Rebuilding After a Loss: How to Avoid Contractor Fraud and Unfair Practices

It’s not uncommon for major natural disasters to prompt complaints about contractor fraud and unfair practices.

As Louisiana residents begin to recover from Hurricane Ida, Louisiana Insurance Commissioner, Jim Donelon, released valuable advice to protect policyholders in their state…advice that actually delivers value across the country regardless of the state.

"The recovery process following a major hurricane is already tough but unscrupulous contractors can make that situation even more difficult," said Donelon. "Policyholders should request a clearly worded and itemized contract and review it with the contractor to be certain they agree with its contents before signing."

A contract should include the following:

  • The name of the builder, permanent address and key contact information.
  • A separate breakout of labor and cost of materials.
  • An agreed upon schedule for the homeowner to make payments only after construction milestones are achieved.
  • The contractor is responsible for getting all required permits.
  • The date the project is to begin and the date it is to be completed.
  • Proof of required licenses and insurance coverage from the start date to the finish date.
  • A statement guaranteeing that the work area will be left in its original condition when the job is done.

When preparing to work with a contractor, a property owner should:

  • Beware of unwarranted solicitation from individuals canvassing neighborhoods going door to door.
  • Get multiple bids for the job from licensed and insured contractors.
  • Check a contractor’s license by contacting the contractors licensing board in the applicable state. Most states also offer tips for working with contractors.
  • Look for complaints against a prospective contractor at the Better Business Bureau and check reviews whenever possible.
  • Consider asking the contractor’s insurance carrier or agent to deliver a certificate of insurance coverage directly to you.
  • Never sign your insurance check over to your contractor. Retain control of the funds and disburse periodic payments as repair work is completed in accordance with the schedule in the contract.
  • Pay as work is completed in accordance with the contract. Always pay by check or money order and keep receipts. Never pay with cash.

If your contractor has not begun work within 45 days of taking a deposit, they may be in violation of your state’s contractor fraud statute. If you have complaints about contractor fraud or price gouging, contact local law enforcement or file a complaint with your Attorney General’s Office. If you have grievances about workmanship, consult an attorney.

VANTREO is here to help. If you have a question related to an existing insurance claim or to protecting yourself from unscrupulous contractors, just let us know. Reply here.