No one wants to experience damage to their home, but it does happen. With home insurance, there is comfort in knowing that you will be able to have someone you trust fix your home. In this situation, your insurance provider could try to process your claim under their managed repair (sometimes labeled “option to repair”) program. This is something that a homeowner should be prepared for.
What is a managed repair program?
Through this program, insurance companies can make and control repairs instead of paying for a claim if the policy allows for it. Most home insurance policies have some kind of provision that allows the insurance provider to choose the contractor, materials, and oversee the repairs to your property. This would happen without much, if any, input from you. Some policies refer to this as an “Option to Repair”, like policies issued by People’s Trust Insurance Company.
Insurance companies claim using their own preferred vendors help keep costs down, resulting in lower premiums. They argue that overseeing the repairs helps them fight “inflated estimates from contractors” and ensures that property owners are actually repairing their properties using the funds provided.
These claims only seem valid if you believe that contractors are inflating their estimates or that a homeowner wouldn’t want to repair their property following a loss. These are beliefs that are not grounded in reality for the majority of home insurance claims.
People’s Trust option to repair policy
Under a People’s Trust insurance policy, in exchange for a discount of 5% on yearly premiums, homeowners give up their right to oversee the repairs to their own home. Instead, repairs will be performed by the “Rapid Response Team.” What People’s Trust doesn’t typically tell policyholders is that the Rapid Response Team and People’s Trust Insurance are affiliated companies and are owned by the same person.
Other insurance companies, such as Citizens Property Insurance and Florida Peninsula, also have similar programs. While the terms may be slightly different , the end goal is the same. These insurance companies want to oversee everything from the reporting of the claim to completion of the work.
Citizens Property Insurance Corporation’s managed repairs provision says that Citizens AND the homeowner both agree to managed repairs. Under its “Managed Repair Contractor Network Program,” Citizens may, “at our option and with your consent” provide a contractor to make covered repairs. Once the damage has been reported, Citizens will provide an estimate to the homeowner and a Contractor to make repairs. While it may seem like the homeowner would have more control with this type of insurance policy, Citizens still chooses the contractor and still directs the repairs.
Why should all this really matter to a homeowner?
After a loss, most homeowners just want their property repaired as quickly as possible.
To illustrate our point, we’re going to look at People’s Trust Insurance again because they leverage their right to repair more often than other insurance carriers. We’ll start by looking at what they claim the benefits are for homeowners in Florida:
The homeowner reports a claim and People’s Trust says they will immediately send out an adjuster and, if the claim is covered, will send out the Rapid Response Team to begin making repairs. People’s Trust says that the Rapid Response Team provides a 3 year warranty for workmanship.
The benefits offered by People’s Trust are similar to those offered by other insurance companies with managed repair programs. All repairs can be handled with little involvement from the property owner.
What are the downsides to an insurance company directly making the repairs instead of paying for them?
When an insurance company pays out for a claim, the insured property owner gets to choose how to use the money. Most policies have deductibles, which lowers the amount the insurance company has to pay for the loss, but do not need to be paid first by the property owner. Some deductibles are really big, like a hurricane deductible. In that instance, a property owner might have to prioritize what gets repaired immediately if they don’t have enough money to cover the deductible. For example, someone might choose to fix their roof before painting their walls. They might also choose some way to save money on the repairs, like doing some of the repairs themselves or downgrading some items. Property owners are given the freedom of choice when claims are paid out by the insurance provider.
Repairs by insurance companies do not give people nearly the same amount of freedom. People’s Trust Insurance Company requires that the homeowner pay their deductible prior to repairs beginning work. This means that if you can’t afford to pay the deductible, you don’t get your house fixed. People’s Trust offers financing for the deductible (through another affiliated company), but even then you’re paying interest on a loan to get work done.
Another insurance company, Florida Peninsula, has a provision that says that it can elect to repair the property. If that option is taken , the homeowner must provide access to the property, execute all work authorizations and pay for their deductible.
While the Insurance company is supposed to provide a full estimate for you to approve, there are lots of cases where this simply does not happen, or the estimate only covers some of the damage. What happens if the materials used in your home are no longer available? Who picks the new materials? How do you ensure that the work is done timely instead of taking months on end?
