Working RR Magazine - Issue 1

PREMIERE ISSUE

Restoration + Remediation

Spring 2022, VOLUME 1

MOLD LAWSUIT

That Changed the Industry

INSURANCE IQ:

Sorry You’re Not Covered

RESTORATION CONTRACTOR LAWSUIT: A Case Study

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Restoration + Remediation

Editor’s Note

Spring 2022, VOLUME 1

CONTRIBUTORS

3

eK ndra Budd Working RR

Customer Service iM ssteps: Recovery is What Matters

8

Insurance IQ: Sorry oY u’re Not Covered

a N vigating Insurance Claims: What oY u eN ed to n K ow

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COVER STORY : Restoration Contractor Lawsuit: A Case Study

How to Get Referrals from Insurance Agencies

Mold Lawsuit That Changed the Industry

“Classic” Contractor rF aud Scheme, Exposed

Mission Working RR is published to help readers build their businesses, reduce their risk of liability and stay informed on important technology and industry issues.

Write Us! Comments and letters are welcome. All stories without attribution are written by the editor.

Editor Isaac Peck | isaac@orep.org Marketing & Graphic Design Ariane Herwig | ariane@orep.org Associate Editor Kendra Budd | kendra@orep.org

Tom Scalisi

Timothy E. u H ll

Isaac Peck Working RR

Working RR 6353 El Cajon Blvd., Suite 124-605 San Diego, CA 92115 (888) 347-5273 | Fax: (619) 704-0567 subscription@workingrr.com www.workingrr.com Like Us on Facebook!

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Working RR is published by OREP Insurance Services, LLC (CA Lic. #0K99465) and mailed to 12,000 restoration and remediation professionals. The ads and specific mention of any proprietary product contained within are a service to readers and do not imply endorsement by Working RR. No claims, representations or guarantees are made or implied by their publication. The contents of this publication may not be reproduced either in whole or in part without written consent.

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Working RR | Spring 2022

EDITOR’S NOTE

Glad to Meet You Hello and thanks for reading Working RR. My name is Isaac Peck, the Editor of Working RR and Senior Broker at OREP Insurance (OREP.org).

Working RR (Working Restoration and Remediation), which you now hold in your hands, is a new independent industry publication designed to help you build your business, reduce your risk of liability and stay informed on important industry and technology issues.

Our promise is to cover these stories with the energy and honesty that your important industry deserves—without the slant. I hope you find that this issue lives up to that promise.

Working RR reaches over 12,000 restoration and remediation professionals, covering stories important to this valuable profession. Please pass along your suggestions, story ideas and comments to me at isaac@orep.org. I’ve always believed that the men and women who go out to do the actual work everyday are the ones who know best about what’s really going on and what matters most. Please let me know and I will do my best to cover the story.

Another Email Newsletter?

Yes, another email newsletter. But this one is different. The email edition of Working RR is content-driven, bringing you valuable features and important news in between print mailings. If you haven’t seen it, you’re not included in the mailing list. You can opt-in for the email edition of Working RR at www.workingrr.com.

Finally, please support the advertisers who make this magazine possible and tell them you saw it in Working RR! Thanks again.

Isaac Peck Editor of Working RR and Senior Broker at OREP Insurance

Spring 2022 | Working RR

3

Customer Service Missteps: Recovery is What Matters

by Timothy E. Hull, CR

Making sure the customer service failure does not happen again is the hardest part of the process, because it requires the business to make and keep a commitment to the customer.

This past year my wife and I finally

got around to having the glass shower doors installed in our master bathroom.

The contractor we hired was working on the project when I eagerly walked into the room to check on his progress.

He glanced at me with a frustrated look on his face. When I apprehensively asked what was wrong, he pointed to a 1/8”-long scratch that was directly at eye-level on the clear glass door. Before I could say anything, he immediately told me what he was going to do to correct the situation.

We’ve all heard the cliché, “It is not the problem, but the solution that matters.”

If this is true, the restoration business

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Working RR | Spring 2022

should be called the Solution Industry.

Whether it’s personality conflicts, unrealistic expectations, poor communication, or lackluster execution, customer service failures are an everyday part of this business. Most business owners and managers would like to think their company delivers flawless service—and some take admirable steps to get close— but in reality, even the best companies screw up at least once in a while.

For those companies whose reality is like most, there is good news. You can recover. And, if you recover properly, there is a high probability of creating customer loyalty greater than before the customer service failure occurred.

This situation is often referred to as The Service Recovery Paradox. The theory almost seems ludicrous in some respects. To think that a customer would be more loyal after having a bad experience, even with an appropriate recovery, doesn’t sound logical.

Picture yourself waiting to check out at your favorite supply store. The person working the sales counter is obviously not aware of your preferred customer status. They are trying to complete a transaction for the customer in front of you when there is an issue with the bar code scanner. The sales associate page 7

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page 4 calls for help and you both wait... and wait and wait. Ten minutes later, without even acknowledging the situation, the associate offers a half-hearted apology and you are on your way―now late for a meeting with your customer and irritated enough to take your business elsewhere.

In similar situations, some would choose to call the store manager and complain. The store manager would apologize and maybe even offer modest compensation, such as a discount on your next purchase. To me that reduces loyalty, not increases it. However, if the store manager were to offer you a dedicated “preferred contractor” sales desk and assign a sales associate to your account in an effort to ensure the situation doesn’t happen again, then we might be getting somewhere.

The reason the second recovery scenario works is because an unhappy customer’s loyalty is not based on the past experience, but rather on their fear of future failures. Consequently, unless the contractor provides a way to minimize or eliminate the risk of future failures, loyalty is impossible to achieve, as they may never get the second chance.

So, what does a good customer service recovery process look like? For me it is simple: own the problem; fix the problem; make sure the problem doesn’t happen again.

Owning the problem generally means accepting responsibility for the consequences of the service failure. This starts with a sincere apology for any inconvenience it may have caused the customer. It is recommended to do more listening than talking at this stage.

Even if you don’t agree with the customer (who IS always right, by the way) the problem still needs to be acknowledged and accepted. Being “present” with the customer and having empathy for their situation is often as powerful as any compensation that may follow.

Fixing the problem is the easiest part

of the process and usually that at which restoration contractors are best. As long as the action is in alignment with what the customer perceives will rectify the situation, then the resolution is sound.

With this in mind, I would offer two pieces of advice. First, act swiftly. This conveys to the customer that you are acting with the same sense of urgency as they view the situation. Second, do not offer meaningless compensation. An attempt to “buy-off” a problem rarely ends well for either party. This sends the message that the relationship with the customer is merely transactional and you have no interest in future business.

Making sure the customer service failure does not happen again is the hardest part of the process, because it requires the business to make and keep a commitment to the customer. It also requires involvement from multiple levels of the organization to formulate implementable plans of action to prevent similar situations from occurring in the future. However, these plans cannot be developed in haste or operational procedures become a patchwork of bandages that address only symptoms and not root causes.

