Storm Chasers Blank Price Contingency Contracts Illegal, Charges Filed, Plus More....

Ed the Roofer

I copied this from a Blog site by the name of: http://hailchaserchaser.blogspot.com/

The blogger does not identify who he is, whether that be a current or former Insurance Adjuster or a Contractor or just a very diligent home owner activist.

Although there are some "minor" points that I disagree with in some of his comments, on the whole, he has some great advice and insight.

The following Copy/Paste includes the Bloggers comments following the initial news statements.

Storm Chasing Contractors, Please Make Sure To Read Item #2 and #3 and #4, In Particular.

Ed



Tuesday, May 5, 2009

Take Note. People of Illinois v. Precision Roofing, Xteriors and Steve Tatgenhorst


I've gotten a chance to check out the lawsuit brought by the Attorney General's office against Precision Roofing & Restoration, Xteriors Inc and Steven Tatgenhorst. The case 09CH847 was brought in McHenry County and filed on April 9, 2009 and is a complaint for injunctive and other relief. There are some very interesting allegations brought in the complaint that bear out what I've been trying to say in this overall blog for quite some time now. Take note.

There are allegations that Tatgenhorst and/or his companies took money from consumers and either didn't do the work or did a shoddy job. If this is eventually proven, he should be found liable and he should be fined, made to pay the money back and there should be punitive damages levied against him. If he is innocent of the charges, more power to him. There are other allegations brought against him that also speak to the very crux of what some of the problems (I believe) are with the "chaser" style of doing business.

1) The suit states that Tatgenhorst and Precision Roofing & Restoration held themselves out as members of the Better Business Bureau when in fact they were not. I have stated before that it's my belief that merely checking the Better Business Bureau site when researching a contractor is not the ONLY thing a homeowner should do when looking into a contractor. I've found instances when the BBB site still lists a company as being in good standing when the company has been sued and lost in court. It can sometimes take a long while for this info to get to the BBB. In the case here at hand, homeowners should not assume that the use of the BBB logo on "contracts" and flyers means that the entity is actually a member. Verify this.

2) The suit states that Tatgenhorst and Precision and Xteriors failed to disclose to consumers that they are not licensed public insurance adjusters with the Illinois Department of Financial and Professional Regulation, Division of Insurance. Contractors take note. I have believed that in order to advertise that you will "negotiate" or "pursue the homeowners' best interests" with an insurance company, you have to be a licensed public adjuster in the State of Illinois. You are telling the homeowner that you are participating in the adjustment of an insurance matter and you have to be licensed as a Public Adjuster. That's just simply the law. It is my non-lawyer opinion that you as a contractor have no bearing whatsoever to negotiate the insurance claim with an insurance adjuster for a homeowner unless you have a public adjuster's license. You can say you have a contract with the homeowner until you're blue in the face. If you don't have a public adjuster's license, it doesn't matter.

3) Here is one of the biggest points I've been getting at. The suit states that in all instances, Tatgenhorst, Precision Roofing & Restoration and or Xteriors entered into home repair and remodeling contracts with consumers exceeding $1000 and FAILED TO SPECIFY THE TOTAL COST OF THE JOB, INCLUDING PARTS AND MATERIALS LISTED WITH PARTICULARITY AND ANY CHARGE FOR THE ESTIMATE. I have been harping on this all through this blog. According to the Illinois Home Repair and Remodeling Act, contracts for home repair and remodeling are required to contain this information. I contend that just filling in a blank spot with "ins proceeds" does not fulfill this requirement. I would go as far as to say that most homeowners are signing these "blank contracts" that do not state a dollar amount to do the job and do not state the cost of parts and materials and do not state when the job's estimated beginning and end dates would be. This point is further clarified on page 8 of the complaint where it states that Xteriors' agreement stated that Xteriors would accept as the contract price whatever amount the homeowner's insurance company approved as payment of the claim. The next paragraph then goes on to state that the contract executed by the homeowner failed to specify the total cost of the job, including parts and materials listed with reasonable particularity and any charges for an estimate, in violation of Section 15 of the Illinois Home Repair and Remodeling Act. Add this to the fact that these same contracts state that the contractor will "negotiate" the claim when these contractors are not licensed public adjusters.

4) The suit also states that Tatgenhorst and Precision Roofing & Restoration and or Xteriors (the Defendants) failed to disclose to consumers with regard to roofing services that they subcontract out the roofing services, the identity of those subcontractors performing those roofing services on the Defendant's behalf and whether or not those contractors are licensed roofers with the Illinois Dept of Financial and Professional Regulation. This speaks for itself. Many homeowners believe the contractor will be installing the new roof. The contractor is "holding himself out" as a roofing contractor and in order to do so, you must be a licensed roofing contractor in Illinois. Even if he's acting as a general contractor, those people hammering shingles onto the roof need to be Illinois-licensed roofing contractors.

