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Question DetailsAsked on 12/19/2017

Is it normal for a roofer to deposit your insurance claims check that is written to Home owner and Lender

Also waive deductible to put a sign in yard

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3 Answers

0
Votes

NO - not unless the two parties it was written to have endorsed it over to him on the back, which is not uncommon - but the lender would not do that until the work covered by the check (partial or full job depending on whether a partial or full payment) was properly done and apssed inspection. The reason they are on the check as a payee is because they can take the check to offset reduction in the value of the property if it is not properly repaired using the funds. Usually only done in the event of a total loss, where they can take the payment to pay off any mortgage if the structure is not rebuilt. Keeps them from being stranded with a burned down house with a mortgage still outstanding on it, for instance.


I would question how he got a hold of the check in the first place - it should have come to YOUR address or maybe to the lender - did he steal it out of your mailbox or house or change the address with the insurance company, either one of which would be a big red flag and be theft and insurance fraud, criminal fraud against you, and if taken from your mailbox a federal crime as well for stealing mail. Depending on circumstances, and on whether the job is fully done correctly or not, you might consider talking to the insurance company about possibly putting a fraud hold on the check and on his account, and about reporting it to the police if not authorized. Also, if his bank accepted the check when it wasnot written to him, either they are responsible for reimbursing the insurance compny for it (for them to then reissue a new check), or he was guilty of fraud by falsifying endorsements on the back signing it over to him, which again would be fraud on his part.


Especially if the job has not been done yet - he may be a scammer planning on running off with the money and not doing/finishing the job at all, so I would (assuming it was not properly endorsed over to him) immediately contact the fraud unit at the insurer.


On the sign thing - if you receive any discount from his price which makes the net amount charged by him for the job less than the total of the insurance coverage plus any amortization reduction plus your insurance deductible, that is generally insurance fraud if the difference is not refunded to the insurance company. "Waiving" the deductible is an especially nefarious practice which is criminal insurance fraud in most states, because it means he overbid the job (increased it by the amount of the deductible) to be able to give you that "waiver", so the insurance company is overpaying by that amount. Criminal fraud on his part, and civil and maybe criminal fraud on your part if you do not report it to the insurance company and pay them back the deductible amount. I said "nefarious" because that sort of fraudulent practice raises insurance costs for everyone.


If he said he was paying you the deductible amount in exchange for allowing the sign on your property, that would still have the effect of getting around the4 deductible because it would obviously be "part of the job" and intimately related to it, plus of course the "payment" just happening to equal the deductible would make it obvious that the intent was avoiding your paying the deductible - so insurance fraud. Plus technically the payment or waiver would be payment or bartering value received by you, so would be taxable in addition.


If this guy is working on the roof - you are in a tough spot as getting caught might mean he stops work and abandons the job. If not started yet, I would call a red flag and work at getting the insurance company approval of his bid revoked so you can go with another contractor. And you will likely need a lawyer in that case - which the insurance company may or may not provide, depending on the terms of your homeowner's policy.

Answered 11 months ago by LCD

0
Votes

Can I go to jail if contractor gave me cash out the check?

Answered 11 months ago by Janey

0
Votes

As to getting cash back from him - assuming that the insurance claim was based on his price quote originally, generally that would be considered an illegal kickback and insurance fraud - which unless you have a prior criminal conviction record might get you a jail sentence, or maybe only probation and a requirement to repay it to the insurance company and a fine, but might leave you with a criminal record either way.


If they 'adjusted" the claim WITHOUT any contractor quotes  - just using their own estimator (rare except in major disasters where they are handling hundreds of similar claims), then whether or not you have to pay back any insurance coverage which is in excess of the actual cost of the job is a legal question and depends on your contract and state law. Sometimes yes, sometimes maybe not if they just did a cash settlement on their own without any cost input from you or a contractor on your behalf.