Truly addressing service delivery failures should involve an analysis of categorical trends over a period of time. These failures will generally fall into a few categories such as scheduling, communication, or planning that can be dealt with more strategically than tactically. This is known as a procedural approach to problem solving. Other issues related more to personnel can also be present and should be dealt with swiftly on an individual basis.

As for my glass installer, he executed his customer service recovery perfectly. He immediately apologized for the situation, even going so far as to acknowledge the inconvenience it might cause us by not having use of the shower. He let us know that he really should have inspected the glass before he left the shop and definitely before he started mounting the hinges and bottom frame. He had

already ordered new glass even before making me aware of the issue, and said he would schedule the replacement installation as soon as it came in. His finishing touch for the recovery was when he proceeded to install the defective door anyway, because he didn’t want us to be without use of the shower while we waited for the replacement. He did this, even knowing that he was not going to be paid for the additional time.

Regardless of the situation, customer service issues are a part of every service business. Resolving the issue and implementing a successful customer recovery in a timely manner should be an integral part of every restorer’s operating procedures. Getting it right is critical to customer loyalty and future referrals. Don’t hide from your company’s service failures.

Own them; fix them; make sure they don’t happen again, and you might just create one of the most powerful sources for repeat business―loyal customers.

Just four months after our shower door project was finished, my 9-year son and his buddy broke a 40-square-foot picture window in our sunroom while playing baseball in the back yard. Guess who I called?

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WorkingRR.com Spring 2022 | Working RR

7

Insurance IQ: Sorry You’re Not Covered

by Isaac Peck, Editor

You’ve spent thousands of dollars purchasing two separate insurance policies only to find that neither one of them covers you in this scenario.

Restoration contractors and remedia-

tors have had a long and difficult road when it comes to getting proper insurance coverage. In a recent policy audit conducted by OREP’s underwriting partner, ARMR, over 1,000 restoration firms had their insurance policies examined and 60% were found to be improperly covered.

And when I say improperly covered, I mean that there is likely a LARGE coverage gap wherein you do not have insur-

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ance coverage for a significant part of your operations.

Given what most restoration firms are paying for their insurance, this can be shocking to hear!

So, let’s dive into some of the most common coverage gaps that restoration and remediation firms are unaware of: 1. Category 3 Water Exclusions This is a big one. If you work in any way

with water loss, do work with water cleanup or repair water damage—chances are very good you have Cat 3 water exposure. What exactly is Cat 3 water?

The IICRC defines Cat 3 water as follows: Category 3 water is grossly contaminated and can contain pathogenic, toxigenic or other harmful agents and can cause significant adverse reactions to humans if contacted or consumed. Examples of Category 3 water can include, but are not limited to: sewage, waste line backf lows

that originate from beyond any trap regardless of visible content or color, all forms of flooding from seawater, rising water from rivers or streams, and other contaminated water entering or affecting the indoor environment, such as wind-driven rain from hurricanes, tropical storms, or other weather-related events. Category 3 water can carry trace levels of regulated or hazardous materials (e.g., pesticides, or toxic organic substances).

However, the issue is that any water that is sitting stagnant for any significant period of time will become Cat 3 water. Furthermore, if there is even a minute amount of Cat 3 water present, the entire job can be excluded on an insured’s policy.

The problem for restoration firms is that Cat 3 water is excluded in the vast majority of policies that are available to them in the marketplace.

Most general liability policies sold to restoration and remediation firms have a bacteria exclusion that necessarily includes Cat 3 water (because of the bacteria in Cat 3 water). So even a drop of Cat 3 water means an entire job can be excluded under a normal General Liability policy.

2. Mold Exclusions Of course there’s a mold exclusion on your General Liability policy. That’s why you’re carrying a second policy to cover you for mold. That means you’re OK, right?

Not quite. Even if we set aside the fact that having two separate policies creates a scenario where neither insurance company wants to pay the claim, there’s another problem that arises when you’re carrying two policies. This is especially true when you have a general liability policy and a separate mold policy—a large coverage gap exists between them.

Here’s an example: Let’s say you or one of your employees responds to a mold

cleanup job and arrives on the jobsite.

Your employee accidentally turns the stove on (just bear with me) and sets the house on fire. That’s clearly Property Damage that should be covered under your General Liability policy, right? The problem is that the General Liability policy specifically excludes mold and work that you do surrounding mold. In other words, since you were responding to a mold cleanup job, that job and everything related to it is excluded under your General Liability policy.

What about your mold policy—will it cover you in this scenario? No, because your mold policy doesn’t cover you for traditional general liability claims. It only covers you for the “release, escape or dispersal of mold and mold spores.”

The result: Sorry, you’re not covered.

You’ve spent thousands of dollars purchasing two separate insurance policies only to find that neither one of them covers you in this scenario.

What to Do The coverage scenarios above are just two of the most common coverage prob-

lems that restoration and remediation firms face. So, what can you do to make sure you’re covered properly?

First, get expert help. There are over 1.2 million licensed insurance agents in the United States, but very few of them have expertise with environmental policies and even fewer know about how to procure coverage for restoration and remediation professionals.

The sad fact is that most insurance agents don’t have experience, training, know-how, or even access to the insurance markets that restoration professionals need to be properly covered.

However, OREP is making single-solution insurance policies much easier for restoration and remediation professionals to get access to. With an online application that takes only five minutes, restoration firms can get a quote that will ensure they are properly covered for mold, Cat 3 water and more.

Visit OREP.org/RR to get a quote today and learn more about OREP’s comprehensive insurance solutions for restoration professionals.

Spring 2022 | Working RR

9

Navigating Insurance Claims: What Restoration Contractors Need to Know

by Tom Scalisi, Levelset

Preliminary notices provide a wealth of benefits. They improve communication, show that you’re a professional outfit and understand your rights, and set your expectation to get paid.

From the outside, it might seem that working for insurance companies on behalf of homeowners in need is a solid business plan with very little room for error. Anyone who’s ever done this type of work knows better. Restoration contractors definitely face their own challenges, least of which is trying to navigate insurance claims so they can get paid.

While there will always be work and money for the making, restoration contracting is anything but straightforward.

Most of the parties involved in restoring a family’s home have minimal actual construction experience. They might

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not realize how much materials cost.

Their inexperience can slow down the construction process, including when it comes time for you to get paid.

ny’s cash flow to suffer. There are many reasons for this, and once you read them, you’ll understand how they work and why they don’t rush to pay anyone.

Here is what restoration contractors need to understand about insurance claims and how to protect their payment rights in the process.

Interest Insurance companies make money in two ways: through a positive premium to claim ratio and interest on the premiums they collect. They invest the money they make and premiums they receive for the interest.

Why Insurance Companies Delay Restoration Claims By far, the most challenging part of restoration work is not the actual work; it’s getting paid. Insurance companies are notorious for dragging their feet on payments, causing the restoration compa-

Insurance companies will often take their premiums and invest in shortpage 13

page 10 term assets to make as much interest as possible while also playing it safe. Some popular choices are treasury bonds, corporate bonds, and cash equivalents.

