IS IT LEGAL TO “WAIVE”, REIMBURSE OR ABSORB A DEDUCTIBLE?

As recent storm work has come through, our salespeople are being asked once again if it is possible for us to cover the deductible for their home insurance claim for a roof replacement. This puts our representatives in a challenging and awkward position because there are no great answers to give a homeowner.

After just about every major storm, less ethical roofing contractors begin this prac-tice and create the issue of paying deduct-ibles that then effect all roofing contractors in our area. One common ploy is to offer to absorb the homeowners deductible while telling homeowners it is perfectly legal or fine to offer some sort of reimbursement for that deductible, be it in the form of advertis-ing or gift cards. No one wants to be told that they are lying, cheating, or committing some sort of crime for asking what seems to be a perfectly reasonable question. All we can do is explain the insurance claim pro-cess, then let homeowners determine for themselves what is legal, or what is ethical, in how one does business.

ROOFING INSURANCE DEDUCTIBLES –

Consider the mindset of a roofer willing to compromise on the law (committing insur-ance fraud). Is this someone who will cut corners on your home, or replace quality materials with junk? Would this be some-one you trust to work on your house?

Some roofers will argue that it is entirely up to the contractor to decide what they are willing to do to get your work. If they want to issue a gift card to reimburse for a deductible, they should be allowed to do that regardless of whether an insurance company is involved, because the market should dictate what the acquisition cost of a customer should be. If the contractor wants to pay $1,000 back to a customer whose claim was $10,000 and deductible was $1,000 (leaving $9k for the work), they should be allowed to do that if an insur-ance company is involved or not, because that is what the two parties have decided to do. In cases like this, if the contractor is literally issuing a gift card or writing a check back to the homeowner for Adver-tising or simply good will then technically, this would require a form 1099 to be

issued to the homeowner as transactions greater than $600 are required to be declared, and the homeowner to pay income taxes on that transaction. I doubt contractors engaged in these practices are seriously collecting social security numbers and properly filing their taxes for them. This type of financial transaction could be considered tax fraud and yet again this shows another example of a deficiency in ethics.

When you dive into the above scenario further, it is the insurance carrier’s responsi-bility to pay for the value of the damaged property minus the deductible. If the con-tractor can do the work for $9,000, then the insurance carrier theoretically should have paid $8,000 and the homeowner the remaining $1,000. This could also be con-sidered insurance fraud by inflating the price of the initial estimate.

Whether insurance fraud is a crime in which the parties will ever get caught is a different argument, but we would never recommend flirting with this type of behavior.

How many legitimate companies have at the core of their business model a plan to either mislead someone or come up with ways to legitimize an illegitimate act?

By the same token we can see why it hap-pens so often: If I were new to the insur-ance claim process and a seemingly legiti-mate restoration contractor offered to absorb my deductible, I wouldn’t think for a minute that I would be engaging in a fraudulent act.

At Pinnacle Roofing our Core Values are:

Do What’s Right. Do Everything to the Best of your Ability. And; Show People You Care.

We believe in corporate and per-sonal ethics. Not just because it is the law; but, because it’s the right thing to do. We prefer to work with honest, hardworking home-owners, so we may lose a few customers eager for a deal. But we wouldn’t want to work with those customers anyway.

TO SUM IT UP: if you were to be caught engaging in these schemes, most likely your contractor wouldn’t take all of the blame and get taken down alone. Be cautious with contractors like these because when they offer free services or hand you money at the end; that money comes from some-where- like cutting corners or cheaper materials, lack of insurance or ultimately the worst: a falsified invoice handed to your insurance company.

So remember, if it sounds too good to be true- it probably is.

& HOME EXTERIORS

IS IT LEGAL TO “WAIVE”, REIMBURSE OR ABSORB A DEDUCTIBLE?

As recent storm work has come through, our salespeople are being asked once again if it is possible for us to cover the deductible for their home insurance claim for a roof replacement. This puts our representatives in a challenging and awkward position because there are no great answers to give a homeowner.

After just about every major storm, less ethical roofing contractors begin this prac-tice and create the issue of paying deduct-ibles that then effect all roofing contractors in our area. One common ploy is to offer to absorb the homeowners deductible while telling homeowners it is perfectly legal or fine to offer some sort of reimbursement for that deductible, be it in the form of advertis-ing or gift cards. No one wants to be told that they are lying, cheating, or committing some sort of crime for asking what seems to be a perfectly reasonable question. All we can do is explain the insurance claim pro-cess, then let homeowners determine for themselves what is legal, or what is ethical, in how one does business.

Consider the mindset of a roofer willing to compromise on the law (committing insur-ance fraud). Is this someone who will cut corners on your home, or replace quality materials with junk? Would this be some-one you trust to work on your house?

Some roofers will argue that it is entirely up to the contractor to decide what they are willing to do to get your work. If they want to issue a gift card to reimburse for a deductible, they should be allowed to do that regardless of whether an insurance company is involved, because the market should dictate what the acquisition cost of a customer should be. If the contractor wants to pay $1,000 back to a customer whose claim was $10,000 and deductible was $1,000 (leaving $9k for the work), they should be allowed to do that if an insur-ance company is involved or not, because that is what the two parties have decided to do. In cases like this, if the contractor is literally issuing a gift card or writing a check back to the homeowner for Adver-tising or simply good will then technically, this would require a form 1099 to be

issued to the homeowner as transactions greater than $600 are required to be declared, and the homeowner to pay income taxes on that transaction. I doubt contractors engaged in these practices are seriously collecting social security numbers and properly filing their taxes for them. This type of financial transaction could be considered tax fraud and yet again this shows another example of a deficiency in ethics.

When you dive into the above scenario further, it is the insurance carrier’s responsi-bility to pay for the value of the damaged property minus the deductible. If the con-tractor can do the work for $9,000, then the insurance carrier theoretically should have paid $8,000 and the homeowner the remaining $1,000. This could also be con-sidered insurance fraud by inflating the price of the initial estimate.

Whether insurance fraud is a crime in which the parties will ever get caught is a different argument, but we would never recommend flirting with this type of behavior.

How many legitimate companies have at the core of their business model a plan to either mislead someone or come up with ways to legitimize an illegitimate act?

By the same token we can see why it hap-pens so often: If I were new to the insur-ance claim process and a seemingly legiti-mate restoration contractor offered to absorb my deductible, I wouldn’t think for a minute that I would be engaging in a fraudulent act.

At Pinnacle Roofing our Core Values are:

Do What’s Right. Do Everything to the Best of your Ability. And; Show People You Care.

We believe in corporate and per-sonal ethics. Not just because it is the law; but, because it’s the right thing to do. We prefer to work with honest, hardworking home-owners, so we may lose a few customers eager for a deal. But we wouldn’t want to work with those customers anyway.

TO SUM IT UP: if you were to be caught engaging in these schemes, most likely your contractor wouldn’t take all of the blame and get taken down alone. Be cautious with contractors like these because when they offer free services or hand you money at the end; that money comes from some-where- like cutting corners or cheaper materials, lack of insurance or ultimately the worst: a falsified invoice handed to your insurance company.

So remember, if it sounds too good to be true- it probably is.

CONTACT US TODAY!479-250-1470