Further restrictions to be aware of with managed repair options
Florida law stipulates that an insurance company has 90 days to investigate and issue payment on a claim. Under many managed repair provisions, they only have 30 days from the date of inspection. This means the managed repair option shortens the insurance companies time limit to fully evaluate the claim by 60 days. This can lead to errors and cutting corners. It is not uncommon for a Preferred Contractor to provide a work authorization form that allows the homeowner to “make all covered repairs.” However, this form will also fail to explicitly state what repairs will actually be made, what materials will be used and how long it will take.
Under many managed repair options, an insurance company contractor gets to choose the materials when matching materials are not available. Some policies state that the materials used will be of similar or greater quality, but provide no definitions as to how to determine what is similar or greater quality. When a homeowner hires their own contractor, they don’t make these decisions, the homeowner does. Homeowners are trusting the insurance company to do the right thing when a managed repairs option is exercised. Considering the purpose of this option is to keep claim values down, it is tough to feel confident that they will.
Disputing estimates & coverages with your insurance provider
If the contractor is told by the insurance company what is covered and what isn’t, how do you dispute the estimate and coverage? There are lots of times where a loss is only partially covered, or at least that is what the insurance company tells you. The contractor may not make additional repairs to non-covered damage, which would leave you with damaged property even after the repairs are done. This can be a big problem if the repair work is interrelated. For example, if your roof is leaking and the insurance company says it will repair the inside damage but not the roof, you’ll keep having water come into your home.
Repairs should be done in a timely manner, but unfortunately the work is often done slowly, or not done at all, and expected timelines are frequently not provided. If you choose a contractor to restore your home, you will probably pay them in several installments, with the final installment coming upon completion of the work. In this situation, the homeowner has the right to withhold payment until the job is done. This is a great motivator for getting work done on time. But what leverage does a homeowner have over their insurance company’s contractor? They are often paid a reduced rate to do the job, have multiple jobs going at once and also may have to leave your home at any moment to provide an estimate to another homeowner for a loss in order to meet the 30 day deadline.
What if I don’t want the insurance company to control the repairs?
You may not be able to avoid a managed repair situation, but you can protect yourself by knowing your rights. If your insurance provider is trying to manage the repairs, make sure that they have complied with the policy’s obligations.
Let’s start with how the carrier must invoke their options to manage the repairs. Every policy will outline what an Insurance Company must do in order to manage the repairs. It’s important to review your policy annually, but especially after a loss to ensure that both you and your insurance company are fulfilling its obligations.
For example, under Florida Peninsula’s and Peoples Trust policies, the insurer must provide written notice no later than 30 days after the inspection of your home of their intention to exercise the option to repair. Citizens may exercise its option within 30 days of receipt of the sworn proof of loss. With Citizens, consent to participate may be withdrawn at any time prior to signing a contract with the Contractor. Peoples Trust and Florida Peninsula do not allow for the homeowner to back out of the managed repairs in this way.
Here’s some good questions to ask yourself if you’re being faced with a letter from the insurance company indicating that it wants to take over repairs:
1) Did they provide you notice within the specified time period?
If notice was not provided within the specified time period, you may not have to comply with the policy’s Managed Repairs Provisions.
2) Were you provided an estimate outlining the scope of the work within the specified time period?
While you are required to sign off on the work authorization for the carrier’s contractor, they must provide you with an estimate so that you know what will be done to repair your home.
Do not sign a blank form.
3) Do you agree with this estimate?
The estimate should cover all of the damage to your home or provide for a way to supplement the estimate based on undiscovered damage.
In the event that you disagree with the scope of the work in the estimate, the insurance policies sometimes provide ways for resolving that, either through the appraisal process or through going to court.
You don’t have to go through this alone. Our insurance attorneys will provide you with a free legal consultation to talk about your claim. During our discussion, we will tell you if you have a case against your insurance company and how we suggest pursuing it.
Here’s how we can help
- Tell us about your insurance claim.
- We’ll tell you how we evaluate your claim right away and for free.
- If we think we can help you, we’ll make a plan of attack together.
- You’ll never pay out of pocket — we’ll only get paid out of the additional money we recover from the insurance company.
Fill out the case evaluation form or start a chat, and a lawyer will evaluate your case and reach out to you. Or you can also call us directly at (727) 821-3195.