The Roof Insurance and Construction Process

After a bit of a hiatus, hail is back with a vengeance in Colorado this year. From the perspective of a roofing company, that means now is the time to go connect with customers because it is far more likely roofs have been damaged and will require repair. From the homeowner’s perspective, it is a time to make sure that the roof’s integrity has not been breached and fix any damage that has been caused. Thus, many people in Colorado are going to be dealing with sales meetings, contracts, construction work, and insurance claim. This blog post seeks to provide a detailed overview of the insurance claim process specific to roofing hail damage in Colorado. 

  1. Establishing the Connection.

The first step in the repair process often begins with a homeowner connecting with a roofing company. This can be accomplished through various means like canvassing, door knocking, or advertisements. Homeowners should be aware that after a significant hail event, it’s common to have roofing contractors offering their services in the affected area. If a roof is actively leaking, then speed may be required. Otherwise, it is a good idea for both parties to take a moment to vet each other before entering into a deal.

The homeowner can check the roofing company’s online reviews or talk to other customers to get an idea of the quality of the work. Past performance is not a perfect indicator of future performance, as materialmen, labor, insurance companies, and market conditions can all have an impact on a job. But, it’s the best thing most homeowners have to get a comfort level with the roofer.

The roofer can verify that there is in fact hail damage and that they are dealing with someone who has actual authority to allow them onto the property and bind the owner. And, if the homeowner is planning to pay with insurance, the roofer may wish to obtain information about the policies.  

One big warning sign early in the sales process is a roofer agreeing to waive collection of the insurance deductible. This has long been viewed as insurance fraud by carriers and is not permitted by the Residential Roofing Act among other Colorado statutes. A roofer might potentially be able to pay a homeowner for things like advertising or referrals, but an offer to simply not collect the deductible should raise flags.

  1. Contract Payment Styles.

If the homeowner and roofer want to work together, the next step is to sign a contract. There are several contract styles that homeowners and roofers can agree on. These may include cash contracts, insurance proceeds contracts, and assignment of claims.

Cash Contracts are straightforward – the homeowner pays the roofer directly for the work performed. This method is often used when insurance isn’t involved, when a homeowner chooses not to file a claim, or where the homeowner wants to handle the entire insurance process themselves. A cash contract can also help establish a bid or fixed price for the insurance carrier which some commentators believe helps get the carrier to pay the proper amount.

More often, though, a homeowner has an insurance policy and wants the carrier to pay for the repairs. Roofing companies commonly understand this and will often have the option of working for the insurance proceeds. However, the details can vary. Some roofers will simply do whatever the carrier approves for whatever the carrier pays. This can result in a quick job with minimal fuss and no out of pockets other than the deductible, but it also means the homeowner might not be getting everything they are entitled to under their policies because they just took whatever the carrier offered. For smaller damage, this might be the way to go.

 Other times, roofing companies agree to work for insurance proceeds but also offer to help the customer supplement the claim. This involves the roofing company producing its own scope of work and price, usually after a detailed inspection as to the damage, materials needed for repairs, and other issues related to the job. This can slow the claims process down, sometimes significantly, but can also result in a better product for the customer. If the carrier doesn’t approve the entire supplement, a customer could still choose to come out of pocket to cover the difference. In years past, some carriers even offered monetary incentives for customers who pay to upgrade to more hail-resistant shingles out of pocket.

A less common approach is for the contractor to take an assignment of the claim entirely and then stand in the shoes of the homeowner with respect to the insurance company. This is a more complicated relationship. When the roofer simply does the work up front and shoulders the full burden of dealing with the carrier afterwards using the assignment, the customer can get the best of both worlds – quick and quality work. But, complexities and problems can easily crop up in such an arrangement down the line, particularly if other professionals such as adjusters, attorneys, or appraisers are involved, or if the roofer uses the assignment to sue the insurance company. It would probably be wise for an attorney skilled in roofing issues to be involved early if the parties want to go down this road. 

  1. The Claim Filing Process.

When filing an insurance claim, homeowners often engage a roofing contractor to estimate the cost of repairs. It is a bit of a grey area, but it is commonly understood in the industry that  roofers can inspect the damage and give estimates. That is, they can provide information to the carrier and homeowner about the facts of damage and the costs of repair. 

A roofing should not be arguing over the language of the insurance policy, however, as that is something that Colorado requires a public adjuster’s license to do.  The line between what is factual and what is policy based is not really very clear, however. The best rule of thumb is that, the more expensive and complicated the claim, the more likely it may be necessary to hire a public adjuster.

Most roofing claims do not go further than the first supplement request and approval or denial from the carrier. But, there are certainly times where multiple inspections, appraisals, or even lawsuits occur before the claim handling is complete. Both homeowner and roofer should stay in communication about this process so that they can discuss the relative risks and delays and the homeowner can make a decision about how hard they want to push if the carrier doesn’t pay what it should.

  1. The Deposit: ACV vs. RCV

Typically, after an insurance claim is approved, the insurance company will issue an Actual Cash Value (ACV) check, which represents the claim amount minus depreciation. A roofing company working for insurance proceeds will generally require this be paid as a deposit for starting the work.

Later on, the carrier will usually pay additional amounts. The Replacement Cost Value (RCV) is the amount it would take to repair or replace the entire damaged roof. The difference between the ACV and RCV is usually paid after the repair or replacement work is completed, upon submission of a final invoice to the insurance company. The timing of the RCV payment can vary. However, in most cases, the insurer releases it after the work has been inspected and approved. If the claim is supplemented, however, there might be interim payments along the way.

Where a roofing company is working for insurance proceeds, the contract will typically require that the payments be turned over to the roofer as they come in. One big area of contention I sometimes see in the case of roofing claims is a homeowner that sees a large check coming in, sometimes from a supplement the roofer submitted, and decides that they want to keep some of it. On the positive side, sometimes the customer just wants to not actually do some of the approved work, like a fence. That would be something the customer usually has to work out with the roofer, but the homeowner needs to remember that the carrier very well may not pay the RCV amount for any work not actually done. 

In a minority of cases, the homeowner might simply view this as “their money” and the roofer as charging too much. This is an extremely common issue that gets people sued. Indeed, other than situations involving clear mistakes or defective work, misunderstandings about why the money is being paid and what it needs to be used for are the most common battle we see at Underhill law among roofers and customers. The bottom line is that the money is being paid by the insurance company specifically to fix the roof and usually specifically to pay the roofer’s bid. The homeowner is not free to put it to some other purpose and, if they do, they risk claims for breach of contract or even insurance fraud in extreme cases. 

  1. The Construction Process

The construction process usually begins after the initial deposit (the ACV check) is received. The roofer should conduct the job professionally, keep an open line of communication with the homeowner. The homeowner, meanwhile, should provide access to the property, prompt payment, and be vocal about any concerns or questions when they arise. 

For simple roofs, the construction process might be over in a single day. Larger projects may require multiple trades scheduled over a period of time. The homeowner should be patient with the roofer, who has more experience and industry connections. 

  1. Closing Out the Job

Once the job is completed, assuming everything went smoothly, there are only two more things to do. First, the carrier needs to be notified of the completed work. Sometimes it will send an adjuster to the property to inspect and verify it was done, and sometimes it will just verify this with the homeowner. Second, the roofer will need to collect final payment. Many roofers issue an invoice to the homeowner that can accomplish both of these goals. 

If both parties to the process understand what to expect, it is likely to be smoother for everyone. At Underhill Law, we deal with both helping parties navigate this process and enforcing the law and contract when they do not. If you think you may need our services, please give us a call to set up a consultation.