I see estimates from contractors from nearly every state. As do I. Many times submitted well before the adjuster gets involved. In those cases (before adjuster involvement) those estimates are given by inexperienced contractors unfamiliar with most or all of the detail of the processes discussed here. They are typically the same contractors who bid themselves out of business in five years by competing for retail business at low profit rates. Taking the low, mid and high range of those who estimate rather than “negotiate” and averaging out a MOR price would likely give P&C ins an edge - XM8 pricing, perhaps? That estimate of yours will put you in the top .00000000001% of the market.
The policy does not owe that price regardless of what agreement you have with the homeowner prior to the adjuster involvement. *Considering the fact that the CEO’s from Allstate, SF, Farmers, AmFam, Nationwide, Met Life, and others have agreed with my logic from above and below and have paid similar to what I proposed (remember, I always allow some room to slightly negotiate downward, if need be), their approvals of and full payment of my “estimates” conclusively defeat your argument. *
HO-0003 Policy-Section I Conditions-3. Loss Settlement -
b) Buildings under Coverage A or B at replacement cost without deduction for depreciation subject to the following.
- …(80% requirement) …we will pay the cost to repair or replace, after application of deductible and without deduction for depreciation, but not more than the least of the following amounts:
a) the limit of liability under this policy that applies to the building;
b) the replacement cost of that part of the building damaged for like construction and use on the same premises; or
c) the necessary amount actually spent to repair or replace the damaged building.
- We will pay no more than the actual cash value of the damage until actual repair or replacement is complete. Once actual re-pair or replacement is complete, we will settle the loss according to the provisions of b.(1) and b.(2) above. (b.2 refers to policies that are under insured and therefore ACV only)
One could reasonably content that that estimate is more than necessary based on the fact that it will be the most expensive bid in the market by far. *But, in the case where a contingency agreement contract is signed with the insured, it will be the only “bid”. Now, as just an example, if three pro ins repair experienced contractors (not free estimators) who understand the value of making a profit, understand economics, market value, doing top quality work they can stand behind, understand the process also from an insurance industry perspective as well as construction, etc. “bid” on the job, my price might end up in the middle or even the lowest of the three. Because I reject the specious arguments P&C insurance makes for their repair pricing being “fair” (not more than neccessary), and instead, base my pricing on the fact that P&C ins bases their premium pricing on future costs for full demo and rebuild which logically includes 100% O&P and code upgrades, my prices may appear higher, but in reality, all things considered, there are where they should be.
If the insured is paying a premium to cover a claim that would cost the ins co $30,000 2.5 years from now that would cost $27,500 today - and my price was $27,500, I would be right on target. But, that’s not how P&C ins wants to pay. They know the current repair price based on the premiums paid is in fact $27,500 - that’s what they owe - but then they call $22k, $24k and $26k the low, mid and high ranges and attempt to pay the MOR at $24k - or $3,500 less then owed per the insured’s premium. Even if they pay the high range, they are paying $1,500 less that they owe per the premium paid. That would suggest that my logic which the above mentioned CEO’s agreed with would bring the average price quoted on the “contest” estimate somewhere around $16,250 or there about. - *
If insurance were taken out of the equation no reasonable homeowner would ever pay that when there are many other perfectly good contractors who are significantly less.
Before I quit doing retail a few years ago, I was usually the highest bidder and I usually got the jobs and made good to great profits. Some guys may have contracted more jobs but for less money. I slept well, did they? Must have had some unreasonable customers, I guess.
You could have an insured that signed the contract with a team of lawyers present in front of the local judge and it would not hold up. No offense, but…you’re sounding like you’re reading from an insurance adjuster manual…
And same insured agreed to assist you and was willing and eager to pursue litigation on your behalf after the supplement that was turned down after much haggling and re-inspections it would still likely not hold up.
If the supplement was not valid, I would not have turned it in.
The lawsuit would likely be filed for breach of contract and bad faith. In the early stages a motion would be file for summary judgment for the insurer based on
While I applaud your creativity and well thought out explanations to back your price I do not see how this price could be something that will get through often enough to be an effective way to base a business model.
The policy does not owe a price just because a contractor has a signed sealed contract. It owes based on reason, market value, and the law. And it is on that reason, market value (RTA as opposed to ISO below market value) and the law that I base my pricing.
In the situation of this exercise if your estimate was the signed airtight contract and the others were merely comparison bids I do not believe there is a court, judge, insurance commission on this planet that would agree that the policy owes that price. see above…
All that being said I see a lot of interesting points in all these estimates (even yours LMB ) please feel free to give me any feedback or opinions on mine.[/quote]