Why a General Contractor Should Not Be Used to Prepare an Insurance Claim Adjustment

Posted at Jan 01, 2016

Use a General Contractor to Repair Your Property, Not to Manage Your Insurance Claim

When you suffer a building loss, you may think of getting a contractor to estimate the damage. This is not the best path for maximizing your claim and speeding up the process. Below are several reasons this is not recommended:

  • Your insurance company has employed an adjuster, not a contractor, to represent its interests. Contractors do not understand nor are they familiar with the claims adjustment process.
  • They have limited experience if any in settling insurance claims. It is necessary to have a complete and thorough knowledge of the insurance policy before preparing an estimate. Contractors are not familiar with policy conditions. Therefore they are not equipped to provide the best claim presentation under the contract of insurance.
  • Contractors are accustomed to estimating what their costs are to build a building today. Because your claim is based on the cost to repair or replace the exact building you had before your loss, this is not in your best interests and contrary to policy requirements.

Your insurance claim is based on the cost to replace with like kind and quality at today’s labor and material costs. This is true whether or not you would restore the property the same way it was or whether the material or construction techniques used in the original building are even possible in today’s market. The appraisers at Alex N. Sill Company are accustomed to supplying current unit cost replacement values based on like kind and quality to buildings of all ages. Your policy may have some of the previsions listed below:

  • Your policy is either a replacement cost or actual cash value policy. In both instances, it is necessary to deduct depreciation from the total repair or replacement value to arrive at the actual cash value. Contractors do not work with nor are they familiar with the theories and methods of applying depreciation.
  • If you have a co-insurance policy, it is most important to understand the impact of the co-insurance clause on your insurance recovery before preparing or submitting a claim. Contractors do not understand co-insurance.
  • Contractors do not possess the knowledge of what is insured or excluded under your policy.
  • It is important for your claim to be prepared with sufficient detail to support the amount of loss you are claiming. Contractors’ estimates are rarely detailed enough. Therefore, the insurance company will request several estimates, a process that only delays and confuses the issue.
  • Insurance company adjusters prefer to deal in unit costs. Most contractors are accustomed to working with segregated labor and material costs. Although the adjuster may accept this approach, it will usually delay the settlement process. Rarely will a contractor be able to efficiently convert his pricing and estimating approach to comply with the unit cost method.

There are some important factors that go into a claim some of which take knowledge & experience to file the claim correctly. Some of those include soft costs such as architects fees, job supervision, overhead, profit, contingencies, general conditions, etc. which are oftentimes a part of a general contractor’s overall estimate. However, a lack of sophistication in knowing the amount to include in the claim and effectiveness in negotiating costs not directly associated with this particular segment of the work may oftentimes be overlooked or not dealt with at all.

Some final considerations when filing a claim that your general contractor probably doesn’t have experience with:

  • In a tenant-occupied building, it is necessary to identify and separate what should be included in your claim and what should be included in the claim your tenant submits. This can only be accomplished after a careful review of the insurance policies and leases affecting all involved parties. Contractors are not equipped to do this.
  • After your claim is prepared, it must be presented to and sold to the insurance company’s adjuster. This requires an effective negotiating technique based on a thorough understanding of the claims adjustment process, the policy of insurance, and the appraisal of the loss. Contractors are not trained for this.

If you are ok with an average claim, then working with your general contractor may be the solution for you. If you need to maximize your claim to return your property back to its original state, then you need a public adjuster working for you. Our team of certified public adjusters at Alex N. Sill Company are available without cost to show you the correct way to prepare your claim and answer your questions. We are your partner in the process and only work for you. Contact us today to get your claim on the right track.


Written by Sillco