Contract with water damage co still valid after denied coverage?

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Contract with water damage co still valid after denied coverage?

Plano, TX · Member since 2017 · 151 posts · 5 votes

We had sewer water backed up into a multiplex a couple of weeks ago. Our PM sent a water damage company onsite to extract the standing water on emergency.

Later the company called and asked me to sign a contract so they could proceed with some testings, and negotiate with my insurance company. They were confident that it should be covered. They said they could even help with my deductible.

My insurance company denied the claim later.

But their quote is extremely high. Without insurance coverage, we have to find another contractor to do the work.

My question is, is the contract I signed still valid? The contract reads:

Contractor will furnish all materials, equipment, subcontractors and perform all labor necessary to complete the following work (the“Work”): Restore property to Pre-Loss condition.

Contractor shall carry adequate commercial liability insurance and workers’ compensation insurance in the amount legally required and will pay all federal and state taxes on the materials and labor included in the Work. Contractor shall be acting solely for Client and not for Client’s insurer/adjuster.

After I told the guy from the water damage company that my insurance denied, he kind of stopped replying to my text.

I did find another company who can do the job for a fraction of the price. But am I still legally bound with the first company?

This is our first time dealing a water damage company. Subsequently very unfamiliar with their process when insurance is involved.

Could someone share your thoughts if you have dealt with this before?

Thanks very much!

Zoe

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Angela Smith
Member since 2018 · 161 posts · 152 votes
6y
sounds like the first company was counting on padding the bill to gain $ from the insurance company. That's dishonest if you ask me. if the second contractor's bid is accurate then that is evidence that the first is dishonest at best and fraudulent at worst. as far as your contract, if they stopped responding, is that at breach of the contract? If so, you are responsible for the work that they already completed, but not more. I think..?
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Zoe Lee
OP
Plano, TX · Member since 2017 · 151 posts · 5 votes
6y
Originally posted by @Angela Smith:
sounds like the first company was counting on padding the bill to gain $ from the insurance company. That's dishonest if you ask me.

if the second contractor's bid is accurate then that is evidence that the first is dishonest at best and fraudulent at worst.

as far as your contract, if they stopped responding, is that at breach of the contract? If so, you are responsible for the work that they already completed, but not more. I think..?

The insurance adjuster did express concerns over their quote.
yes I will pay for what they did on the first day
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Michael Jones
Lender · Hutto, TX · Member since 2017 · 95 posts · 60 votes
6y
@Zoe Lee I saw your first post about this issue.
You should have had a contract with a septic company who should have been conducting multiple visits and tests throughout the year.
Make sure they didn't fail you. If they did not come out or if they missed something, you may be able to hold them liable.
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Zoe Lee
OP
Plano, TX · Member since 2017 · 151 posts · 5 votes
6y
Originally posted by @Michael Jones:
@Zoe Lee I saw your first post about this issue.
You should have had a contract with a septic company who should have been conducting multiple visits and tests throughout the year.
Make sure they didn't fail you. If they did not come out or if they missed something, you may be able to hold them liable.

I do. They inspect three times a year. They went on site and said everything is fine.
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Charlie Lott
Flipper/Rehabber · Austin, TX · Member since 2016 · 5 posts · 0 votes
6y
The contractor should have supplied you with a Time and Materials Rate sheet and had their documents signed prior to performing any work. It is illegal for them to say or promise to “help with your deductible” and is considered insurance fraud. A reputable contractor would always 1. Provide an industry standard Time and Materials rate sheet and get documents signed prior to commencing work. 2. Provide back up for their time sheets which would show how many men, Arrival times, departure times, total hours and work performed. 3. Provide back up of a list of all materials used during the clean up. 4. Provide back to support any sub contractors or outside vendors used. 5. Never speak for the insurance adjuster or carrier regarding what will be covered during a loss. Every policy and coverages are different.

