Navigating Insurance Claims: What Restoration Contractors Should Know
For restoration contractors, the relationship with insurance companies often feels adversarial. While that can be the reality, when it comes to navigating insurance claims and dealing with adjusters, there are ways that you can make it a smoother process and also potentially grow your business through these relationships.
That’s not to say there aren’t very real challenges for restoration contractors, especially as they’re trying to deal with claims and get paid. If you can understand the challenges you’re facing, you’re in a better position to deal with them head-on and proactively in your work.
Reasons Insurance Companies Delay Restoration Claims
Contractors should understand what they’re up against when it comes to delayed restoration claims.
The toughest part of the job is usually getting paid, leading your company’s cash flow to suffer.
There are some core reasons that restoration claims can be denied, meaning your payment is too.
First, insurance companies make money in a couple of ways, one of which is on the interest they earn on collected premiums. Insurers will often invest in short-term assets to make as much money as they can on premiums. The longer money is in an interest-bearing account, the more money the insurer makes.
The other issue is that when a homeowner files a claim, there is frequently a dispute between them and their insurer. When the claims process starts, an insurance adjuster will assess the damage and then provide a quote. The homeowner is interested in replacing the value of what they had, so they have to prove not just that but the condition prior to the damage.
Restoration contractors might be stuck in the middle, and they may start working before an emergency claim even begins. That can lead to an insurance company finding your charges to be more than what they will pay. When there’s a restoration estimate, that might be less than the contractor expects.
Homeowners, especially following a disaster, might be cautious about paying a restoration contractor. They could be skeptical, and if the insurance company is writing a claim check directly to the homeowner rather than you as the contractor, that can create new problems. The owner might decide they don’t want to pay for the work you’ve already done once the check comes, for example.
How Can You Speed Up Your Payments and Protect Yourself?
One of the best tools available to restoration contractors when dealing with insurance claims and homeowners is to utilize the Assignment of Benefits, which we’ll discuss in more detail.
There are other steps available, too.
You can use preliminary notices before you begin work. A preliminary notice is a document you can send at the start of the project, getting everyone on the same page.
When using a preliminary notice, you outline the work that will be done and your procedures and processes. You can include an estimate of the total price of the work, a full description of the work you expect to do, and the materials being used.
When you use a preliminary notice, you’re providing your name to an insurance company before they write any checks, and you’re reminding everyone that you’re well aware of your rights.
You can also use a notice of intent to lien if needed. This lets homeowners know that you’re waiting for your payment, and they might then be more proactive about getting paid by their insurer so they can pay you.
Restoration contractors may end up using mechanics’ liens while homeowners wait for their claims to be paid, which can also speed things up for you.
Homeowners might not always advocate for themselves with their insurance company, especially since the money is going straight to the contractor, so there’s less incentive for them. That will delay your getting paid, so you might use strategies to encourage or even force their hand to stay in communication with their insurer about payments.
The Assignment of Benefits
For restoration contractors, the assignment of benefits can be a critical part of your work. The AOB allows you to get paid directly by an insurance company for the services you do for homeowners.
AOB is legal because of the freedom of contract, stating that parties can make private agreements and the government can’t interfere in these, as long as the contract isn’t violating the law.
AOBs are the norm in healthcare and increasingly are in restoration work by contractors as they deal with homeowners’ insurance companies.
As a contractor, when you use the AOB, you can do the work and get paid, lessening the burden on the homeowner. For homeowners, an AOB helps them avoid negotiations, and they don’t have to pay the whole bill upfront and then try to get reimbursement from their insurer when the work is done.
Homeowners dealing with damage and destruction to their property are focused on getting back to a sense of normalcy with the least amount of hassle, which is what an AOB helps them achieve. Their insurance rights are transferred to you as a third-party contractor.
You can start working immediately, and you will receive a check made solely payable to you that will be sent directly to you. You can then cash it without any other party’s endorsement.
In Florida, there have been recent legislative actions related to AOB contracts, with burdens falling onto the shoulders of restoration contractors. For example, contractors are now required to submit itemized descriptions of the work to be done, adding an additional level of complexity on your part if you’re relying on an AOB to help a homeowner return to normal as quickly as possible.
An AOB can simplify otherwise complicated and time-consuming negotiations and reduce the risk of litigation, so at RAF, we’re advocating against anything that burdens independent contractors relying on them to do business.
What If There Are Issues With the AOB?
While an AOB is ultimately what tends to be the best option for restoration contractors and the homeorwner, that doesn’t mean an insurer will always make this easy, either. For example, if an insurer receives notice of your AOB, they might still list other parties on a check when they cut it. The carrier might not even send the check to you, instead sending it to the insured homeowner.
As part of navigating claims, know your rights. When an insurer is aware that an AOB has been made, the insurer isn’t allowed to deal with other people.
In Florida, the Second District Court of Appeals has upheld that once there’s a valid assignment, the individual or company receiving the notice of assignment can be liable to the person who received the right if it’s later paid to someone else.
Since you have the right to the insurance proceeds, an insurance carrier can only get rid of the debt they owe by paying you if you have an AOB.
Even if an insurer sends the money to the homeowner directly and they keep the money, the insurance carrier can still be liable to pay you the entire amount you’re owed.
The more you understand how insurance companies work and know your rights, the better position you’re in to advocate for yourself as you navigate claims.
Insurance Companies Can Help You Grow Your Business
A lot of what we talk about above are some of those worst-case scenarios that can occur. If you know your rights when it comes to insurers and exert them, you can ultimately find they’re a good resource to grow your business as a restoration contractor.
You want to show insurance carriers that you’re a reliable restoration contractor and a trusted partner.
Get your name out there in your local insurance industry through networking events.
When you do work for customers, deliver an excellent experience, especially since it is such a tough time for them.
If you work with an insurance company and things go smoothly, make sure you follow up with them and let them know you’d value their referral.
Some of the things that insurers focus on in the claims process that you can target to build strong relationships with them include being more cost-efficient, eliminating waste, providing faster service, and having high levels of customer service and satisfaction.
When you can figure out the insurer’s perspective and the ins and outs of the claims process and deliver what they’re looking for, you may find yourself in a position with a steady stream of referrals.
We're Your Advocate and Your Voice
At the Restoration Association of Florida (RAF), we understand the challenges you face as a restoration contractor. We’re advocates for independent contractors specializing in restoration work. We work to preserve your rights, and we also provide educational resources.
When you become a member of RAF, you’re represented in the Florida state legislature, you’re part of a network of other professionals, and you receive an education that’s relevant and timely in the industry.
While the hope is always to work well with insurance companies, the reality is that it doesn’t always happen, and the relationship can be contentious, especially with the Assignment of Benefits. So we help you understand your rights, empowering you as a professional independent restoration contractor.