I applaud the Illinois Attorney General's office for bringing this action on behalf of the Algonquin area homeowners who allegedly were victimized by Tatgenhorst / Xteriors / Precision Roofing & Restoration. I only hope that this action proceeds to a point where these issues are resolved rather than the case be settled out and many of these issues end up not being addressed.

Don't get me wrong. All homeowners that were affected by the alleged actions of Tatgenhorst and his companies deserve to be paid back if the court decides in their favors and if the court finds that Tatgenhorst and his companies broke the law, he should receive the appropriate punishment. A person is innocent until proven guilty. It's just that there are pervasive business models in place in Illinois that employ the tactics outlined above (among other issues) and I feel it is very important that these issues receive court attention as well.

You contractors out there that believe you can negotiate claims for the homeowners and use what I refer to as "blank" contracts, watch this case closely. I do not believe the Illinois Attorney General's office would bring these allegations if there is no basis in law to do so.

You "old school" contractors who actually still write estimates and actually give the homeowner an honest opinion as to whether they have hail damage (by actually inspecting the roof before saying so) and respectfully ask the homeowners to accept your bid because you are the best choice for the homeowner, keep it up. I believe you are doing the right thing.

Let's see what happens.

Ok. You can start bitching at me and telling me to get a life and tell me what a Boy Scout I am.

Posted by hailchaserchaser at 1:54 AM 1 comments
Labels: Home Repair And Remodeling Act, Precision Roofing and Restoration, Public Adjuster, Tatgenhorst, Xteriors

__________________
Please Stay Tuned For A Very Important Message From Our Sponsor
http://www.rightwayroofingcompany.com/ www.rightwayroofingcompany.com
Roof Estimates, Roof Repairs, Roofers, Roof Leak Help, Elgin, Carpentersville, East Dundee, West Dundee, Sleepy Hollow, Algonquin, South Elgin, Huntley, Lake In The Hills, Illinois

buildpinnacle

Ed,

Wow, you really hate the stormers, don't you! I have to agree. As I agree with most of the blog there are a couple items that I don't agree with. As I do currently hold a Public Adjusters license in OK, it is not allowed in Texas. A few years ago, the big P.A. lobbyist monies got licensure passed primarily b/c contractors where taking their jobs for free just to get the work. They won, hence the license. The state further clarified all apsects of 'negotiating' a claim, etc and made it rule of law that one that negotiates the claim (PA) cannot directly or indirectly be involved in the work. Conflict of interest. In that respect, as I do believe the blogger is somewhat correct in the fact that you have to be a PA to negotiate insurance claims. I do not believe that eliminates a roofing or restoration company from providing trade expertise and assistance to their clients throughout the process. I am very careful as to what words I use on mailers, etc and the manner in which I conduct myself with an adjuster. I let them know that I am there by the HO's request to determine trade scope and price....as an expert in my trade. Albeit I know policy well, it usually doesn't need to come into play and legally, I cannot start spouting it off. Speaking by strictly rule of law. Field conditions with adjusters vary vastly.

Secondly, I have about 10 copies of the 'subject to insurance company approval' contract spoken of in the blog that customers of mine gave me during last years storm season from other 'out of towners'. NO LOCAL roofing company uses this type of agreement. That should be your first clue, Mr. HO. Just for gigs, I sent it to my lawyer for his reveiw. The ruling was this and hence my disagreement on this portion of the blog. The agreement is not 'illegal'....it's just not legal. In order to have a contract between parties you have to have consideration. The agreements are essentially a contract to enter into a contract. Therefore, not enforceable. I simply tell the potential HO the contract is not enforceable, they call the company and let them know they are going with me and I let the HO I will gladly speak with them if there are any problems. Never has been.

Now, that being said. Harmony will probably chime in on this. There is an enforceable agreement that has many names, but is essentially an 'Authorization to Proceed and Direction to Pay' agreement that is enforceable. These agreements are most generally used on large resotration projects such as fire, tornado, hurricane, or water losses in the tens, hundreds, or millions of dollars and are normally mulit trade. My particular agreement is several pages. I WILL NOT spend the days upon days required to accurately scope a large commercial fire loss and come up with my report so the BO can use it to settle the claim and hire his buddy for less money. This is the first thing I let the potential client know when I walk in. I inform them that they do have to make a decision to hire me before I go to work. I give them addresses of current fire or water losses we are restoring and several phone numbers of clients who can give them the experience of how we handled the loss. That may sound brass, but I don't have time for tire kickers on that side of the biz. You have days involved in a loss before you can even come up with an accurate estimate for reconstruction. All my major subs have to inspect with me to go over the current conditions of their trade such as electricians, hvac, plumbers, masons, steel, framing, etc. Not free.