always involve your insurance agent in a loss to verify coverages, always get thorough and carefully read documents from a contractor even during a water loss where time is of the essence, always pre plan for the events so when they happen you have a plan in place for fire, water mold, asbestos.
Request all the back for the invoice from the contractor. Contact your agent and ask why the coverage was denied, what was the cause of the back up? Is there a city waste company involved? Is your property the only one that had a backup? Or did other properties back up with yours?
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Zoe Lee
OP
Plano, TX · Member since 2017 · 151 posts · 5 votes
6y
Originally posted by @Charlie Lott:
The contractor should have supplied you with a Time and Materials Rate sheet and had their documents signed prior to performing any work. It is illegal for them to say or promise to “help with your deductible” and is considered insurance fraud. A reputable contractor would always 1. Provide an industry standard Time and Materials rate sheet and get documents signed prior to commencing work. 2. Provide back up for their time sheets which would show how many men, Arrival times, departure times, total hours and work performed. 3. Provide back up of a list of all materials used during the clean up. 4. Provide back to support any sub contractors or outside vendors used. 5. Never speak for the insurance adjuster or carrier regarding what will be covered during a loss. Every policy and coverages are different.

always involve your insurance agent in a loss to verify coverages, always get thorough and carefully read documents from a contractor even during a water loss where time is of the essence, always pre plan for the events so when they happen you have a plan in place for fire, water mold, asbestos.
Request all the back for the invoice from the contractor. Contact your agent and ask why the coverage was denied, what was the cause of the back up? Is there a city waste company involved? Is your property the only one that had a backup? Or did other properties back up with yours?

Hi Charlie, the property runs on a septic system. The adjuster talked to a couple of tenants who told him they've been having issues for a long time, so he concluded the backup was not accidental.

The only work the contractor did was to extract water on the first day. Also the representative called my adjuster a couple of times.

So is there a way to get out of this? Or I have to work with them? The quote was given to my PM, and verbally to me over the phone. It was not part of the contract I signed. The contract has no info regarding materials, hours, or cost.

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Michael Jones
Lender · Hutto, TX · Member since 2017 · 95 posts · 60 votes
6y
@Zoe Lee I recommend you pursue this angle. It's worth continuing to try to work with insurance. Your tenants should have submitted a work order to the PM if they were having issues. If they did not submit an order, then there's no evidence that there were issues and no reason your insurance company should only side with one side of the story that is entirely verbal.
If you have evidence that the septic maintenance company was not maintaining the system and fulfilling their part of the contract, you may be able to take them to small claims court.
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Jeremy VanDelinder
Real Estate Coach · Round Rock, TX · Member since 2015 · 431 posts · 235 votes
6y
I own a restoration company as well as flip houses. Let me see if I can shed a little light. @Angela Smith's unwarranted assumptions notwithstanding, the first company might very well have been doing nothing amiss. You see, restoration pricing is in large part, set by the insurance industry itself. Because it is emergency service and people don't have the luxury of getting comparative quotes, estimates, etc, here is how it works: There is software that contains a huge database of insurance standard pricing--it gets updated monthly and this is what restoration companies use to price their work. They are not "padding the bill to gain $ from the insurance company." They are charging what the insurance companies will pay (and BTW there is massive overhead in this industry--their liability coverage alone is through the roof.)

That being said, the first company might be able (I think should) work with you on pricing to give you some kind of a break since it was not a covered loss. Our work authorization actually has a clause to address "stop work order"-- yours may or may not. You might be bound by the contract, but again I would hope they would be willing to work with you to release the contract for a non-covered loss if it comes to that. If your point of contact at that company is not responding, try to go "over his head" and get in touch with his boss.

For what it's worth, I think @Charlie Lott is on to something. I wouldn't give up so easily on it not being covered. I would fight it (in the insurance industry the 'squeaky wheel gets the oil'). I'm disappointed that your restoration company isn't helping you with this fight--IMO they should be. The "ace in the hole" is to hire a public adjuster. A good one knows how to take the gloves off and beat up the insurance company. The PA will take a cut of your settlement but usually its worth it.
Hope that helps a little. Feel free to let me know if I can help with other questions.
0 Reply
Zoe Lee
OP
Plano, TX · Member since 2017 · 151 posts · 5 votes
6y
Originally posted by @Jeremy VanDelinder:
I own a restoration company as well as flip houses. Let me see if I can shed a little light. @Angela Smith's unwarranted assumptions notwithstanding, the first company might very well have been doing nothing amiss. You see, restoration pricing is in large part, set by the insurance industry itself. Because it is emergency service and people don't have the luxury of getting comparative quotes, estimates, etc, here is how it works: There is software that contains a huge database of insurance standard pricing--it gets updated monthly and this is what restoration companies use to price their work. They are not "padding the bill to gain $ from the insurance company." They are charging what the insurance companies will pay (and BTW there is massive overhead in this industry--their liability coverage alone is through the roof.)