The longer an insurance company can let their money sit in an interest-bearing account, the more interest they’ll receive. Since this is how they make a lot of their money, they’re not interested in pulling the cash out to pay you, as they’ll lose the interest they were gaining on it.

For further information on this subject, read: Insurance vs. Bonds: What Contractors Need to Know (https://www. levelset.com/blog/insurance-vs-bonds/).

As an example, Liberty Mutual reported $274 million in third-quarter profits in 2019. While that’s an impressive number, it pales in comparison to State Farm’s $5.6 billion profit for all of 2019.

That’s not all interest, but it does provide some perspective as to how much money is in play.

Disputes The process for a homeowner to file a claim isn’t always as straightforward as an insurance company spokesperson makes it out to be. A major cause of these disputes arise when the insurance company, adjuster and the homeowner have different views on the value of the damages.

At the beginning of the claim process, an adjuster needs to assess the damage and produce a quote. The adjuster’s goal is to replace what the homeowner had.

The homeowner may want to replace the value of what they had, not necessarily the items or home itself. Often, homeowners need to prove not only what items they had, but also the condition of the home before the damage.

That takes time.

A restoration contractor may also struggle to find a middle ground with an adjuster. Contractors often handle the

emergency before the claim has even started. The insurance company may find the charges to be in excess of what they’re willing to pay. Also, when the restoration estimate comes in, it may be less than the restoration contractor was expecting.

In most cases, a restoration contractor cannot negotiate the terms of the estimate, but they can discuss them with the adjuster.

Insurance Policy Coverage Depending on the type of damage that a restoration contractor comes in to fix, there can be many moving parts involved in the claim. An insurance company may want to sort through the entire claim before cutting checks.

A single insurance policy doesn’t cover every type of damage. A typical homeowner’s policy will likely cover storm damage, from a fallen tree or lightning strike for example. But a claim for damage from floods or earthquakes will typically require additional coverage. It takes time for the insurance company to verify not just the extent of the damage, but the cause of it. If the policy didn’t cover it, the homeowner will need to pay for the restoration out of pocket. Even if the homeowner’s policy does cover the restoration work, other factors will delay a restoration contractor’s work (and payment).

If the damage to the home is extensive, there’s a good chance the residents will have to find somewhere else to stay. The cost of a temporary home will ultimately come out of the insurance company’s pocket. But that also means no one will be in the home. This can be a challenge in the early stages of the restoration, as the contractor and adjuster won’t have access to the interior.

Other factors, including challenges with utility companies and municipalities may also factor in. Sometimes the costs and pressures of these factors outweigh the restoration contractor’s stake.

These are just some moving parts that can significantly slow your payment.

Why Homeowners Delay Payment After an Insurance Claim Most of the time, it’s safe to assume that the homeowner you’re working for has very little experience in either insurance or construction. It’s probably the first time they’ve dealt with a disaster as well. The restoration contractor rides in, hoping to be the knight in shining armor.

Sometimes, however, the customer sees things quite differently. After a major disaster, it’s not unusual for restoration contractors to flock to the area from all over the country. Homeowners are often afraid of being taken advantage of by a fly-by-night restoration outfit, and may hem and haw over the pricing, and drag their feet on payment.

Dealing with a skeptical homeowner is a problem because the insurance companies write the claim check to the homeowner, not to the restoration contractor directly. That check may be the largest one the homeowner has ever seen. The owner may decide that they don’t want to pay for the work, instead pocketing the cash and blocking your calls.

Fortunately, a smart restoration contractor knows how to protect themselves against non-payment risk, whether the insurance company or the homeowner is the cause of the delay.

Speed Up Insurance Claims and Get Paid Since you already know that the insurance companies involved in your restoration projects are in no rush to get you paid, you need to be proactive about speeding up your payment. Here are a few steps you can take to reduce the time it takes to get paid.

Sending preliminary notices is the first step to protecting insurance payments. Restoration contractors work page 14

Spring 2022 | Working RR 13

page 13 chanics lien is coming will likely speed up the payment process. Of course, this assumes that you collected the mortgage company’s information in the first place!

In either of these scenarios, a notice of intent to lien is often all it takes to get the ball rolling. The preliminary notice has protected your payments, but the NOI shows you’re serious about filing a mechanics lien.

A Mechanics Lien is a Restoration Contractor’s Best Protection It’s important to keep a close eye on your mechanics lien deadline, since a lien claim is a contractor’s strongest payment protection. If payment is late, a restoration contractor may need to file a mechanics lien while the homeowner waits for the insurance claim to be paid. quickly, responding to an emergency and getting the homeowner back up and running as soon as possible. Because they use this shot-out-of-the-gate business model, they may overlook preliminary notices.

Preliminary notices provide a wealth of benefits. They improve communication, show that you’re a professional outfit and understand your rights, and set your expectation to get paid.

They’re your introduction to the parties involved, and very often, they protect your lien rights.

Discover how sending notices helped a restoration company shorten their payment cycle to 17 days. Even if you’re not implementing preliminary notices before you start work, the good news is that by the nature of your business, you may still have time. Because most restoration contractors work quickly, they often fall within the time frame for most state requirements even after completing the project.

In fact, some restoration contractors find that sending a notice at the end of the job is the best way to get paid faster.

This method puts your name in front of

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the insurance company before they cut the checks. It also helps to remind the parties that you know your rights.

How a Notice of Intent Can Help If you haven’t received payment for your restoration work, the homeowner might not realize that there’s an issue.

Most likely, they’re waiting for payment as well. When you send a notice of intent (NOI) to lien that details how close they are to having a lien against their home, they’ll realize the deadline is looming. They’ll reach out to the insurance company and hold their feet to the fire, hopefully producing your payment.

While it doesn’t hurt to send an NOI to the insurance company, that alone might not produce a payment. It may start an investigation as to what happened with the check they cut to the homeowner however.

If the homeowner has a mortgage on the property, sending an NOI to the mortgage company or bank is sure to cause a reaction. Banks want their mortgage properties lien-free so they’re as liquid as possible if they have to foreclose on them. An NOI explaining that a me-

Filing a mechanics lien on a property will hopefully speed things up, and it will definitely help secure your interest.

No one wants a lien placed on their property. Homeowners are likely to start negotiating to settle the debt before it goes any further.

Case in point: A homeowner in Maryland asked a question about this very scenario. The insurance company was dragging their feet on payment. Rather than wait for filing deadline to pass and hope for the best, the restoration contractor filed a lien.

Even if the owner and insurance company promise to pay, there are never any guarantees in construction. A promise to pay is not a payment until the money is in your bank account.

If the owner or insurance company doesn’t pay, you have the right to enforce the lien and foreclose on the property in order to collect your payment.

You’ll have to start the lawsuit process, so be sure that you document the progress of the job from start to finish.

The good news is that you’ll probably be able to roll your court costs into the lien’s amount.

