Insurance Fraud NEWS
$4.5M contractor fraud ring busted in Colorado
March 27, 2013, Denver, CO
Recently two of the chief executive officers of Disaster Restoration Incorporated, headquartered in Denver, Colorado were charged by the Justice Department with multiple counts of mail fraud and conspiracy to commit insurance fraud. The total dollar count of the fraud comes close to $4.5 million. Disaster Restoration Inc. is a General Contractor specializing in insurance claim restoration; they specialize in responding to an emergency situation to your home or business by doing such things as removing wet carpet and padding in your front room to larger losses for a commercial business.
According to the charges, Disaster Restoration was instructing their sub-contractors who would actually prepare the estimate of repair, to increase the estimate by at least 20%-30% above what the actual cost would be, and Disaster Restoration would then submit the estimate to their insurance company client for payment. After the deal was completed, the paperwork would be sent through the U.S. Mail Service, leading to the mail fraud charges.
Most likely, we may also see insurance claim employees named in this legal action because an operation such as what Disaster Restoration was running cannot exist in a vacuum.
This unfortunate story only serves to confirm what I have felt for a long time, which is that the computer estimating programs used by all of the insurance property claims units that I know of are recipes for disaster. The basis for the computer estimating system rest on the price setting for a certain type of work in a certain geographic area; such as the cost for painting interior drywall in San Francisco, California may be different from the cost Omaha, Nebraska. The different prices which apply are obtained from the Contracting industry in the geographic areas where the work is being done.
For Disaster Restoration Inc., their method of increasing the estimate would be to have far too many fans or dehumidifiers in a single room, in order to dry the wall out quicker. However, the fans would be left on for days and days without being reduced in number as the room or building would dry out. Charges for the fans would run $30 - $40 per day/ per fan and a single room may have a dozen fans in it. Many times Disaster Restoration Inc. would also charge for the use of a portable generator, due to the fact that the electrical strain on a home would be too great because of all the fans blowing at the same time.
Due to the wide spread fraudulent actions of far too many contractors, I believe it may be time for Adjusters to start writing their own estimates and not rely on the dollar amounts spit out by some computerized estimating system.