That being said, the first company might be able (I think should) work with you on pricing to give you some kind of a break since it was not a covered loss. Our work authorization actually has a clause to address "stop work order"-- yours may or may not. You might be bound by the contract, but again I would hope they would be willing to work with you to release the contract for a non-covered loss if it comes to that. If your point of contact at that company is not responding, try to go "over his head" and get in touch with his boss.

For what it's worth, I think @Charlie Lott is on to something. I wouldn't give up so easily on it not being covered. I would fight it (in the insurance industry the 'squeaky wheel gets the oil'). I'm disappointed that your restoration company isn't helping you with this fight--IMO they should be. The "ace in the hole" is to hire a public adjuster. A good one knows how to take the gloves off and beat up the insurance company. The PA will take a cut of your settlement but usually its worth it.
Hope that helps a little. Feel free to let me know if I can help with other questions.

Thanks very much for your input. The first company wanted almost twice as much to do only "dry, clean, kill bateria" where the second company does repair as well for half the price.

I am mot sure if they can come even close to the second quote.

I do want to fight the insurance. I did house inspection and septic tank inspection in March, both turned out with no problem. The only time these two units submitted work order was in November for clogged toilets. We hired a plumber to replace the sewer line. A week later this happened.

If I wanted to hire a public adjuster, how do I go about it?

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Jeremy VanDelinder
Real Estate Coach · Round Rock, TX · Member since 2015 · 431 posts · 235 votes
6y
I understand--you may be correct that they are overcharging, but it is hard to tell unless I'm looking at their line item breakdown. In this industry there are really good companies and there are a ton of OK ones. Look at things such as: are they an IICRC certified firm? Are they warranting their work--including odor control? Does their scope of work include the same things as the other company? Think about it this way: If a company is good enough to be charging insurance prices, why aren't they??--the significantly lower price actually makes me wonder.
The PA may or may not be able to help, but at least he can review your policy and the situation to let you know if there is a case to be made. Once you sign, he represents you--kind of like and attorney. The insurance company will deal with him and all communication with go through him. I will private message you the name of a Public Adjuster that I've done some work with in the past. Also, the website for the Texas Association of Public Adjusters is: https://www.mytapia.org
0 Reply
Zoe Lee
OP
Plano, TX · Member since 2017 · 151 posts · 5 votes
6y
Originally posted by @Jeremy VanDelinder:
I understand--you may be correct that they are overcharging, but it is hard to tell unless I'm looking at their line item breakdown. In this industry there are really good companies and there are a ton of OK ones. Look at things such as: are they an IICRC certified firm? Are they warranting their work--including odor control? Does their scope of work include the same things as the other company? Think about it this way: If a company is good enough to be charging insurance prices, why aren't they??--the significantly lower price actually makes me wonder.
The PA may or may not be able to help, but at least he can review your policy and the situation to let you know if there is a case to be made. Once you sign, he represents you--kind of like and attorney. The insurance company will deal with him and all communication with go through him. I will private message you the name of a Public Adjuster that I've done some work with in the past. Also, the website for the Texas Association of Public Adjusters is: https://www.mytapia.org

Thank you Jeremy. Great point about comparing the actual work. I will definitely do that.
0 Reply
Zoe Lee
OP
Plano, TX · Member since 2017 · 151 posts · 5 votes
6y
Originally posted by @Michael Jones:
@Zoe Lee I recommend you pursue this angle. It's worth continuing to try to work with insurance. Your tenants should have submitted a work order to the PM if they were having issues. If they did not submit an order, then there's no evidence that there were issues and no reason your insurance company should only side with one side of the story that is entirely verbal.
If you have evidence that the septic maintenance company was not maintaining the system and fulfilling their part of the contract, you may be able to take them to small claims court.

Michael, they submitted a work order in November for clogged toilets. I had a plumber checked and he replaced a sewer line which he believed was the reason causing the clogging. A week later the backup happened.
0 Reply
Zoe Lee
OP
Plano, TX · Member since 2017 · 151 posts · 5 votes
6y
Originally posted by @Jeremy VanDelinder:
I own a restoration company as well as flip houses. Let me see if I can shed a little light. @Angela Smith's unwarranted assumptions notwithstanding, the first company might very well have been doing nothing amiss. You see, restoration pricing is in large part, set by the insurance industry itself. Because it is emergency service and people don't have the luxury of getting comparative quotes, estimates, etc, here is how it works: There is software that contains a huge database of insurance standard pricing--it gets updated monthly and this is what restoration companies use to price their work. They are not "padding the bill to gain $ from the insurance company." They are charging what the insurance companies will pay (and BTW there is massive overhead in this industry--their liability coverage alone is through the roof.)