And worse - if you should not have this money and you are caught, you would likely end up on the insurance company "blacklist" - called CLUE, the Comprehensive Loss Underwriting Exchange, which is an insurance company directory of people convicted or caught in insurance fraud. Ending up on that list would commonly result in cancellation of ALL existing iunsurance (including homeowners, auto, health, etc), and being unable to buy any future insurance for quite a number of years, or being able to work in a job requiring a clean criminal record or bonding, etc. I have read it can even cause inability to get a Bond if you are ever arrested because the bonding companies access the list to check for bond/insurance fraud in the past. Not to mention having a criminal record which could affect both your current and future employment. Plus they could sue you in civil court for not only the unneeded insurance payout amount, plus also for additional damages and legal costs and such, in a civil fraud and breach of contract suit.


And if you get blacklisted and lose your homeowner's insurance and cannot replace it, then your mortgage or loan trust holder can and probably will make your home loan immediately due and payable, and foreclose it you cannot pay off the loan in full immediately. Ditto to your auto if you lose your auto insurance (which also generally means your auto registration is voided, in most atates).


The financial outcome of a damage insurance claim payment is usually this. They approve a settlement amount based on a contractor quote, with the actual insurance payout amount usually equalling the repair quote amount as the "adjusted claim amount" or similar terminology, minus any depreciation/amortiation adjustment if you did not have replacement value insurance, minus your deductible. 


So (simplified) say you had a $10,000 repair quote, and roof was three-quarters of the way through its design life, and you had a $1000 deductible. In that case, with "replacement value" insurance meaning you are insured for full replacement cost of damages, their payout would be $10,000 minus your $1000 deductible = $9000 insurance payout, and the contractor gets that amount plus a $1000 deductible payment directly from you.  (Deductible is the amount of each claim which you have to pay out-of-pocket before insurance coverage kicks in).


If you instead have the somewhst cheaper depreciable/amortized coverage, then the $10,000 loss would normally be paid out this way - total loss amount $10,000, insurance adjusted value 1/4 of that (because it was already 3/4 of the way through its life so it had lost 3/4 of its value already and would have needed replacement anyway in a few years) so 1/4 of $!0000 = $2500 covered damages, they pay that minus your deductible of $1000 = $1500 paid out by them to go to the contractor (or to you to go to him) by the insurer. You pay the contractor the $7500 depreciated value, plus your $1000 deductible = $8500, which combined with the $1500 insurance payout = $10000 repair cost and total payment to contractor. In each case, the total of those 2 or 3 components, as applicable to your type of insurance, should just total the amount the contractor receives for the job, with neither him nor you ending up "ahead of the game".


In general, any reduction in the contractor's cost in the final total job cost he bills has to be refunded to the insurance company, as if his original quote was that much lower.


Given what you have said so far, I would say you are in a bad looking situation, both with respect to the payment and with respect to the ethics and reliability of the contractor, so you should talk to an attorney to help you through this and to make sure the insurance company realizes you were (presumably) not complicit in any fraud.  And do not take time to do this, because you do not want the insurance company to find out about it before you talk to the attorney and get "on the record" that you are taking steps to make this right. And probably he will tell you to turn the money over to him to be given to the insurance company or will go with you to them to turn it over - or he may go to the police or district attorney with you and the money the contractor gave you to report the contractor to them for criminal fraud - depends on the circumstances and how much the lawyer feels the contractor was intentionally fraudulent, or how strong he wants you case to look, because obviously if you report the contractor for fraud (obviously only if you, in consultation with your attorney, believe this) that makes your innocence look the stronger.. You want to be proactive in this situation, assuming the situation is as I understand it, so as to avoid bad things down the road on the insurance, civil/ contract law, and the criminal law side.


Then what you do about the contractor depends on where the job is to date, whether you have paid him moneys out of pocket or from the insurance company, etc - you very likely have cause for action for your legal costs and such against him and his insurance company (assuming he is insured). And the insurance company may provide legal assistance in the case to, to recover what they paid out and/or to prosecute fraud claims against the contractor.


Good Luck - act quickly getting legal advice (from an attorney you ferret out - no help on Angies List on that, or maybe at your local Legal Aid Society if you cannot afford an attorney) so you are the "good guy" in this case, not seen as being complicit in what sounds to me like fraud by the contractor.


Answered 11 months ago by LCD




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