Catastrophes and the Heightened Potential for Fraud

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Windstorms, hailstorms, heavy rain and tornadic events are of course followed by the expected increase in claims involving roof and home damage.  Historically, immediately following these events, contractors market the neighborhoods and launch door to door sales campaigns.

Most roofing contractors are reputable and provide a valuable service.  However, as in every industry, there are those who take advantage of the system, cross boundaries and ultimately cause harm to the homeowners.  The following scenarios are from an investigative perspective and are what we tend to see in the field following these catastrophes.

Generally, legitimate contractors don’t door knock and market door to door.  It’s important for consumers to understand that a roofing contractor showing up at their home following a storm is likely a red flag.  Following a storm, contractors or their sales reps will walk through a neighborhood and knock on doors.  They offer to conduct “free inspections” and get the owner’s approval to get up on the roof.  While on the roof, unbeknownst to the home owner, they intentionally damage shingles, vents and parts of the roof in an attempt to make the damage appear to be storm related or to add to existing damage in order to necessitate a full roof replacement.  All sorts of methods are used such as lifting, tearing, and hammering shingles to damage the surface.  They have used coins and other tools to scrape and break shingle granules free, and so on.

Following these “free inspections”, many times the contractor will attempt to get the homeowner to sign a contract.  The contract often stipulates that the homeowner will utilize their company, enforcing a penalty (usually up to 25%) should they decide not to.  While many of these agreements may not be enforceable in court, the contractors pressure the homeowners and sometimes threaten them with lawsuits, liens, judgments, fines, etc. to scare them into paying the fee.

Additionally, sometimes the contracts are not compliant with State Department of Insurance statutes and cross the line of the contractor relationship and the role of a public adjuster, causing a conflict of interest.  This conflict happens when the contractors offer to help work with the insurance company to get the homeowner a new roof, essentially representing the homeowner with no public adjuster licensure.  The contractors then contact the insurance company for the homeowners and assist in filing the claim.  Taking it a step further, are scenarios where contractors obtain the insurance policy information from the homeowner and later call the insurance company misrepresenting themselves as the insured to file the claim.  These scenarios are common with homeowners where there is a language barrier and the homeowner doesn’t fully understand the process. They assume the contractor is helping them.

Another form of a roofing scam following a storm is when the roofer secures the insurance proceeds check from the homeowner as an initial payment to start work.  They then disappear, never start the work, and stop responding to the insured leaving them without the money and with a still damaged roof.

Yet another common fraudulent practice is when the roofer underbids the job to secure a contract and then gradually adds supplemental work and invoices thereafter.  A red flag here is when the contractor makes claims that the cost of materials went up unexpectedly.  While material costs do go up and down, contractors typically have advanced notice of such.

The best way to reduce the impact of these types of fraudulent scams starts with educating the consumers – particularly those in areas subject to potential storm damage.  To get out ahead of things we need to educate them on these scams, letting them know what to look out for.  This starts with the first red flag, involving a storm chasing contractor knocking at their door unsolicited.  Homeowners should always ask for proper licensing and valid insurance from any contractor they consider working with.  Another major red flag to watch for is if the roofing company’s address is a post office box and they have no physical address.  This is common with storm chasing contractor scams.  Many of the storm chasers come from out of town, so looking for a reputable local contractor is usually a better way to go for consumers.  Most importantly however, the homeowner should know to contact their insurance company directly should they feel their roof has significant damage following a storm.  The insurance company can then assign an inspector to check the insured’s roof and a claims examiner can take it from there.

From an investigative standpoint, there are many things we can do should there be red flags warranting a closer look.  Should an inspector identify areas of damage that appear man-made, mechanical in nature or intentional, following up with a professional engineer’s inspection will help to confirm findings.  An engineer’s inspection can give a more detailed and accurate report including a breakdown of the estimated age of the damage, how the damage occurred, etc. Should these findings be confirmed, the deploying of an SIU field investigator will be beneficial for documenting additional evidence, not only to support the claim in question but for future claims that may involve the same contractor.

The investigator will follow up directly with the insured(s) for recorded statements to document the timeline of events surrounding the loss and exactly who has been on the roof.  They will secure recorded statements from the identified contractor(s) involved.  They will also canvass the neighborhood to identify any witnesses for statements.  With a storm chaser scenario, likely other neighbors have dealt with the identified contractor(s) as well or may have even seen the contractor(s) on the insured’s roof and have beneficial information to provide.  Securing documents, contracts, bids/estimates, researching the identified contractor’s licensure and business dealings, etc. for evidence in the claim is crucial as well.

Investigators can also assist in educating consumers regarding the best protocol to follow when they believe they have damage to their roof following a storm, as well as how to handle storm chasing contractors who knock on their door.  These contractors can be high-pressure and often very convincing to a homeowner who is not familiar with the industry and what steps they should follow with their insurance company.

It’s also important to note that it is not always a contractor taking advantage of a homeowner.  Sometimes the homeowner is aware of the situation and involved in the fraud scheme as well.  A thorough field investigation will help reveal this and uncover the facts of the event and claim.

An aggressive investigative approach to questionable claims involving these contractors will put them on notice and ultimately help to minimize the number of fraudulent claims.  When they realize that their actions will be investigated and findings may be reported to the State Department of Insurance as a fraud referral, they will move on to other companies.

Mark Gilbert,

President

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