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Contractor Pollution Liability + General Liability • Policy designed specifically for Restoration and • Broad pollution coverage included Remediation Firms • Coverage for fungus, mold + bacteria / category 3 water • Eliminate Coverage gaps (and disputes) with ONE policy • No subcontractor restrictions

Call (888) 347-5273 or Apply Online at OREP.org/RR Open 12 Hours a Day to Serve You Better 8-8 EST (5-5 PST) OREP Insurance Services, LLC. CA Lic. #0K99465

COVER STORY

RESTORATION CONTRACTOR LAWSUIT: A Case Study

by Kendra Budd, Associate Editor

All argued that the Comey’s lawsuit, while including the classic accusations that you see against a restoration contractor, lacked sufficient detail to even proceed on a legal basis. However, the case continued to move towards trial.

The majority of claims against restoration contractors are settled quietly— but every once in a while, a case can go public in a big way. One such case is Comey v. State Farm et al.

The Comeys, a married couple, sued State Farm, along with both of the restoration contractors (RCs) who did work for them: SERVPRO and ServiceMaster, adding the ServiceMaster franchisor to the suit for good measure.

While the case was litigated and resolved in 2016, it provides a rare inside look into the types of allegations that RCs face in a lawsuit and provides some teachable lessons for how to protect your firm against similar lawsuits.

It is one of those “classic” lawsuits that proves a great case study for anyone that’s concerned with risk management in this industry.

At the time, the case went viral all over local and state media in California. The specter of a family being forced from their home because of (alleged) unaddressed water damage, toxic mold growth, and other environmental hazards is the perfect narrative for the media to run with!

Here’s how it happened and what we can learn from it.

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A Simple Water Leak Cindy and Greg Comey, along with their two children, were living in Mission Viejo, California when their home suffered a “sudden and accidental water loss” which started upstairs and quickly traveled through the ceiling to the downstairs and then into the crawl space. The water damage was so extensive that the house was deemed uninhabitable. The Comeys fled their house as quickly as possible and immediately contacted their insurance company, State Farm.

The Aftermath The Comeys held a policy with State Farm for over 20 years and were part of the Premier Service Program. When they called, they were referred to SERVPRO of Mission Viejo, a vendor that was part of State Farm’s Premier Service.

State Farm made it clear to the Comeys that SERVPRO was screened and vetted. Additionally, they represented that SERVPRO would not be paid until all work was completed to the family’s satisfaction and services came with a fiveyear warranty.

The Comeys first complaint was the fact that SERVPRO did not arrive until the next day following the water loss. page 19

Spring 2022 | Working RR 17

page 16 “Immediate and thorough emergency dry out was necessary to prevent mold growth and to mitigate further water damage to [the] home. Mold can grow within a 24-hour period,” the suit alleges.

Arriving the day after the water loss, SERVPRO began dry out services and within a couple of days, SERVPRO reported that the home was dry and the Comeys could return. But within two weeks, the family started smelling mold in the home.

The Comeys allege that SERVPRO had originally promised to perform mold testing, but no mold testing was ever completed—so the family was forced to pay for their own out of pocket. In an interview with ABC 7, Cindy said, “When we found out the results, it was a shock. The house was contaminated with mold.” The family moved into a hotel, but by then State Farm had already paid SERVPRO, despite the family’s dissatisfaction with the services provided.

Unhappy with the work of the initial restoration contractor (SERVPRO), the Comeys insisted that State Farm bring in a different dry out and mold remediation vendor. Through State Farm’s Premier Service Program, a local ServiceMaster franchise was recommended and hired.

However, it would be more than 60 days from the initial water leak until Service Masters Complete Restoration (ServiceMaster) arrived at the property to “address the still wet building materials and mold contamination.”

After ServiceMaster completed their work, the Comeys argued that they had simply concealed the mold, instead of cleaning it up.

The Lawsuit The year after the initial water damage and two (attempted) cleanups, the Comeys filed a lawsuit against State Farm and both RCs for breach of contract, breach of duty of good faith, fraud,

false promise, intentional misrepresentations, and negligence. In their lawsuit they allege that the lack of taking proper channels of repairing and cleaning the damage was an attempt to cut corners and to spend as little money as possible– a fraud that State Farm and both RCs were in on. The lawsuit also argues that SERVPRO and ServiceMaster work with State Farm regularly, meaning that they are not independent from State Farm.

The lawsuit makes over a dozen allegations against SERVPRO that are classic accusations faced by RCs everywhere.

Namely, that SERVPRO was negligent by: • Placing insufficient dry out equipment in the home • Artificially limiting the scope of work to stay within policy limits rather than advise plaintiffs of the true damage • Failing to put up barriers to isolate wetted building materials • Failing to demo areas of the home to allow for dry out • Damaging the house and its contents • Ignoring industry standards for dry out and mold prevention • Covering up mold contamination • And much more!

The Comeys alleged that ServiceMaster committed the exact same 15 errors and omissions as SERVPRO did.

According to the Comeys, the upstairs bathtub was where the water leak originally began. However, neither SERVPRO or ServiceMaster took out the bathtub, where water was trapped under it since the first incident. ServiceMaster then allegedly sprayed Kilz’s white paint on the mold spots, in an attempt to cover it just to pass a second mold test. They charged the Comey’s just under $5,000 for remediation. “That’s how they save money— by cutting corners,” said Evangeline Grossman, the Comeys’ attorney.

Conspiracy The Comeys advanced another argument that will be familiar to any RC: that the insurance company was “in cahoots” with the contracting companies

to pay as little as possible. Grossman argued that the whole reason behind State Farm’s actions, including having SERVPRO and ServiceMaster as their preferred vendors, was a ploy to spend as little money as possible. “Defendants, and each of them made the misrepresentation with the intention of inducing plaintiff’s reliance, so that plaintiffs would hire a service provider who would under scope the loss and conceal damage rather than a legitimate contractor who would properly scope the loss and perform all work necessary to remediate the water and mold damage,” Court documents state.

In emails recovered by their attorney, Evangeline Grossman, during the litigation process, a veteran State Farm claims team manager wrote to his adjuster: “We can say all we want that they are independent contractors, but I think we would lose in court,” reported ABC7.

Rebuttal State Farm’s opening paragraph sums up the defendants’ rebuttal nicely: “Plaintiffs sued us because of some generalized dissatisfaction with their water loss claim…[but] fail to allege any specific facts to demonstrate how the contract was breached or which policy provision was violated so as to constitute breach of contract. Instead plaintiffs rely on boilerplate allegations of unreasonable claim handling without stating any facts to support these allegations.”

The legal briefs filed by State Farm, SERVPRO, and ServiceMaster all consistently attack the glaring lack of details and facts included in the Comeys’ lawsuit. All argued that the Comeys’ lawsuit, while including the classic accusations that you would see against a restoration contractor, lacked sufficient detail to even proceed on a legal basis.