That being said, the first company might be able (I think should) work with you on pricing to give you some kind of a break since it was not a covered loss. Our work authorization actually has a clause to address "stop work order"-- yours may or may not. You might be bound by the contract, but again I would hope they would be willing to work with you to release the contract for a non-covered loss if it comes to that. If your point of contact at that company is not responding, try to go "over his head" and get in touch with his boss.

For what it's worth, I think @Charlie Lott is on to something. I wouldn't give up so easily on it not being covered. I would fight it (in the insurance industry the 'squeaky wheel gets the oil'). I'm disappointed that your restoration company isn't helping you with this fight--IMO they should be. The "ace in the hole" is to hire a public adjuster. A good one knows how to take the gloves off and beat up the insurance company. The PA will take a cut of your settlement but usually its worth it.
Hope that helps a little. Feel free to let me know if I can help with other questions.

Charlie, I checked the contract, there is no "clause to address "stop work order"". There is a cancellation part, but within three days. It'll way past that.

Now I am afraid to get back to them, what if they hold me to the contract and give me a pricy quote even with the denied coverage? It could be thousands of more dollars what rhey charge.

What if I have the second company do the work? They wanted to get on it yesterday, while the guy from the expensive company didn't respond me last week. In that case, is there penalty?

0 Reply
Jeremy VanDelinder
Real Estate Coach · Round Rock, TX · Member since 2015 · 431 posts · 235 votes
6y
I think the enforceability of the first contract is a good question for an attorney or public adjuster. I'm afraid to weigh in on that for fear of giving incorrect "legal" advice. However, from a practical standpoint, I don't know what they gain by going after you as long as they are paid for the work that they have already done. The fact that they haven't contacted you also might be an indication that they've decided to "move on." (Again, not legal advice--just my thoughts as to what I would do as a business owner.) If the first company continues to stonewall you, then at some point you have to move on too and get the project done.
Maybe an email & voicemail: "I've not heard back from you yet. I have another company ready to perform the work. If I don't hear from you by 5:00 today I will assume that you are no longer interested in the job and will tell the other company to move forward." If they do call you back, then negotiate a discounted price in the event insurance doesn't pay or a release from the contract.
0 Reply
Zoe Lee
OP
Plano, TX · Member since 2017 · 151 posts · 5 votes
6y
Originally posted by @Jeremy VanDelinder:
I think the enforceability of the first contract is a good question for an attorney or public adjuster. I'm afraid to weigh in on that for fear of giving incorrect "legal" advice. However, from a practical standpoint, I don't know what they gain by going after you as long as they are paid for the work that they have already done. The fact that they haven't contacted you also might be an indication that they've decided to "move on." (Again, not legal advice--just my thoughts as to what I would do as a business owner.) If the first company continues to stonewall you, then at some point you have to move on too and get the project done.
Maybe an email & voicemail: "I've not heard back from you yet. I have another company ready to perform the work. If I don't hear from you by 5:00 today I will assume that you are no longer interested in the job and will tell the other company to move forward." If they do call you back, then negotiate a discounted price in the event insurance doesn't pay or a release from the contract.

Thanks Jeremy, another day passed without their returning my text. Um...

On a different account, what would a warranty entail for this type of work anyway? The second company told me they can touch up the wall if needed but not the floor for there could be another water backup. Does this sound reasonable? They are certified with good Google reviews.

0 Reply
Jeremy VanDelinder
Real Estate Coach · Round Rock, TX · Member since 2015 · 431 posts · 235 votes
6y
What do you mean by touching up the wall and/or floor?
As far as a warranty--I'm particularly talking about workmanship. They will mitigate any further problems--odors in particular can be a big issue.
0 Reply
Zoe Lee
OP
Plano, TX · Member since 2017 · 151 posts · 5 votes
6y
Originally posted by @Jeremy VanDelinder:
What do you mean by touching up the wall and/or floor?
As far as a warranty--I'm particularly talking about workmanship. They will mitigate any further problems--odors in particular can be a big issue.

