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Post Info TOPIC: Hurricane Loss Homeowners Claims - How To Read Your Adjuster's Summary


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Hurricane Loss Homeowners Claims - How To Read Your Adjuster's Summary

How Do I Know If My Loss Claim Value Is Fair?
What Do The Adjusters' Construction Line Items Mean?

Labor, Materials, Sales Tax, Overhead*, and Profit = Construction project cost estimation values.

Those values also can be found on a "adjuster summary" type page as "line items".

These individual line items are the constant pieces of the foundation needed for the existence of small and large structures placed, or replaced, by primary-general construction business owners/investors.

Conversely, constructed structures and construction business costs are to be accounted for by insurers-agents to help figure out future primary-general contractor replacement cost values, for a given property.

The Texas Department of Insurance by Bulletin B0045-98 has "reminded" insurers to account for and repay back to claimants (primary-general/sub-trade) construction contractor costs, including business overhead and profit loss dollar values whether they use a primary-general contractor or not, so that insurers do not reap "illegal windfall".

Simply stated, insurers can anticipate that it is reasonable to assume that in preparing costs (premium costs and loss payment costs) for the worst case scenario, replacement costs will involve a prospective primary-general building contractor.

Generally, when insuring a property, one cannot properly claim to have figured out reasonably anticipated future replacement costs for a structure unless one were to estimate costs like a primary-general contractor, who can use both inhouse and sub-trade expertise and labor.

Insurance agents estimation programs help them to do just that.

It appears though that, per the necessary TDI bulletin and basic math, insurers that disclose sub-contractor O&P business costs only in their "adjuster summary" are not accounting for and paying FULL "Contractor" dollar values woven into the loss value, whether any contractors are used, or not.

Real Example: Roof damage/loss has general contractor using a roofing contractor value woven in it. Ask almost any builder to verify that fact.

Since homeowners have pre-paid for prospective primary-general contractor expertise, and do not pay replacement costs to act as their own "contractor", hiring primary-general contractors for single trade or multiple trade "insurance work", is quite reasonable.

Be aware if you hear something like, 'we don't pay general contractor overhead and profit on roofing, carpeting or fencing in Texas', or, 'the work is not "complex" enough for general contractor involvement'.

The adjuster may be interfering with fair trade, and be trying to put a wedge between you and your contractor.

Expertise/Labor Costs-
Owners-investors, managers, internal and external general support all provide financial, mental and physical effort for the business

Consider some new construction and reconstruction expertise-labor, from the top down, that are accounted for in your insurance premium payments;

1. Primary-General Investing Contractor
2. Front Office Support - Secretaries, Assistants, Sales Representatives
3. Back Office Support - Customer Service, Accounting, Marketing
4. Field Support - Sub-Trades Craftsmen, Supervisors, Managers
5. External Support - Legal, Engineers, Architects, Others

When a new house or business is placed in your area, ALL anticipated labor, materials, sales tax, overhead, and profit costs are typically accounted for by the investing primary-general contractor.

Again, when a insurance agent, using their own aggregate construction / premium estimating program, adds up ALL anticipated labor, materials, sales tax, overhead, and profit costs to replace a house or business in your area, ALL construction costs are accounted for again, (along with the insurance company's business and profit costs), and are part of your insurance payment values.

So, when you see the insurance adjuster line item estimate total, look carefully, it may simply account for the visually measured damaged areas, and the different (leveling, roofing, carpentry, painting, sheetrock, cabinetry, AC, carpeting, etc). general trade work labor needed, and materials, and sales tax, but not primary-general contractor overhead and profit costs.

Materials Costs-

...can be verified over the phone. Delivery costs and labor for accepting the delivery on the project site should be accounted for. Many professional contractors do not sell their materials at cost to their clients, as they need to make a profit on those investments.

Sales Tax-

Applicable rates for various purchases will apply.

*Business Overhead
Costs Vary & Can Include-

-Office Rent
-Office Mortgage
-Office Supplies
-Electric Bill
-Project Site Office
-Vehicle Rental
-Vehicle Fuel
-Vehicle Maintenance
-Inhouse Equipment
-Rental Equipment
-Fax Machines
-Cell phones
-Internet Access
-Business Insurance
-Property Insurance
-Workmens Comp Insurance
-General Liability Insurance
-Vehicle Insurance
-Project Insurance
-Health Insurance
-Dental Insurance
-Hospitalization Insurance
-Life Insurance
-State Licenses
-City Licenses
-Permit Fees
-Other Needs


The monetary reward above the total investment risk costs of the primary-general contractor. What is left over after all others are paid.

10% is a common pre-tax profit factor.

How Can I Tell If ALL Contractor O&P Loss Value Has Been Paid?

Some insurers, like Allstate, use the (IntegriClaim) construction estimate line item called "Contractor's Overhead & Profit" (O&P) to account for sub-trade contractors O&P value only.

This has shown up in hurricane Rita as being 29%, if it is accounted for at all.

However, according to conversations with the IntegriClaim construction estimating program "management", MS/B (Marshall Swift & Boeckh), regarding their own instruction manual, the "Contractor's Overhead & Profit" line is for accounting for a single primary-general contractor's overhead and profit values.

Basic single investing contractor O&P (10+% & 10+%) together with the various sub-trade contractors O&P, (29+%) typically equals a base 49% O&P value per common Allstate post-storm construction estimating methodology.

However, as Allstate representative Mark McGillivary indicates, any basic 20+%, 29+%, 49+%, etc. O&P percentage value may be too low for the individual contractor, and deserves market adjustment, whether storm work is involved, or not;

"There's no set formula of what we pay," he says. In some cases, rates are set by state regulations. If there are no laws governing the rates, Allstate uses a basic "10 and 10" formula for overhead and profit. That said, there are many areas where the company pays more depending on what the market rate is, McGillivary says.

The insurance claimant's "contractor-of-choice" is who determines what their business overhead and profit needs are, not insurers.

Financially responsible insurers/adjusters "adjust" to the labor, materials, sales tax, overhead and profit market range values, and fair game/market trade practices, not set them.

-- Edited by Roger Poe at 09:11, 2007-09-17

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