Lessons Learned While the public nature of this dispute was most unfortunate for all involved, the Comeys eventually reached an unpage 21

Spring 2022 | Working RR 19

page 19 disclosed settlement with State Farm and the suits against SERVPRO and ServiceMaster were dismissed. This, of course, happened right before the case went to trial.

Kari Dybdahl, the President of ARMR, the lead underwriter for OREP’s remediation and restoration contractor insurance suite, says that the claims made by the Comeys in this case are very classic allegations seen by many restoration contractors nationwide.

In terms of what lessons we can learn from it, Dybdahl says there are five main things you should be doing to avoid claims and complaints: 1. Follow the standards.

2. Stay in touch with the customer.

3. Create a detailed work file for every job, including why you did what you did, and so on.

4. Try not to work for bad customers.

It all starts with the standards, according to Dybdahl. “Every word in the Institute of Inspection Cleaning and Restoration Certification (IICRC) has been reviewed from a risk management standpoint, so sticking to the industry standards and guidelines is job number one. Our standards are peer reviewed by thousands of people and you don’t want to be doing anything outside of that,” says Dybdahl.

Next, you want to be very careful not to lose contact with the customer. “A very common reason for claims is the property owner gets disappointed with the quality of workmanship. Maybe you put in the wrong color floor or fail to stay in communication with the customer.

Often a petty dispute will devolve into something more. The RC will say ‘I’m not going to fix your floor because you owe me money,’ or ‘I’m not going to give you your furniture back unless you pay me.’ A petty dispute can easily turn into something really ugly because a lawyer really can’t make much money on that matter unless they can come up with additional damages,” reports Dybdahl.

That’s why it’s very important to pay at-

tention to your quality control. “We see very large restoration firms that have never been sued and then we see smaller $500,000 per year firms that have three losses a year. The difference can be stark in terms of how the business is run. We just saw a claim where the restoration firm had really ignored that homeowner for 8 months. Larger firms have jobs that don’t turn out so well, but they resolve them without getting sued.

The quicker you catch an issue, the less expensive it is going to be. And don’t let the job drag on; get in there and get out.

Frequent check-ins with the customer, good quality control, and a willingness to make it right with the customer goes a long way,” argues Dybdahl.

Third, note your file as if you were to be deposed. “Make sure your notes are detailed and document as much as you can. Imagine if you were to be deposed and you’re looking back at your notes from two years ago. You don’t want to leave much ambiguity as to why you did what you did. Maybe you had a good reason why you did something. However, you’ll have to explain why you did what you did if you ever wind up in court,” Dybdahl says.

Next, try not to work for bad customers. This is, admittedly, easier said than done. “If you’re thinking you’re talking to someone you don’t want to be working with, you should try not to work with them. This is hard to do if you’re on a repair network, but there is sometimes nothing you can do to overcome the downstroke of a bad customer. If you have a customer that is deadset on being dissatisfied and blaming you, it might not matter how well you communicate or how good a job you do, it won’t stop them from filing a suit. In those cases, you’ll need to rely on the fact that you followed the standards and took good notes,” reports Dybdahl.

not properly covered. “The majority of General Liability policies being carried by RCs in the market today exclude Category 3 water losses. This means in cases like this one, where the water was sitting for a day before the restoration firm arrived, technically that would be excluded under most GL policies.”

The problem is that many of the insurance brokers who help restoration firms find coverage are not educated on the unique risks faced in the industry.

Restoration firms that are looking for a single policy that is specifically designed for their restoration and remediation business can visit OREP.org. OREP specializes in restoration contractor insurance and offers comprehensive policies specifically designed for the unique risks faced by RCs. Visit OREP.org/RR to learn more.

Stay safe out there!

Are you covered for Cat 3 water (black water)?

OREP’s Contractor Pollution Liability covers microbial substances, including mold, bacteria, and Cat 3 water.

Coverage Designed Specifically for Firms like YOU.

Shop OREP.org today!

Lastly, make sure you have the right insurance coverage for the work that you’re doing. Based on Dybdahl’s policy audits of over 1,000 restoration firms’ insurance policies, 60% of firms are

Spring 2022 | Working RR 21

How to Get Referrals from Insurance Agencies

by Kendra Budd, Associate Editor

“Ask yourself how you can uniquely position what you have to offer to fit in seamlessly with those trends and shifts in the market.” etting referrals from insurance G agents is imperative to driving your restoration company—but it’s not always an easy thing to accomplish. Insurance agencies are always going to refer who they’ve worked with longest, and whose made them the most money. It can be difficult to work your way up on an insurance agent’s list. You have to build your brand and client relationships before insurance companies start putting their faith (and money!) in you.

Matthew Danskin, owner of Restoration Referral System shared his insights on how to get more referrals from insurance agents on Restoration Domination

Show for Contractors & Entrepreneurs podcast, hosted by Rico Garcia Jr. The episode, which took place in November 2021 outlines different tactics that Danskin has used over the years to further his business.

Here’s what we learned.

How to Stand Out According to Danskin, there are 3 essential methods to use when wanting to stand out to insurance agents. The first is something he calls “organics.” He suggests looking into every client’s insurance company, but especially those

that didn’t refer your company. “We want to leverage ourselves to that customer, so we can get to that agent,” he says. The best way to go about this is to have a positive relationship with those clients, because that’s who insurance agencies are going to use as their reference. Otherwise, there will be nothing for you to leverage.

The second method is to “tap into your past book of business.” Danskin recommends going back and looking at past clients to see what insurance agencies they were under. You’ll be able to notice a pattern of which insurance page 24

22 Working RR | Spring 2022

page 22 companies do and do not work with you as much. From there you can distinguish which agencies you need to be targeting more to build relationships.

This will also give you past references to show to insurance agencies that maybe don’t refer you as often as you like.

However, with this in your back pocket you can show a positive experience that your company and their agency had together in the past.

These both lead into his final method, which is the cold-call strategy. Danskin suggests calling an insurance agent and asking to set up a meeting. This is especially useful if you used the organics method earlier, that way you have a direct clientele in common. However, there is a right way and wrong way to go about cold calls: “You never just want to walk in, that won’t reflect well. Setting up a meeting ahead of time is the best avenue.” To finally sell your company to them, write them a review online after your meeting as soon as possible.

Preferably five-star. This will leave a good impression on both you and your company, because branding is going to be a big selling point for you.

The reason many insurance agents keep referring the same restoration companies is because they’re reliable and familiar—their brand is safe but also different. In the article Working with Insurance Carriers to Grow Your Restoration Business by Jenny Barber, she reiterates this idea. Barber outlines in her article that a great way to brand yourself is to network, especially by going to industry events.

“The idea is to not only get your name out there, but also to see what kinds of trends are making waves in the world of homeowner’s insurance. Ask yourself how you can uniquely position what you have to offer to fit in seamlessly with

24 Working RR | Spring 2022

those trends and shifts in the market,” she advises.

Branding yourself and your company by using these methods will give you a leg up in insurance referrals. Standing out and getting your foot in the door is the first step; next you’ll have to give insurance companies exactly what they’re looking for.