I have been under the impression that water damage companies replace walls and floor. Only this afternoon did I learn that they don't do that. They cut up the wall and remove the carpet.
No wonder you were confused :)

0 Reply
Zoe Lee
OP
Plano, TX · Member since 2017 · 151 posts · 5 votes
6y
Originally posted by @Michael Jones:
@Zoe Lee I recommend you pursue this angle. It's worth continuing to try to work with insurance. Your tenants should have submitted a work order to the PM if they were having issues. If they did not submit an order, then there's no evidence that there were issues and no reason your insurance company should only side with one side of the story that is entirely verbal.
If you have evidence that the septic maintenance company was not maintaining the system and fulfilling their part of the contract, you may be able to take them to small claims court.

My tank maintaines company only services the tanks, not the connecting sewer lines. My plumber only checks the plumbing inside the property and replaced the sewer line. There is no company that does both, hence the foreseeable finger pointing which makes it difficult to pinpoint one party and make him accountable.
0 Reply
Bob Freitag
Wholesaler · Waxhaw, NC · Member since 2016 · 15 posts · 4 votes
6y
I am a public adjuster and sorry to hear you are going though all of this. This is not uncommon. Water/Sewage backups are not always covered under a policy. Many times you have to endorse this extra coverage on your policy. So the first thing I would do is contact your adjuster and have them send you a denial in writing if they have not already done so. I will be happy to review their denial and your policy to confirm this for you. If you have a lot of properties, sit down with your insurance agent and make sure you have this coverage on all policies. It is pennies on the dollar.
As far as the first restoration company, I assume that once they discovered you have no insurance for the claim, they do not want to do anymore work for you and have moved on. They know it is unlikely that people have funds to come out of pocket to pay for work and are not crazy about doing a lot of work and then fighting you to get paid. You need to terminate their contract in writing, and you will owe them for any work they have done for you. Then at that time you are free to hire anyone you chose to do the repairs.
0 Reply
Zoe Lee
OP
Plano, TX · Member since 2017 · 151 posts · 5 votes
6y
Originally posted by @Bob Freitag:
I am a public adjuster and sorry to hear you are going though all of this. This is not uncommon. Water/Sewage backups are not always covered under a policy. Many times you have to endorse this extra coverage on your policy. So the first thing I would do is contact your adjuster and have them send you a denial in writing if they have not already done so. I will be happy to review their denial and your policy to confirm this for you. If you have a lot of properties, sit down with your insurance agent and make sure you have this coverage on all policies. It is pennies on the dollar.
As far as the first restoration company, I assume that once they discovered you have no insurance for the claim, they do not want to do anymore work for you and have moved on. They know it is unlikely that people have funds to come out of pocket to pay for work and are not crazy about doing a lot of work and then fighting you to get paid. You need to terminate their contract in writing, and you will owe them for any work they have done for you. Then at that time you are free to hire anyone you chose to do the repairs.

Thanks Bob. Will the contract termination written in text message be sufficient?
The insurance company denied this time due to "ongoing issue". After we fix the system, could they cite the same reason again in the future to deny us?
0 Reply
Zoe Lee
OP
Plano, TX · Member since 2017 · 151 posts · 5 votes
6y
Originally posted by @Bob Freitag:
I am a public adjuster and sorry to hear you are going though all of this. This is not uncommon. Water/Sewage backups are not always covered under a policy. Many times you have to endorse this extra coverage on your policy. So the first thing I would do is contact your adjuster and have them send you a denial in writing if they have not already done so. I will be happy to review their denial and your policy to confirm this for you. If you have a lot of properties, sit down with your insurance agent and make sure you have this coverage on all policies. It is pennies on the dollar.
As far as the first restoration company, I assume that once they discovered you have no insurance for the claim, they do not want to do anymore work for you and have moved on. They know it is unlikely that people have funds to come out of pocket to pay for work and are not crazy about doing a lot of work and then fighting you to get paid. You need to terminate their contract in writing, and you will owe them for any work they have done for you. Then at that time you are free to hire anyone you chose to do the repairs.

Bob, got the letter, stating "wear and tear". But a week before the flooding, we just replaced a sewer line intending to fix the problem. If after fixing, still "wear and tear", does that mean after we fix again, if something happens again, they can call that "wear and tear" again? Unless we replace the whole septic system, they could keep citing the same thing and demy claims?

Another bad news: The water damage company billed us $6,000 for extracting water, dry, the only thing they yet to do is to remove contaminated floor, dry wall. They quoted us $9k for the entire "Mitigation". A week later the water backed up again. Now if we send them back to extract the water again, is that amother $6k? Or they charge by project, meaning maybe the second time extraction is included in the 9k?

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