I want to tell you a horrible story that I hope will open your eyes and lift the vale of ignorance that clouds your perception of the importance of doing business with contractors that carry insurance.
Uh oh I Just Burnt Your House Down
I recently received a call from a client at approximately 900pm. I was still in the office finishing up some work. When I picked up the phone my client sounded out of breath and frantic and I could hear sirens in the background…
Her house was burning to the ground.
That morning she had hired a family friend who had a “Roofing Business” on the side to come replace her roof that had reached the end of it’s life. This man had probably replaced hundreds of roofs before. For all intents and purposes this man is as professional and qualified as any large roofing corporation.
But he’s not a corporation.
He’s a guy that does roofs on the side… He’s one man who makes some extra money replacing roofs for people that he knows. In order to make money, expenses have to be low and for anyone who has ever priced out a roofing insurance policy the insurance expense for roofers can be uncomfortable.
Needless to say insurance expense is not a burden carried by my client’s family friend.
So this family friend is replacing my clients roof, slaving away in the heat, and like many people would, he takes a quick break in the afternoon to drink some water and smoke a cigarette. This happens on contracting jobs everyday, everywhere…
Except this family friend replacing my client’s roof didn’t butt-out his cigarette when he finished. When he was done with his smoke he flicked his cigarette off the roof… or so he thought.
Claims Happen, Even to Family Friends
To get to the point, the cigarette did not leave the roof. It got stuck between the gutter and roof, smoldered all afternoon and into the early evening when it finally caught the roof and freshly laid shingles on fire. The house was in a relatively rural area and by the time anyone noticed the fire and the volunteer fire department arrived at the house all hope for saving my client’s home was lost.
Homeowner Insurance
Yes, my client’s homeowners insurance did pay the claim (I can read your mind).
However, now they have a $250,000 loss on their property report. Their premiums are definitely going to go up and there is little I can do to help. Changing insurance carriers may help to keep premiums a little lower but what insurance company wants to take on a new risk with a $250,000 loss and is known for using contractors without insurance?
I’ll answer that for you… Not Many!
Adding insult to injury, because the claim had to go through their own insurance carrier, they are responsible for paying the deductible even though the loss was someone else’s fault.
There is also a chance that the insurance carrier will decline to renew my client’s homeowners insurance policy because they had a loss from an uninsured contractor. That is (as we are learning) a major risk for the insurance carriers who would obviously be worried about this scenario playing out again.
The Rub
The insurance carrier covered the loss at full replacement minus the deductible.
They did offer a renewal albeit at a higher premium which was fair considering the loss. My client has a new home which they will be moving into shortly. I tried to re-market their homeowners insurance at renewal but most carriers declined to quote based on the loss. So, for now the damage was not horrible. But trust me the consequences of this situation could have been much, much worse.
Always, Always, Always, Always use contractors that have insurance.
Ask for a certificate of insurance dated current listing YOU the homeowner on the certificate. This gives you good piece of mind that contractor is insured and that you will be protected.
As an aside…
This post is not a rip on contractors at all. The contracting business is enormously important in our economy.
I alone have spent over $20,000 on my house in the last year taking it from the 1950’s to 2011. Most contractors live in the community that they do business, so dollars get circulated and spread rapidly which is good for everyone. Again, this post is not a knock on Contractors.
It’s a warning to homeowners. Insurance seems like a pain in the ass and often it is. But the layer of protection and security that insurance provides is important. Insurance keeps families in homes and businesses in business.
Thank you.
P.S. If you were so inclined The Murray Group would love to be your insurance agent. You can inquire about receiving an insurance proposal by Clicking Here.
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