Waiving Deductibles: Legal? Ethical?

new roof

Curious if Kangaroo Contractors can “absorb” your deductible? And how this works? Our peer, Chris Tulp of Premier Roofing Company in Denver, Colorado nailed this topic right on the head. Check out what he has to say about this situation:

“How is it that roofing contractors are “waiving” deductibles?

Well, in the simplest of terms, they’re fibbing to the insurance and mortgage companies. A homeowner’s insurance policy is a contract between the homeowner and the insurance company. Per this contract, homeowners trade annual premiums in exchange for protection from catastrophic damages to their properties minus a deductible. Just as you would have the legal protection if your insurance carrier were in breach of contract and refused to pay a claim, your insurer has legal protection from you if you fail to meet your obligations (i.e. you or your contractor provide inaccurate information to save on your deductible or premiums). Many contractors will advertise that a yard sign can be used as an “advertising credit” for the deductible amount. If they are planning to invoice for the full insurance claim, they must divulge in their invoice to the insurer the cost of work to be provided on the project. If they are charging the insurance provider $10,000 for work they actually do for $9,000, the roofer is inflating the price for goods sold to account for this discrepancy. Insurers would balk at the notion of subsidizing advertising for contractors…if they knew about it of course.

If an insurance company knows the work is being completed for less, they will provide less money. For example: If the insurer finds out that the homeowner was able to complete the work for $9,000 instead of $10,000, they would only release $8,000 total instead of $9,000 – again forcing the insured to pay the $1,000 deductible to the contractor. Long story short – the discrepancy between the price billed to the insurer and the price billed to the homeowner is technically a breach of contract between the insured and the insurer – regardless of whether it was facilitated by a contractor.

Some roofers will argue that it is entirely up to the contractor to decide what they are doing to get the work. If they want to pay a customer $1,000 to get their business, they should be allowed to do that regardless of whether an insurer is involved because the market should dictate what the acquisition cost of a customer should be. If the contractor is literally cutting a check back to the homeowner for “advertising” technically this would require that a Form-1099 be issued to the homeowner as the Federal Government requires transactions greater than $600 to be declared and for the homeowner to pay income tax on that transaction. I doubt contractors that cut checks back to homeowners are collecting Social Security numbers and properly filing their taxes for them – leaving another important detail out of the conversation.

Whether this is a crime for which homeowners or restoration contractors are likely to get caught is an entirely different argument as I wouldn’t recommend trying it either way. It strikes me as sketchy at best to falsify information you give your insurance company or to work with someone offering to do it for you. How many legitimate companies have at the center of their business model a plan to provide misleading information to the party cutting the checks?

By the same token, I can see why it happens so often: If I were new to the insurance claim process and a seemingly legitimate restoration contractor offered to absorb my deductible, I wouldn’t think for a minute that I could be in breach of contract.

In the end, if your insurer were to catch you or your contractor, my guess is that your contractor wouldn’t take all of the blame. So be cautious with contractors like these, they may be cutting corners on your project, or worse yet, putting your name on a falsified invoice they provide to your insurer. In the end, the old adage: “If it sounds too good to be true- it is,” explains everything better than I can, so be sure to do your research and choose a company with a long track record of customer satisfaction. Don’t let your guard down; check references, never give money to a contractor before the materials show up, and make sure you’re not getting put in a situation where you may be breaking the law just to get a “better deal.”

Glossary of Common Roofing Terms:

Ever curious about what a certain word means when speaking to your roofer? Here is a list of common roofing terms so that you understand the process a little better.

Algae Rooftop fungus that can leave dark stains on roofing.

Angled Fasteners Roofing nails and staples driven into decks at angles not parallel to the deck.

Apron Flashing Metal flashing used at chimney fronts.

Asphalt A bituminous waterproofing agent used in various types of roofing materials.

Blistering Bubbles or pimples in roofing materials. Usually moisture related. In shingles blisters are caused by either moisture under the material or moisture trapped inside the material.

Buckling When a wrinkle or ripple affects shingles or their underlayments.

Counter Flashing The metal or siding material that is installed over roof-top base flashing systems.

Crickets A peaked water diverter installed behind chimneys and other large roof projections. Effectively diverts water around projections.

Cupping When shingles are improperly installed over an existing roof or are over-exposed, they may form a curl or cup. May also be due to a manufacturing defect.

Deck The substrate over which roofing is applied. Usually plywood, wood boards, or planks.

Drip Edge An installed lip that keeps shingles up off the deck at edges, and extends shingles out over eaves and gutters, and prevents

Eaves The roof edge from the fascia to the structure’s outside wall. In general terms, the first three feet across a roof is termed the eave.

Fasteners Nails or staples used to secure roofing to the deck.

Flashing Materials used to waterproof a roof around any projections

Granules Crushed rock that is coated with a ceramic coating and fired, used as top surface on shingles.

Roof Louvers Rooftop rectangular shaped roof vents. Also called box vents, mushroom vents, airhawks, soldier vents.

Selvage The non exposed area on rolled roofing. Area without granules. Designed for nail placement and sealant.

Soffit Ventilation Intake ventilation installed under the eaves, or at the roof edge.

Starter Strip The first course of roofing installed. Usually trimmed from main roof material.

Tab The bottom portion of traditional shingle separated by the shingle cut-outs.

Tear-Off Removal of existing roofing materials down to the roof deck.

Transitions When a roof plane ties into another roof plane that has a different pitch or slope.

Underdriven Term used to describe a fastener not fully driven flush to the shingles surface.

Underlayments Asphalt-based rolled materials designed to be installed under main roofing material to serve as added protection.

Valleys Area where two adjoining sloped roof planes intersect on a roof creating a “V” shaped depression.

Warranty The written promise to the owner of roofing materials for material related problems.

Waterproof Underlayments Modified bitumen based roofing underlayments. Designed to seal to wood decks and waterproof critical leak areas.

Woven Valleys The method of installing valleys by laying one shingle over the other up the valley center.

 

Personalize Your Roof with Your Own Color and Style!

Did you know that your roof can be your own style? You can personalize everything including your style and color. There are four different style options that begin with basic and go to a designer look. GAF has a program with HGTV HOME Design Expert Nancy Fire who can help you choose your color. The options are incredible including everything from browns and reds, blues and greens, grays and blacks and beiges and golds. There is certainly a color that will help to make your roof your own. You can choose a color that matches your brick and siding or one that brings out something different. Changing the color of your shingles can have a dramatic effect on the appearance of your home. Recently we changed the color of the shingles to the beautiful GAF Timberline HD Barkwood color from the lighter Shakewood, giving the house a new look.

New Roof Color before and after Change

Wylie, TX… Still Recovering 3 Months Later

It has been three months since baseball-sized hail pummeled Wylie. Cars, homes, and yards were destroyed. Initial estimates announced 80% of the homes in Wylie were damaged and millions of dollars’ worth of damage reported. Recovering from such damage will take months and even years. The backlog for repairs, materials and labor … on top of the insurance claims’ red tape, create delays. The good news is local roofers, like Kangaroo, are here to stay and walk with you through the process. Here is a roof we recently completed in Wylie. We were proud to be one of first responding roofing companies and able to help get some of these hail victims’ homes back in order.

 

 

 

 

roof materialcontractor installing roofcontractors replacing a roof

 

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