the insurance company allows and the insured will only have to pay his deductible plus any upgrades he chooses. BUT, most importantly, the Insurance Contingency Agreement also provides that YOU WILL DO THE WORK!


To illustrate why this form is so important, let me give you this scenario:

     A hail storm appears out of nowhere in Oklahoma and Insurance restoration Contractordamages the roof of the house owned by "Joe Homeowner." Joe calls your roofing company, right after the storm, and asks you to come look at his roof. After Joe gets off the phone with you, Joe calls his homeowners insurance company and after finding that this type of damage is "covered" by his policy, places a claim.

     You go out to Joe's house, get out your ladder, crawl up on the roof, inspect the damage, take some measurements, take some photos, then tell Joe that he should relax, you will negotiate with the insurance adjuster to get Joe the best settlement so the job can be done right. You tell Joe that, best of all, you'll do the repairs for whatever the insurance company pays and the ONLY out of pocket expense Joe will have is the deductible on his insurance policy. Joe tells you to go ahead, you shake Joe's hand, get the adjusters name and number and go back to your office to start "negotiating."

     Some of you, particularly those without experience in this, are going to ask WHY didn't the contractor get a repair contract signed RIGHT THEN? Simple, to create a contract you would need things that you just don't have. For example, you can't create a scope of the work until you see what the insurance company will "cover" to settle the claim! AND... since you don't have a scope, there is no way to give a PRICE and even if you could, you just told Joe, and this is the standard in insurance restoration, that you would do the work for whatever the insurance settlement was! If you can get Joe to sign a contract for what YOU think should be done for YOUR price to do this work, you could be way off from the insurance settlement. You could, for example, tell joe that the whole roof needs to be torn off and replaced and for $10K, which the insurance company should pay for, you'll do the job . What happens if the insurance company only authorizes a $5K repair? You've just sold Joe on a complete re-roof and the adjuster is now telling Joe that this is unnecessary and replacing the damages shingles is all that is necessary. Do you still want to do the repair job? Now that Joe thinks you don't know you're a** from a hole in the ground, the better question is ...Will Joe Let You DO The Repair Job?

Now lets get back to our scenario:

     OK so you've made 5 trips out to Joe's house with the adjuster, have emailed the adjuster two different sets of photos of the damage, written the adjuster 10 emails, gotten pricing and checked availability of the existing shingles on Joe's roof and pleaded Joe's and your case to the "stupid" adjuster for two weeks. The adjuster wants to do a repair and you tell them the whole roof is damaged and a repair will not put the roof back to the condition it was in before the storm and the repair will not match the existing. From the ground, because adjusters are above being a roof monkey and NEVER climb roofs, the adjuster says it looks like a repair will do fine. You climb up on the roof again and take more pictures. You go back and forth and finally the adjuster agrees with you and authorizes a re-roof ! You're so proud of yourself, because you just got Joe a $10K re-roof job when he was expecting a $5K repair. Yay! You tell Joe you have great news and make an appointment to see him day after tomorrow.

     Now, in the meantime, some "roofer" from out of rooferstate drove by Joe's house, saw the damage and, looking for work, knocked on Joe's door. He gave Joe a price of $6k to do a complete re-roof, scientifically basing his bid on the materials plus his truck payment, plus his alimony and child support payment, plus two months past due rent on his apartment... you know, a real businessman!??


     You meet up with Joe and tell him the good news. He politely thanks you for getting him more money than he ever thought possible, then tells you "thanks, but I got a bid for $6k to do the re-roof and I am going to go with that one." The part he doesn't say is that you just made him $4000 because he will still get $10K from the insurance company and the job is now costing him only $6K so Joe gets to pocket the difference! What can you do about this? Nothing. You didn't get Joe to sign anything so he is not obligated to accept your "bid".


     Insurance Restoration Roofing contractYou just spent days of running around, meetings, emails, photos, crawling up on Joe's roof not once but three times and your payday for this...NOTHING! KISS IT GOOD BYE!

     An Insurance Repair Contingency Agreement like our Authorization of Insured Form, helps keep this from happening to YOU!


Contractors, do you have questions about Insurance Restoration Contingency Agreements like this?  Please share your comments, questions and experiences below!


I have been using a Contingency Contract since 1983 
If you are going to sell this agreement you need to change the wording "negotiate with the insurance company" this wording makes you act as a public adjuster and in most states it is illegal to act as a public adjuster without a licenses. Also the public adjuster can't do the work or be involved.
Posted @ Tuesday, September 06, 2011 9:21 PM by Bruce Hollingsworth
You are partly correct... yes it is illegal to act as a public adjuster without a PA license in some states... just as it is illegal for a public adjuster to extend their mandate to the actual materials, installation techniques, and the basic "doing the work" part of the insurance restoration in question... in short a PA cannot act as a contractor. Any insurance claim is "negotiated" in two parts... 
1) The specifics of the insurance policy as it relates to the claim and the rights of the insured as per their insurance policy... this is a job for the PA. 
2) The specifics of the actual materials and work necessary to restore the property. Particularly, any additional work discovered during the progress of the job that is necessary to complete the job as per industry "standards"... This is not the PA's job... this is the contractor's job! This is the "negotiating" part that our contingency agreement refers to.... 
But remember that a contingency agreement for home improvement work should ALWAYS be followed up with a legal contract containing all the state and federal requirements, just as soon as the contractor has the scope of work and agreed upon pricing from the insurance company. Some states, Illinois and California for example, do not recognize a contract as being enforceable for home improvement work unless a TOTAL PRICE is given in the contract! so... always follow up with a legal contract as soon as you can!
Posted @ Tuesday, September 06, 2011 10:07 PM by Bill Baird
This sounds like it is for the contractor's best interest, not the homeowner's. With that said, I have signed one of these contracts, now I nor my insurance company can get a hold of this contractor. How do I get out of the contract? I do not want to go start working with someone else, only to have them step in at the last minute.
Posted @ Monday, May 21, 2012 2:41 PM by John Smith
Signed Insurance Contingency form and 
insurance company sent checks. Paid contractor each time he sent invoice for repairs. 
Received in August a receipt with a zero balance. In December new insurance check for depreciation comes in and the contractor will not sign a lien release on my house, so the mortgage company will not release the remaining funds. Contractor says I owe more money than the depreciation check and accuses me of insurance fraud.
Posted @ Friday, January 24, 2014 9:37 PM by Gena
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