What Insurance Agencies Want There are six things that insurance agencies want from restoration contractors. The first 4 are pretty simple and self-explanatory: convenience, trustworthiness, great customer service and good work. If you don’t have at least these first four qualities, then your restoration business won’t stand a chance getting referred by an agency.

The last two in the list are, according to Danskin, the most important things that insurance agencies look for.

• Can you retain their clients? When referring restoration companies, insurance agencies are going to look what you brought to them. Once they start referring you, those agents are going to look at their numbers afterwards. Since they’ve started referring you, are you helping to retain clients

or are you driving more of their clients away? If you are not at the very least keeping the same percentage of clients, then agencies aren’t going to refer you.

• Can you help them build their clientele? Insurance agencies make most of their money on residual business, which they’ll be looking for your help to protect. Danskin uses the hypothetical example of, “if you’ve just started working with a new agency that usually loses 10% of their business every year, but now they’ve partnered with you they only lose 8% —well that’s a 2% pay raise that they just got. That’s a huge reason why they should choose you as a contractor over the other guy.” If you’re not building an insurance agency’s clientele, then they can’t see a valid reason to refer you.

And the best way to go about it? Building relationships with your clients.

Building Client Relationships Your clients and customers are the determining factor in getting you referrals. If you’re not making your customers feel like superstars, then they’re not going to give you a good review which won’t look

good to insurance agencies. Barber outlines that this is more than just a theory, it’s fact.

Research has found that: • Satisfied customers in the U.S. will share their positive customer experience with at least 11 other people.

• 77% of customers have stayed loyal to the same brand for a decade or more.

• A 5% increase in customer retention can increase profits by 75%.

• 90% of people trust recommendations from their family and friends.

This is what insurance agencies are going to be looking for when choosing who to refer.

More importantly, you want your client to feel safe and comfortable with you during this tumultuous time in their life. According to Barber, customers are genuinely looking for a company that speaks their language, and will stay positive. It’s the same reason we as humans stick with the same brands when grocery shopping, it’s familiar and safe.

Building that environment for your client will lead them to give you encouraging reviews.

Once you’ve built a good relationship with your client and have helped them with their tragedy, it’s not a bad idea to ask them to help you out. Get your clients to call the referral source, especially if the company is one you haven’t worked with, or very little with, before.

This will help you stick in an insurance agency’s mind. Clients are their source of income, so if you’re keeping them and bringing them in through good relationships, you’ll start to stand out more. But before you go chasing after an insurance agency, ask your clients how they like them.

Additionally, contractors should make sure that the insurance agency they’re trying to impress, is also building good relationships with their clients. “I’m going to ask them, what do you think of

them? And that customer either knows and likes their agent…or they don’t know them, they don’t like them. If the answer is negative, that doesn’t give me a powerful inclination to go and pursue that insurance agency,” advises Danskin.

Referrals go both ways, and you want to make sure that you’re only being referred by agencies with positive reviews and client relationship because that will ultimately affect your business.

Final Thoughts Insurance agencies need you just as much as you need them, but if you’re

not building long lasting client relationships, putting yourself out there and bringing in new business, then an insurance agency won’t see any reason to refer you. “If we expect an insurance agent to give us what we want, which is business, then we need to give them what they want,” Danskin encourages.

Just remember to treat your clients with dignity and respect because they are going to be the number one reason you are going to start seeing more referrals.

However, make sure the agency is also taking care of their clients in return.

Stay safe out there!

Spring 2022 | Working RR 25

Mold Lawsuit That Changed the Industry

by Kendra Budd, Associate Editor

In their lawsuit, Ballard and Allison demanded $100 million in restitution both for damages to their home, and their health.

Today, there are entire industries built around mold: testing for mold, cleaning up mold, preventing mold, and the list goes on. Indeed, among many restoration and remediation firms, mold is very frequently a central focus—or at the very least—a key concern.

However, the American public (and its insurance companies) was not always so concerned about mold.

It was only two decades ago when a landmark lawsuit involving mold captured national attention that mold became an outsized concern for insurance companies and an active part of the everyday public’s conversation. The result has been a plethora of businesses, technologies, services, industry standards

26 Working RR | Spring 2022

and techniques to address mold detection and remediation.

ed to training professionals how to deal with mold.

So, what was the case that started it all?

The lawsuit involved a home in Texas and, as you might have expected, an insurance company.

Here’s how it happened.

The case outlined a Texas home that was completely destroyed by mold, because an insurance company stalled on making repairs caused by water leaks.

The Case Anyone who knew Melinda Ballard knew how much she loved the iconic film, Gone with the Wind. So much so that her 12,000-square-foot Dripping Springs home was a replica of Tara, the mansion from the aforementioned movie.

This lawsuit sent shockwaves through the nation, serving as the impetus for many State licensing laws, fundamentally changing how insurance companies deal with and address mold, and creating new industry standards and associations, such as NORMI, dedicat-

In 1998, Ballard and her husband, Ron Allison experienced a plumbing leak in their bathroom, which was “fixed” soon after. However, according to Court documents of Ballard v. Fire Insurance Exchange (FIE), the house’s hardwood floor began buckling shortly after repairs.

Richard Roberts, Ballard’s flooring contractor, first suggested removing several floor boards to allow for dry out.

However, a month later, Roberts then advised Ballard to contact her insurance company because moisture readings showed no signs that dry out occurred, and the damage to the floor was severe.

Heeding Roberts’ warnings, the family filed a claim with FIE, whom Ballard held a policy with since 1992.

According to Ballard, a claims adjuster came out to their home and performed an inspection. The adjuster chalked up the damage to “slab settling” which was not covered under Ballard’s homeowner’s policy. The adjuster also concluded there were no plumbing leaks after testing for them. However, Ballard was far from satisfied and demanded another inspection. A month later, a FIE engineer and second adjuster found the damages were in fact caused by not one, but two water leaks. However, both claimed the leaks were no longer active in the home.

Roberts cautioned the adjuster about the potential dangers of mold growth if they refused to remove the hardwood and subflooring. The warning was allegedly ignored by FIE. In fact, Ballard asked for permission to remove the flooring herself in an attempt to mitigate the damages. Instead FIE rejected the request, directing her to only remove the floor boards with severe damage, and to cover the subflooring with carpet remnants or plywood while the claim was investigated.

This went directly against Ballard’s policy, which allows for the homeowner to mitigate damages. However, the policy also outlines that the homeowners “must cooperate” with what the insurance company decides. FIE even threatened Ballard with the loss of her coverage if she made any repairs during the investigation.

In early 1999, soon after the second inspection, the couple and their 3-year old son began to experience a nightmare.

The windows, door frames, stairs and walls began cracking and buckling just as the floor had from water damage.

Two months after the initial claim, FIE offered a payment of $108,000 to Ballard, but Ballard rejected the offer as insufficient to repair all of the damage.

To make matters worse, the family began to experience unexplained flu-like symptoms, including coughing up blood.

