Consumer education key to combating home contractor fraud

New book gives homeowners step-by-step details on dealing with contractors

contractor bookThis time of year historically has not been kind to insurers and property owners. In the past we have seen Hurricanes Andrew and Katrina as well as Superstorm Sandy wreck havoc on everywhere from South Florida, the Gulf Coast and the Jersey Shore, New York and Connecticut. This year we have the Napa, California earthquake, plus tornados and hail storms in the Midwest.

These and other events underscore the importance of helping homeowners prevent becoming victimized a second time by crooked contractors. Many of these fraudsters are fly-by-night operators who prey on vulnerable property owners desperately wanting to get their lives back to normal again.

The Coalition partners with insurers, consumer groups and government agencies in targeting shady contractors. We support strong legislation giving consumers the ability to rescind a contract if the repairs are deemed unnecessary by their insurer. The contract also must clearly state that the consumer has the right to rescind the agreement within a specified number of days.

We also want to make sure that contractors do not act as unlicensed adjusters to 
act as a “go-between” with the homeowner and their insurer, as well as stopping adjusters from acting as contractors for the repair. Contractors also should be penalized for offering any inducement including waiving an insurance deductible to get a consumer to sign a contract.

Anti-fraud legislation helps a lot, but just as vital is public education. Consumers need to equip themselves with information on preventing contractor fraud — and that needs to happen long before the loss occurs.

A good place to start that education is with a just-published book, Don’t Even Think About Ripping Me Off. It’s a step-by-step guide to help consumers navigate the often-confusing process of dealing with contractors and home repair.

The book was published by Phae Moore, executive director of the National Center for the Prevention of Home Improvement Fraud, who became an advocate after her grandmother was badly victimized by a shady contractor.

The books makes for a good gift, especially for seniors and young homeowners. Insurance professionals should also consider distributing the book to their policyholders and clients. You can order the book online at NCPHIF’s website.

I have one on my bookshelf. Shouldn’t you?

Sandy victim in New Jersey beats shady adjuster in court

Jury rules against Texas adjuster for charging thousands for doing no work

Soon after Megastorm Sandy struck New Jersey in October 2012, unsavory contractors and public adjusters began coming out of the woodwork to reap the riches from stricken homeowners and their insurance companies.

While most contractors and adjusters are honest and honorable, natural disasters tend to bring out the ethically challenged ones, even some that are unlicensed and from far-away states.

That’s a reality that resident Mike Kramer lived through for the last year or so as he battled a Texas-based public adjuster who showed up at his doorstep after the storm. The surge from Sandy brought two feet of water into Mike’s bay-front summer home in Harvey Cedars, N.J. An affable and convincing salesperson used the typical sales line that Mike was apt to get a lot more out of his insurance company by hiring a public adjuster.

Having neither the experience of a major loss nor working with a public adjuster, Mike signed on — even though his insurer already had given him a $12,000 check as a down payment on his claim.

Months passed, the water receded and soon the insurance company paid the remainder of the claim — a total of $80,000. Mike began to rebuild. Then a bill for $10,700 from the public adjuster showed up in Mike’s mailbox. He refused to pay.

“There was no evidence that the public adjuster did anything to help settle my claim,” Mike told me in a phone interview last week.

The public adjuster sued Mike, telling him that he’d better pay up because it would cost him more to hire a lawyer to fight the suit. Little did the public adjuster know that Mike had a good friend who was an ace attorney and who was just as outraged over the public adjuster’s arrogance. He took Mike’s case pro bono.

The drama played out last week in a New Jersey courtroom.The adjuster couldn’t produce any evidence that he did any work on Mike’s behalf. In fact, he apparently didn’t even send Mike’s insurer a letter of representation. Still, Mike did sign a legal contract to pay.

But that didn’t matter in the end. The jury decisively ruled against the adjuster, dismissing his suit. In effect, the jury said “Don’t come into our state, make promises and take advantage of people by failing to do any work.”

Mike also hopes others will learn from his experience. He’s posted a YouTube video, advising storm victims to:

• Don’t sign on with a public adjuster until after you’ve received a settlement offer from your insurer. Know that you have up to a year to negotiate a claim with the insurer.

• Give the insurer adequate time to fully respond to your claim. That could take months during a significant weather event. Hire a public adjuster if the insurer doesn’t respond to your claim.

• If you sign on with a public adjuster, request weekly updates with time sheets and e-mail logs to ensure the adjuster is working on your behalf.

Good advice — and a warning to would-be scammers.

Note: For more tips on avoiding scams by public adjuster, visit the consumer section of InsuranceFraud.org.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

Riptide of fraud may follow Sandy’s path

Now that cleanup is beginning, homeowners in affected areas must increase their vigilance

SandySandy is gone, but she has carved out massive damage that will take months to repair.

Now that cleanup is beginning, homeowners in affected areas must increase their vigilance for scam artists who inevitably follow natural disasters.

Sandy may be the one of most expensive storms in recent history. Contractors will be in great demand as the repair network gets stretched to the limit. Shady operators inevitably will descend on disaster areas, trying to bilk homeowners and their insurers.

These crooks prey on the disaster scene’s chaos and anxiety of consumers as they work to put their lives back together. Fraud fighters, consumer groups, insurers and government agencies must get important messages onto the streets.

• Make sure a contractor is licensed, if required. And if not, check with the proper agencies and insurers to make sure the contractor is reputable;

• Avoid contractors who go door-to-door. They’re almost always up to no good; and

• Work closely with your insurance company to make sure the right repairs are done, and done right.

Megastorms like Sandy also should prompt lawmakers to better protect disaster victims from dishonest contractors. A half-dozen states this year enacted laws giving homeowners more protection from storm chasers.

Here are key contractor laws that should go on the books in more states:

• Let consumers cancel repair contracts if the property insurer denies the claim. This protects consumers from contractors who try to con insurers into paying for repairs that are shoddy, needless, inflated or never even done;

• Contract forms also should clearly mention the consumer’s recision rights. And that it’s a crime for the contractor to offer consumers inducements (such as paying the deductible) to sign up, or for the contractor to act as an intermediary between the consumer and the insurer (i.e., an unlicensed adjuster); and

• Require contractors to register with the state. Registration is not a state license, but will help ensure that a state knows which contractors are doing business within its borders.

The floodwaters now are subsiding, but next may come a riptide of fraud. We must be ready.

About the author: Howard Goldblatt is director of government affairs for the Coalition Against Insurance Fraud.