Requirement to pay overhead and profit?

Latest post Mon, Sep 14 2009 12:48 PM by Minnesota Homeowner. 6 replies.
  • Wed, Apr 22 2009 8:07 PM

    • bluethumb
      Consumer
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    • Joined on Wed, Apr 22 2009
    • TX
    • Posts 3

    Requirement to pay overhead and profit?

    As a contractor for 25 years in Texas, I customarily received overhead and profit on claims I work involving 3 or more trades.  I currently have one insurance company declining to pay these items even after I provided them with copies of the subcontractors' invoices.  Since these items total about $3,000.00 I questioned their decision and asked for the criteria they used to deny my claim to this compensation.  I was informed that there was no written criteria and they were unwilling to write any or supply me with a written explanation for their position.  When I asked what my next step of appeal was regarding this matter, they said they could not help me with that.  I thought this to be most unprofessional and possibly unethical.  Are there rules, laws, or regulations stating requirements that these items be paid if earned?

  • Wed, Apr 22 2009 9:04 PM In reply to

    Re: Requirement to pay overhead and profit?

    Well, the first thing you have to understand is that the insurance company doesn't have to pay you anything or explain anything at all to you nor do you have any standing to appeal anything.

    You are not the policyholder.

    Many insurance adjusters (including me) will discuss estimates with contractors as a courtesy to their policyholders but that is not an entitlement.

    It's ultimately up to the policyholder to deal with his or her own insurance company when there is a dispute about payment for repairs.

    If it costs X dollars to fix the damage and the insurance company doesn't want to pay X dollars, the policyholder has several areas of recourse against the insurance company.

    But to answer your question, yes, there are plenty of laws and regulations that address overhead and profit. Contractors charge it and insurance companies pay it. That's the nature of the beast.

    The insurance company that doesn't pay it is not only an exception to the rule but runs the risk of breach of contract and bad faith lawsuits as well as sanctions by insurance departments.

    There has been much litigation against insurance companies that mess around with overhead and profit, including several class action lawsuits against major insurance companies.

    Here's what the Texas Dept of Ins has to say about it:

    http://www.tdi.state.t...

    http://www.tdi.state.t...

    And here's an article on some of the lawsuits already in progress:

    http://dimechimes.word...

     

    • The right of the people 
    • to keep and bear arms,
    • shall not be infringed.
  • Wed, Apr 22 2009 9:36 PM In reply to

    • bluethumb
      Consumer
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    • Joined on Wed, Apr 22 2009
    • TX
    • Posts 3

    Re: Requirement to pay overhead and profit?

    Of course, I understand that the insurance company is not directly accountable to me.  I contacted them at the insured's request and was told to submit copies of the subcontractors' invoices.  I did so and, at the insured's request, followed up with a call to insure they had received all they required.  They called ME back in a few days to tell me that they were declining payment for overhead and profit.  When I asked why, since there were more than 3 trades involved in the claim, they said that they did not determine whether they paid o/h & p just on the number of trades but on "other factors" such as how interdependent those trades were to scheduling the work.  When I asked for a faxed written criteria outlining their position, they said that nothing written existed.  I asked if they would be willing to give me ANYTHING in writing to support their decision and was told they wouldn't do that either.  I asked if the decision was then arbitrary or totally subjective and they said that it WAS subjective.  The insured asked me to make these contacts on his behalf and provided me with all the contact information and the claim number to do so.  I find it interesting that the company involved is one of the companies listed in the pending suits in the link you provided.  Thank you for your prompt response to my inquiry. 

  • Wed, Apr 22 2009 9:51 PM In reply to

    Re: Requirement to pay overhead and profit?

    Your client has a couple of options that can be done individually or concurrently.

    One is to file a complaint with the insurance department and see how that goes. Unfortunately, that probably will take a long time to run through the system.

    Another is to invoke the Appraisal provision of the policy. It's on Page 8 of the following sample of a Texas HO-B:

    http://www.vwcos.com/d...

     

    • The right of the people 
    • to keep and bear arms,
    • shall not be infringed.
  • Sun, May 3 2009 7:56 PM In reply to

    • bluethumb
      Consumer
    • Not Ranked
    • Joined on Wed, Apr 22 2009
    • TX
    • Posts 3

    Re: Requirement to pay overhead and profit?

    My client, armed with the information you provided, confronted the insurance company and assured them he was willing to take his complaint to the Texas Department of Insurance AND the media.  On Friday he called me to tell me that "after furthur review" the insurance company decided to pay my invoice in full.  I am cheerfully awaiting their check.  Thanks again for your help in this matter.  Score one for the little guys!

  • Sun, May 3 2009 8:03 PM In reply to

    Re: Requirement to pay overhead and profit?

    Glad to see a succes story.

    • The right of the people 
    • to keep and bear arms,
    • shall not be infringed.
  • Mon, Sep 14 2009 12:48 PM In reply to

    Re: Requirement to pay overhead and profit?

    We recently had storm damage done to our home and hired a "small" contractor, he has only a couple of employees.  When he filed for O & P from our insurance company, he too was declined payment.  The reason the insurance company gave him was that the O & P had not been approved (even though the contractor had been billing the O & P from his initial estimate to the insurance company, and had never been told that they were questioning/declining payment).  The contractor explained to me that this O & P is AUTOMATICALLY paid to large contractors, but generally insurance companies refuse to pay it to smaller contractors simply because they can and have historically gotten away with it....small contractors don't have the financial resources for legal fees like the large corporations do seems to be what the difference boils down to.  I read the posts on this site, and realized that what my contractor was telling me is true, my insurance company was in fact refusing to deal with him regarding the O & P profit because legally they do not have to deal with him at all, the policy is ours, and legally the insurance company is only obligated to speak with us.  It made me FURIOUS to know that once again, the "little guy" loses out, and wrongly so.  First, I wrote a letter to the Attorney General's office in our state (Mn), then I made a copy of that complaint letter and forwarded it to our insurance company along with a letter letting them know that I see no reason that they should jerk the "little guy" around simply because he is the "little guy". I assured them that since it was clear that it would have to be ME who stood up for the contractor since they seemed to be hell bent on hiding behind the technicality that the policy was ours, therefore they had no legal obligation to even speak to our contractor, that I would indeed see to it that this time, the "little guy" came out on top.  WIthin two days, I received correpsondence that the insurance company had further reviewed the issue, and had decided to pay O & P to our contractor.  They mailed a check that very day.  My advice to contractors if you are the "little guy"....let your customers know in advance that the big insurance companies make it a practice to wrongly deny O & P to the smaller contractors, and explain how and why this happens....let them know that you may require their assistance to collect what you legally are entitled to collect.  Since most of America IS the "little guy", or started there, you'd likely be pleasantly surprised by how many people would be willing to go to bat for you.  Thanks for the advice and help I've gotten from this site, it is what convinced me that I needed to go to bat for our contractor.  It turned out great!

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