Air Date: 5-25-2018|Episode 505
This week on IAQradio+ we welcome “The Restoration Lawyer” Ed Cross to discuss current legal issues and answers for restoration professionals. Mr. Cross has built a successful law practice that specially caters to the needs of insurance damage repair contractors and remediators.
Full Description:
This week on IAQradio+ we welcome “The Restoration Lawyer” Ed Cross to discuss current legal issues and answers for restoration professionals. Mr. Cross has built a successful law practice that specially caters to the needs of insurance damage repair contractors and remediators. Mr. Cross received a Bachelor’s Degree in Speech Communications with an emphasis on Public Speaking from California State University at Northridge in 1986 (Dean’s Honor Roll), and his Juris Doctor Degree from Western State University in Fullerton California. Ed is also well known for his risk management advice, cleaning and restoration contracts and related forms available for free and/or for purchase on his website edcross.com . These are simple one page forms in plain English that protect payment rights and deter lawsuits. He has recently added contract forms specific to the needs of those doing work in Texas and Florida.
Z-Man’s Blog:
Current Restoration Legal Issues and Answers
Ed Cross, the “Restoration Lawyer” has built a successful law practice that specially caters to the needs of insurance damage repair contractors and remediators. He is well known for his risk management advice, cleaning and restoration contracts and related forms available on his website and his voluntary service to the industry. Learn more at: www.edcross.com
Current legal trends in insurance repair and restoration:
- In California, property owners seeking a more creative way to prosecute grievances against contractors are filing grievances with the Contractor’s Licensing Board. The Contractors State License Board (CSLB) is in actuality the “Anti Contractor Board”; protecting California consumers by licensing and regulating the state’s construction industry. http://www.cslb.ca.gov/ When a complaint is filed against a contractor’s license by a consumer the contractor has fewer rights to defend himself; while the Board conducts an investigation in conjunction with an expert.
Citing a case involving an insurance claim for red wine stain on a tile floor which at the time of the claim had been discontinued) the expert report called for removal and replacement of: all floor tile, the base moldings, cabinets and repainting the interior of the entire home. The Board considers expert reports to be gospel. The Board has the power to revoke contractor licenses and also prohibit future licensure. Contractors may appeal cases to an Administrative Law Judge, in these one-sided proceedings where the contractor is at a great disadvantage, the Attorney General’s Office both represents the Board and controls the proceedings. A single consumer grievance can put a contractor out of business.
This isn’t a new problem in California. Several years ago, Ed tried to do something about it by organizing California restorers and contractors to lobby for reduction of the overreaching powers of the Board and was unable to garner enough financial support.
- In California contractors who only do cleaning and drying do not need a state license. Contractors who provide demolition at a fee greater than $500 must have a license. In California a General Contractors License is known as the “B License”. Asbestos Abatement Contractors also must be licensed.
- The “client” is the party who is legally responsible for paying any amount not paid by the insurance company. Legal duty goes with the client. Restoration contractors commonly obtain the signature of the wrong person on their contracts and authorizations creating legal and collection problems.
- Florida law has a fee shifting Assignment of Benefits provision. Florida, California and Hawaii are considered “consumer friendly states”.
- There is no legal definition of what constitutes a “fair profit”. Buying power and service efficiency contribute to profitability. Sales people want to sign up the job, they also must communicate, disclose and agree upfront with the client on how billing will be done. Ed pushes back hard when clients or insurance companies complain that they could have purchased the equipment for less than the rental costs explaining that: the client or insurance company had the option to buy the equipment and accept the financial risks. It takes trained, knowledgeable and certified technicians to place and monitor the equipment and environmental conditions.
- Ed’s contracts contain a “supercharged AOB” and an authorization to release all information on the status of the claim to the contractor. Using a “tender notification, contractors should make the insurance company aware that they have a signed AOB. In cases when the contractor had a signed AOB, had notified the carrier and the client skipped with the funds; Ed was successful in having the insurance also pay the contractor.
- If advising a policyholder on the issue of signing an AOB, Ed suggests not to sign an AOB that is broader than the scope of work being provided and doesn’t transfer rights such as additional living expense, replacement costs, etc.
- His “supercharged AOB” circumvents the Mandatory 3 Day Contract Rescission Period with consideration being bargained for by the contractor’s agreement to perform services without immediate payment. In CA when work is an emergency and work is urgently needed, and the client provides a written explanation why the work needs done, the rescission can be waived.
- Mortgage companies are holding billions of dollars of contractor’s money and aren’t in a hurry to release it. Ed’s contracts include a Mortgage Information Release provision which permits the contractor to deal directly with the mortgage company including disclosing to the contractor if the policyholder is current on mortgage payments. Ed advises: maintain good customer relations even if it costs. Because contractor’s work improves or restores the value of mortgaged property, California law has ruled that the contractor has a superior legal position and that it is unfair for the mortgage company to keep monies owed to the contractor. Mechanics liens and signed Certificate of Satisfaction also help collection when mortgage companies are involved.
- Restoration Rebels Question, what can be done about bad reviews on Yelp or Google? Defamation lawsuits are hard to prove. Reviews are considered “opinions” and are a 1st Amendment Right. Don’t aggressively retaliate and start a flame war.
- Beware about using generic contracts found on the internet, as it may constitute a crime.Have any contracts reviewed by a local attorney. There are significant differences among contracts used in different states, especially in “consumer friendly” states such as FL, CA and HI. Some states require verbiage from statutes to be included in contracts. Time and material contracts are illegal in CA for residential work. Ed recommends Lump Sum contracts.
- Tortious interference is when someone intentionally or negligently interferes and damages a business contractual relationship. Ed hasn’t seen this litigated by contractors because insurance companies are financial goliaths. It’s not the adjusters job to supervise, direct the project or meddle into the relationship. Adjusters who supervise projects are liable if/when something goes wrong. When adjusters overstep their bounds, a letter should be written to the carrier advising them that the adjuster should back off.
Final Comment:
Most legal problems can be prevented by good communication, good documentation and good follow through.
Z-Man signing off
Trivia Question:
What is the legal term for a voluntary statement under oath?
Trivia Answer:
Affidavit