In April, Ballard by chance met an indoor air quality consultant, Bill Holder, on a flight. She told Holder about the damage, as well as the symptoms her family was experiencing. He was the first to suggest the house may have been contaminated with mold.

Days later, Holder tested Ballard’s home for mold spores. Samples showed that mold was indeed present in the home, including stachybotrys, a toxic mold that is known to cause health problems. The family then hired scientists from Texas Tech University to also test their home.

They confirmed the presence of the toxic mold spores as well. Ballard, Allison and their son had no choice but to move out.

Ballard and Allison hired a lawyer by this time, and although Farmers tried to make sizable offers to settle the claim, starting at just over $100,000, and then later offering over $380,000, but Ballard and Allison still filed a lawsuit against FIE in short order.

In their lawsuit, Ballard and Allison demanded $100 million in restitution both for damages to their home, and their health. The jury ultimately found that the house itself was damaged beyond repair. Pictures at the time of the trial show mold growth on the windows of the home, and cracks everywhere. The home would need to be demolished and rebuilt. However, while Ballard and Allison prevailed on the damage claims, Judge John Dietz ruled that medical testimony on health effects of mold could not be introduced because of the level of scientific proof required by a Texas Supreme Court, at the time of the case.

This was a huge blow to Ballard and her family, because since moving out of the home in 2000, Allison had been diagnosed with “toxic encephalopathy,” a form of brain damage due to mycotoxin poisoning. It is presumed that the poison was emitted from the stachybotrys.

Allison, formerly a financial advisor, was now unable to work and suffering seizures regularly. Allison would later go on to file his own lawsuit against FIE, separate from his wife’s.

In Ballard’s case, she was awarded a judgment that sent shockwaves through the insurance industry. The family was reportedly awarded $6.2 million in actual damages, $5 million for mental anguish, $12 million in punitive damages and $8.9 million to cover lawyer’s—totaling $32 million awarded to the family.

Thus, becoming one of the biggest cases in the nation where a Court ordered an insurance company to pay damages in a toxic mold case.

Unfortunately for Ballard, the initial verdict was appealed in 2002, and the court lowered the cost to $4 million in actual damages. But Ballard refused to go out without a fight, and appealed that verdict as well. In March 2004, appeals were once again pending before the Texas Supreme Court, but both sides reached an undisclosed settlement before the trial began.

Despite this case being settled, it was a turning point in how we treat mold cases and has influenced both the insurance and restoration industries. But why did it take so long for the conversation to start? Well, mold and fungi weren’t always such an issue for the public.

An Insurance Claim’s Issue When Ballard’s case was made national, insurance companies across the country immediately went to their state legislatures and tried to get mold exclusions to be allowed in their policies. This brought forth an explosion of insurance page 28

Spring 2022 | Working RR 27

page 27 companies changing their policies, putting new rules in place, and conducting further training—just to avoid a potential Ballard-like case. Insurance companies also began seeking out contractors who had experience and specialized in water loss and mold cleanup.

Ballard was far from the first to sue an insurance company for mold infestation in the home, but she was one of the first to win against them. Even still, mold in the home is a much newer issue than people realize.

Mold wasn’t on people’s radars until the 1940s when it first began appearing in the home. The need for faster and more affordable construction popularized the use of drywall, which is composed of gypsum between two layers of durable paper. Gypsum easily absorbs water, and dries slowly. Meanwhile the paper is known for being conducive for mold growth. In just 24 to 48 hours of a water leak, a home’s drywall can easily become infested with mold.

Alongside the increasing use of drywall to build houses and apartment complexes faster, buildings also began to be built much more “tight.”

“Ever since the fuel crisis in the ‘70s, there has been a huge push to reduce energy usage and create a more comfortable living environment. We have walls stuffed thick with fluffy insulation,” writes Jason Earle in his article A Brief History of Mold. And since there is little air exchange in most homes, it makes it easier for any pollutant to build up and concentrate.

Yes, mold is invasive, especially in newer buildings, but it’s only when left untreated that it becomes an issue. On multiple occasions, Ballard had tried to get FIE to take her water leak seriously, but they continued to ignore her. Mold, in this case, was arguably the result of poor remediation practices. In fact, during the trial, the first adjuster admitted under oath that they lied to Ballard

28 Working RR | Spring 2022

about not finding any water leaks. This is why the jury awarded the verdict that they did. Not just because of mold, but because of the lack of good faith from the adjuster and FIE. Since the litigation of her case, many have since questioned whether Ballard’s case was more about how her claim was handled instead of the mold itself.

Nonetheless, fear of mold began to take over the industry. Once the case made headlines, the use of mold exclusions in homeowners’ insurance exploded nearly overnight, with insurance carriers rushing to their state insurance departments seeking approval to exclude mold within their state-approved insurance policies.

The exclusion of mold in professional and general liability (GL) business insurance policies was also popularized, which is a reason why the majority of contractors’ GL insurance policies exclude mold. For example, restoration contractors have to either (A) buy a separate policy covering them for mold, or (B) purchase their insurance through a broker that specializes in restoration and remediation firms that can provide the general liability and mold coverage in a single policy (Shop OREP.org/RR for coverage designed specifically for remediation/restoration professionals).

All of these changes in coverage and policies were specifically designed to eliminate, or severely limit, any pay-

outs related to mold—which has become a scary, “bad” word in the insurance industry because of the Ballard judgment.

At the same time, insurance companies also tried to change how they responded to mold cases, seeking out contractors with experience remediating mold and ultimately creating increased demand for restoration and remediation services, as well as more uniform industry standards. In this way, Ballard’s case served as a catalyst that changed how the insurance industry perceived mold—and consequently kicked off the mold “revolution”—the rapid expansion of technologies surrounding mold testing, cleanup, and prevention, the push to license remediation professionals, the popularization of remediation and restoration industry standards and associations (NORMI et al.), and much more.

Mold Remediation Takes Off The first point of controversy in this new and growing industry was to determine how mold could be (if at all) successfully eradicated in a home. Part of this was due to the fact that in the early days of this industry there was a huge debate over which sampling techniques were most appropriate.

The development of the mold remediation industry was parallel to the introduction and acceptance of spore trap samples. Beforehand, the traditional method was culture sampling using petri dishes. Nowadays, we have several different sampling system options

like Environmental Relative Moldiness Index (ERMI), Health Effects Roster of Type Specific Formers of Mycotoxins and Inflammagens (HERSMI), Environmental Mold & Mycotoxin Assessment (EMMA), and InstaScope, provided to remediation professionals. In addition to sampling techniques, technology and tools available to test for, remove, and prevent mold have been increased exponentially since the late 1990s.

“We’ve seen time and time again scam artists take advantage of homeowners,” Hoffman says. As the industry has seen in the past, unlicensed or inexperienced contractors can perform shoddy work that allows mold to continue to grow in a home. Not only that, but it gives contractors a bad rap. “When licensing is done, and done correctly then we have an extra safety net,” argues Hoffman.

