Insurance Job Change Order Question??

kdub1777

We have been working on an insurance job where a house had severe water and snow damage last winter.

In our contract we stated we would tear off siding on 2 walls that could have been hit with water damage, and reside them. Well, when we got in and checked the walls (didn't have to rip off all of the siding) we noticed that there was no damage at all and the old siding was in great shape as well.

We talked with the homeowners and they would like us to repaint the whole house instead of tearing off the siding on those two walls and just repainting those two walls. This would work great for us and they would have a better looking exterior product. The insurance company only allowed us enough money to paint those two walls leaving the rest of the house with the old worn out paint. We could paint the house with the money we saved on siding labor and break even creating a better more uniform product for the homeowners. The homeowners cannot afford any money out of pocket to paint the rest of the house if we went with the contract option.

The insurance company released the total amount of money for the job to the home owners bank (and mortgage holder) and we do the standard bank draws when we need the money.

My question is, can we legally do this without causing problems with the insurance company? All of the contracts have been approved by the insurance company but signed and legalized by the homeowners. The bank is playing a minimal role and only dispersing the funds.

Can this be done without getting us into any trouble? I don't know if I should make a big deal about it or not. The insurance agent has been gone a couple of days last week and I can talk to her about it on Monday if needed, but I would rather deal with the homeowners if it is legal. I don't know if the insurance company would want to have the funds for that taken back or not either.

Sorry for the long post, but wanted to cover my butt here.

WarnerConstInc.

Won't make a difference on a situation such as that.

Cdat

Let me get this straight. Insurance company gives money to do something. You spend money doing something other then what you contracted for. Is this what you're asking?

kdub1777

Yes haha. We actually were contracted to tear off the whole roof, gut the interior and rebuild. We were also stated in the contract to tear off siding on the 2 walls, re-side and paint to match the rest of house. The insurance company released the funds to the bank and is now controlled by the homeowners.

That is my question, can the homeowners and the contractor create a change order using these funds without getting in trouble with the insurance company? The cost to do this will be the same as if we tore off siding and re-sided.

I hear about people getting checks from the insurance company and they let them do what they want with it. Rather it be rebuild the damaged area or use for something else. So, I don't know how it falls in with the insurance company until I can find out next week.

Cdat

The money is in the homeowners name. Seems they get to decide what to do with it.

Ed the Roofer

The insurance company should not, or will not release the final Depreciation Hold Back until the actual items on their scope of work are done.

That is, if they come out for a final inspection. The homeowners could lie and say the work was done, but that would not be ethical.

Ed

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kdub1777

The insurance company did not take depreciation out on a hold back. They dispersed all of the funds over to them. Does this make a difference?

Ed the Roofer

Let the Home Owners Ethics be the guide.

As a contractor, I don't care how they spend it, but I prefer that they spend it with me.

I hate it when I hear how the HO always cries that they can not afford to do xx this or xx that, unless the insurance funds pay for it. That is a bunch of baloney.

With this case, the insurance company will not, more than likely, ever come out to check on the work. It is a done deal with them.

I would not go signing any form that stated that I did work that I did not do, though.

Ed

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kdub1777

Yeah that is a good point. I would not be asking the question if I did not think it was ethical. The walls turned out to be just fine when we thought there might be a problem. That is why it was included in the contract. I think the homeowners will be better off putting the money to better use when they can. They have been the ones paying these insurance premiums for the time they have been in the home. I think they should be able to decide but I wanted to cover myself as well.