So I guess the 'contract' form I may have a double standard on, but trust me, mine is very well written and very explanatory and has several items that are attached to at at later date and are specified in the original agreement.

For what it is worth, I had a friend of mine last year who got in bed with a stormer. He used to be one of the best local leak men years ago and decided to start his own company about 7 years ago. He has full page YP ads in all the books (he has no salesmen) and was an easy mark. Long story short, they were going to use his name, and basically subcontract sell for him. They had their own crews, etc. They eventually set up a bank account under his company's name at another bank as a dba of the scammers real name and started keeping all the jobs and all the money. I tried to warn him, but the numbers glossed his eyes. They owe him over 100K and just recently filed ch 7 after they got his attorneys letter. Funny thing about it, I told him he would have been close to a millionaire this year if he had done the 200 roofs himself. Makes me mad and sad for him. This was in a small East Texas town of 80,000. The stormers will prey anywhere.

__________________

Ed the Roofer

Very insightful response and quite explanatory regarding the legalities of the Contingency Agreement.

If you choose to not copy/paste that eloquent response yourself on that blog, may I have permission to site reference to your statements?

Still, regardless if the validity or enforceability of the charges that will arise to the contractor being charged, it is a road that I would prefer to not travel on.

Ed

__________________
Please Stay Tuned For A Very Important Message From Our Sponsor
http://www.rightwayroofingcompany.com/ www.rightwayroofingcompany.com
Roof Estimates, Roof Repairs, Roofers, Roof Leak Help, Elgin, Carpentersville, East Dundee, West Dundee, Sleepy Hollow, Algonquin, South Elgin, Huntley, Lake In The Hills, Illinois

buildpinnacle

Ed,

You may. The blogger really comes across to me as a disgruntled PA who is tired of roofers taking his 10%. He is mostly correct in what he speaks, though. Interestingly enough, I have known guys who have been in and out of the 'stormer' business for years and have heard their (what I thought at the time) amazing marketing plans, etc. And, of course, all the money stories. When you dig closer, the majority are just in it for the money, have no intentions to stay local and cover warranties or issues, etc. They are basically a mobile sales machine. The customers locally who have ran into them before I get involved and have signed the 'contingency contract' didn't even know what they were signing. The sales rep told them they had to sign the form for the office because it gave them permission to get on the roof and cover them with their workman's comp in case they fell off....the HO wouldn't be liable. Lies, Lies, Lies. Ridiculous.

__________________

jcs0009

And what of the Sales Person??
I am new to roofing. I got into sales because I wanted to get project management experience.
I have about ten years experience in residential design; mostly via cadd.
CADD is dead. I have compelted IRC via HBA. So I know to follow the manufacturers spec.
The company I am working with as an independent contractor is using the "ins.procd." approach.
I receive 35% of net; so the money is great. I also want to do the right thing so I watch the crews work.
I do not negotiate insurance claims; however I do offer to attend adjuster meetings;
"to watch and make certain they do what they say."
My boss who does negotiate the insurance claim is using a "C.I" on his business card as a title.
Clarify Please this statement "As I do currently hold a Public Adjusters license in OK, it is not allowed in Texas. "
WHAT is not allowed in Texas???

I watch the crews of subcontractors and attempt to make certain they are installing to manufacturers spec; by distributing literature on build day.

Specifying where you are from will help me understand your approach.
There are not many english speakers working in these trades here.
The average age of carpenters in the USA is 50 years old.

buildpinnacle

JCS. That post was kind of a scattershot with tons of questions. I am not exactly certain what you are asking, but I will try to attempt to answer your questions to the best of my ability.

First off, you can use whatever terminology you would like regarding 'negotiating' insurance claims and the only terminology that matters is that of the insurance company. Legally, you either have to be a licensed Public Adjuster or a board licesned attorney to actually 'negotiate' an insurance claim. I believe their definitions probably lean towards fighting over policy issues, time constraints, or 'legal' issues regarding the claim. In Texas, they are very strict how us contractors advertise our ability to assist an HO or BO in an insurance claim. I have had very few adjusters come at me with this angle to try to keep from dealing with me. The main reason is more than likely because we are professional, very knowledgable, and extremely helpful. I don't look at a claim from either parties angle. I look at it in sticks and bricks and what it is going to take to put it back the way it was. No more, no less. It doesn't take long for the insurance company to realize this and they back off. I probably do get away with a little more 'P.A.'ing' based on that approach.

Insofar as the law in Texas. You have to be a licensed public adjuster to legally adjust or negotiate claims for consideration on the insured's behalf. The maximum amount of consideration you can charge is 10% of the total replacement cost of the claim. In the event that the insurance company settles the loss within 72 hours of the claim being filed, you are only entitled to bill the insured for you time and expenses to that date. The statute clearly states that a public adjuster cannot directly or indirectly be involved in the recosntruction efforts of the claim. Now, they have made it illegal for contractors to act as public adjusters and illegal for public adjuster to also be contractors. I can legally hold both licenses and plan to get my recipricol license later this year as a public adjuster in Texas. However, I cannot be both on the same claim.

Some more advice as I can see you are new here. I had to get used to this too. The majority of our work is insurance loss work whether it be roofs or burnt down buildings. I took offense initially to the attitude portrayed to the hailchasers as I thought that I fell into that category as we do a ton of hail and win losses. We actually advertise for them. However, upon more reading and more posting, I quickly learned what was considered to be a 'stormer' around here. As noone here intends to blanket any company, the stormers we speak of are the companies who blow into a town four states away, buy out local roofers, make agreements with local roofers, or set up shop to get as many roofs put on as they can, collect thier monies and blow out of town with all their money and their warranties. There are companies who chase these storms, set up shop and do good work, but there are tons of horror stories, bad work, and screwed HO's in the wake from the ones that do. If you are confused or offended by mine or Ed's position or our rants, don't be. If you are an honorable salesman working for an honorable company, join the fight. If you question the integrity of your boss or your outfit in the least bit. You may learn something around here.

__________________

buildpinnacle

By the way, JCS. Humor me. ins.procd? IRC? C.I.? Clue me in.

__________________

jcs0009

"I don't look at a claim from either parties angle. I look at it in sticks and bricks and what it is going to take to put it back the way it was. No more, no less."

Dont most building codes require all buildings being modified to be updated to current IRC codes; here I am specifically asking about Roof, I&W and drip edge; which was minimally 2003 IRC. So, putting it back the way it was really is not the correct thing to do if the house was built in 2000 or before.

Hey, Thanks for the encouragement. Yes, I do want to know what to look for to determine what reputable means and I appreciate Ed and your opinions. I do want to be honest and reputable. It is confusing starting out and at the same time a we all have to make a living. So, to know everything I about the product and services I am selling makes alot of sense, adn why I am here.

jcs0009

We get paid and negotiate INSURANCE PROCEEDS. IRC = ICC International Residential Code. I dont know what CI means? I am not one of those. Anyone? Its like PHD or PA??

buildpinnacle

[quote=jcs0009;676473]"I don't look at a claim from either parties angle. I look at it in sticks and bricks and what it is going to take to put it back the way it was. No more, no less."

Dont most building codes require all buildings being modified to be updated to current IRC codes; here I am specifically asking about Roof, I&W and drip edge; which was minimally 2003 IRC. So, putting it back the way it was really is not the correct thing to do if the house was built in 2000 or before.quote]

JCS0009:

The intentions of my comment are not as blanket as it may have sounded on paper. To answer your question about code upgrade, yes. You have to put the property back into it's pre-existing condition and up to all applicable codes. However, the insurance company is not necessary liable for the entire code upgrade. Insofar as a roof, it would never be an issue. When you are working on a $2 million fire loss on an old commercial warehouse. It can become an issue. Most generally, the commercial policy will stricly outline the insurance companies liability for code upgrade. Normally, it is around 15% of policy limits.

__________________

buildpinnacle

JCS,

You mentioned you get 35% commission. From the guys I know who have retired from the 'storm trooper roofing sales' club, that seems somewhat normal. The company generally takes anywhere from 10-20% from the top as front office, subtracts actuals of materials and labor, and then pays the applicable commission percentage split from the resulting net.

What I can tell you is this. If you are with a good firm, with a good reputation, with good crews...you should be able to bank while the roofs are there. Clover leaf every single job you sell. Go across the street, each side, and behind the last sold house. You can get all the info on these people generally from the last sale and show up as a quasi referral. There is absolutely no reason a salesman who is willing to work the hours shouldn't close 2-3 deals every single day. When you go by where your men are putting on your roofs, get your referrals at that time.

Really good roofing salesmen easily make six figs at this and the masters make 3-400K. I have threatened many times to work 6 months out of the year, take my qtr mill and go home. Unfortunately, once you've owned a business it's like having kids. It quits being about the actual money and becomes more about building, and nurturing, and expanding, and advertising, and hiring, and developing and the opportunity to make those millions always dangling in front.

Here's to you kicking some A$$!

__________________

JR&R

[quote=buildpinnacle;673167]Ed,

essentially an 'Authorization to Proceed and Direction to Pay' agreement that is enforceable. These agreements are most generally used on large resotration projects such as fire, tornado, hurricane, or water losses in the tens, hundreds, or millions of dollars and are normally mulit trade. My particular agreement is several pages. I WILL NOT spend the days upon days required to accurately scope a large commercial fire loss and come up with my report so the BO can use it to settle the claim and hire his buddy for less money.

Pinnacle,

I am a contractor in Mineral Wells. This past year I was schooled (still learning) in the storm chasing industry. I agree that there are many fly by nighters, but I have also found that there is a way to make a decent living, honestly in this line of work, as well as in the restoration industry as a whole. Before the hail storm, we were a turn-key renovation company that was built on strictly referrals, no advertising at all. Because of that, our sales increased drastically when all of those customers and their friends called us for damage repairs.(I am telling you all this because I don't want to be classified as a 'stormerchaser'.) I partnered with a 'chaser' because I became overwhelmed with how to keep up with the work. He introduced me into using exactimate in handling the claims adjustment of the larger claims. Every house I worked on was under paid due to the hail size, and extent of the damage. Using exactimate made it easier to get approval on the adjustments. However, I did get burned a couple of times, with homeowners trying to pocket the money we negotiated or hire someone cheaper. My view is that the contractor working the claim has the right expect to be performing the repairs, otherwise, a low-baller should only be paid his price. From reading this thread there are issues with double-dipping and contracts. What is the best way to outline the contract so that it is a valid, legal document that will stand up in court, but protects both the contractor and homeowner's interest. Also, how do you state the price when many times there are grey areas on what the adjuster may or may not pay?

buildpinnacle

JR&R:

Let me first apologize for not calling you back as I have received a couple messages from you over the past few weeks regarding your post. The agreement you are asking about is referred to by many different names and titles. It is a very vital part of any insurance restoration contractor's formbook. It is also probably the most coveted document in our business as every contractor has played with a version they have found as a starting point and developed it through trial and error, lost lawsuits, hours of lawyers fees, etc. As I don't share my forms with anyone, I will steer you in a direction for some samples that you can purchase that will give you something to start from. This website is several pages deep in a google search, but if you look hard enough, you could find it. Go to www.americasrestorationsystems.com and spend the $49.00 and download their forms package. Take this to your lawyer and start from there. Insofar as roofs go, I don't see anything necessarily wrong with a local company using a blank price contingency agreement to secure a client relationship, or to show the insurance adjuster you are under contract so that depreciation will not be applied to the claim. My opinion and experience is that the 2 part checkmark roofing contingency contracts will not hold up in court.

__________________

JR&R

Pinnacle,

I respect the fact that you don't share your contracts. I picked up that fact after reading some of your other posts. In retrospect, I just as well have asked the 'how much should I charge for'...question. I have begun working with a lawyer that specializes in contract law, but I will check out the forms you referred to. Thanks for the insight that you do provide on this forum.

Brandon

buildpinnacle

Good luck Brandon. You're venturing into a very profitable business if marketed and operated properly. Those who hate insurance claims do so due to the hassle and the 'low profits'. Those of us who enjoy them do so due to the ease and 'large profits'. Go figure. Different strokes for different contractors. You're in a pretty good area if you can expand to the West FTW area.

__________________

buildpinnacle

I just read the last sentence of your post #12. The answer is very simply Xactimate/Integriclaim/Simsol. Xactimate is the most widely used line item insurance pricing softare in the industry. Go to www.xactware.com and get the demo. Since you are close to Dallas, spend the money and the couple days for the intro level training and move up the training ladder from there. To answer your question simply and it really is this simple.....you probably know more than the adjuster about general construction tecniques, but you have to be able to write a concise, encompassing estimate that cannot be argued with. That is the first and most important key to closing large losses and turning small ones into larger ones.

Insofar as the 'price'. There is not one. Your contingency agreement for a fire loss will be one document in your package of contract documents and will be stated clearly as such. You will refer to the others including the attachment of the adjusters summary, payment schedules, etc.

__________________