Licensing However, despite the rapid growth in mold testing and remediation technology, only a handful of states currently require licensing for remediation. Douglas Hoffman, director of the National Organization of Remediators and Mold Inspectors (NORMI) is attempting to change that.

However, one of the reasons we don’t see many states requiring licensing is because of the economic impact it may have on the industry. “When Florida’s licensing laws first went into effect, it was rejected three times by the existing Governor. This was because they didn’t have a grandfather clause in the statute.”

A Grandfather clause allows someone who is already working in the industry to obtain a certification and then bypass all those statutory requirements and get licensed. Without that clause the Governor was worried the industry would take a dip. However, the law was later passed by a different Governor.

Hoffman explains how licensing for mold followed shortly after the Ballard case. “The first place to put in mold remediation licensing was Louisiana in July of 2004.” Texas followed soon after but it wouldn’t be until 2009 that other states would follow, Hoffman tells us.

Those states are Florida and New York, and the District of Columbia adds to that. Portland, OR has also begun to require licensing within its city limits.

To make matters even more complicated, each has different requirements or policies put into place. Hoffman explains, “Florida requires 4 years of education— either a GED or High School Diploma— exams, a criminal background check, and an application with a fee.” D.C., however, requires a certificate for mold remediation on top of training. “These licenses aren’t transferable either,” Hoffman says. “If you want a license in Florida, but only have one for Portland, you’ll have to go through the proper channels to get that license again.”

One of the benefits of licensing is it establishes industry standards for contractors to abide by, which lowers liability for the professionals (you) and sets clear expectations for all involved.

Another reason state licensing hasn’t taken hold yet, Hoffman theorizes, is that there are still no federal guidelines for mold safety. That distinction has been left up to remediators and scientists for the past century, meaning there is no one guideline to go by. “Because there are no federal guidelines, like with lead or asbestos, the states are scrambling to write a regulation that will hold up in court,” Hoffman explains. States just aren’t sure how to word these guidelines that will then be regulated by the federal government.

Lastly, Hoffman believes part of the problem of why licensing is taking so long is because of who is given a voice and who isn’t. “Lawyers should not be writing these laws. Someone in the industry should,” Hoffman says. NORMI wants a seat at the table and to be a stakeholder in these conversations. The lack of mold professionals being included in regulation is perhaps the reason

it’s taking so long for these laws to take effect, Hoffman suggests.

Final Thoughts As we reflect on the Ballard case, we can see that insurance companies responded to it with a combination of (1) reducing mold exposure by excluding it in their insurance policies, and (2) seeking more experienced, specialized contractors who have experience dealing with water loss claims and cleaning up and preventing mold growth in homes.

This shift in the insurance industry’s perspective of mold and increased awareness (and fear) of mold, along with a demand for professional cleanup se rvice s—he lpe d the re storation and remediation profession grow into what it is today.

While it remains to be seen whether further licensing will be enacted in the remaining states, it is clear that mold growth in the home is a problem that both contractors and the consumer public will continue to face. In fact, we are still seeing cases like Ballard’s today. Just last year (2021), a jury in Florida awarded a woman $48 million for sickness caused by mold growth in her home.

As you already know, mold remains a highly contentious (and litigious) item in the United States. Stay safe out there!

Stay Informed Opt-In to Digital News WorkingRR.com The latest news, delivered right to your inbox.

Spring 2022 | Working RR 29

“Classic” Contractor Fraud Scheme, Exposed

by Kendra Budd, Associate Editor

Salespeople employed by one of the two companies (NCS and RRS) convinced homeowners to sign an Assignment of Benefits contract (AOB).

R estoration contractors are often

seen as heroes in times of natural disasters; but for every hero—there’s a villain. Unfortunately, there are some contractors and restoration companies that take advantage of people in need— giving a bad rap to restoration contractors everywhere.

phe Services Inc. (NCS) and Restoration Response Services (RRS)—both of which were owned by licensed roofing contractor, Timothy Matthew Cox.

Backstory The state of Florida is well-known for its hurricanes and in the aftermath of a hurricane, many homes need roof repairs. Unfortunately, some of these people get taken advantage by restoration companies instead of receiving the help they desperately need.

Florida detective Robert Jackson outlines a horrendous story in his affidavit of prosecution summary. Jackson interviewed 19 victims across 8 Florida counties between 2016–2017 who were negatively impacted by NCS and RRS. In each of the 19 cases, salespeople employed by one of the two companies convinced homeowners to sign an Assignment of Benefits contract (AOB). Thus, “allowing NCS to replace the roof and NCS’s or RRS’s name to appear on the check for payment from the homeowner’s insurance company. The AOB also allows NCS and RRS rights to the homeowner’s insurance benefits for their damaged properties,” writes Jackson.

Two such unscrupulous restoration companies were Nationwide Catastro-

In all 19 cases, the companies did not replace or fix any of the roofs. Some

Here’s the story of a Florida restoration contractor who defrauded and stole over $140,000 from his clients and their insurance companies.

30 Working RR | Spring 2022

clients even reported the materials to repair their homes were dropped off and left on the roofs. However, none of the workers came back, causing the roofs to sag from the weight of the materials. Instead, NCS and RRS cashed in the insurance checks, as well as some personal checks from their clients despite never completing the work. Clients complained to the companies for months but were ignored.

Police interviewed Cox during this time, where he claimed at the time he was ill, but that his Jacksonville Manager, Melissa “Missy” Jones, had full control over the business. “Cox explained he was aware business was slow and more money was being paid out than the companies were bringing in; however he didn’t realize they were that far behind in work. Cox told the detectives that he would ensure the money was paid back to the homeowners or the roofs would be replaced,” read the affidavit.

As of 2018, when the affidavit was submitted, none of the roofs were replaced and none of the money was returned.

The Investigation The first victims of the scheme were married couple Carmen and Ivan Bedran.

After the hurricane, the Bedrans contracted with Cox and negotiations began with their insurance company. Cox was paid $5,748.76 by the Bedrans’ insurance company, according to investigators.

Ivan Bedran alleged that NCS placed materials on the roof, but never returned to remove the existing roof nor install a new one. By leaving the materials on the roof, NCS damaged it further, resulting in additional leaks. Cox’s permit expired in mid-2016 before NCS ever started re-roofing, but collected the insurance money anyway. To make matters worse, the Bedrans’ roof was further damaged after Hurricane Irma passed through. They tried hiring another company, but that one only placed a tarp on the roof. Because the Bedrans were taken advantage of by two companies, the Bedrans’ insurance company withheld over six thousand dollars of their insurance benefits.

Detective Jackson conducted the interview with Stillwell, NCS was still in possession of the remaining money and still hadn’t completed the work.

Stillwell and the Bedrans are just 2 of the 19 victims who were affected by Cox’s fraud scheme, and the stories stay pretty consistent. Clients signed an AOB; Cox collected insurance money; contractors never came to start or finish work. In fact, NCS’s page on BuildZoom is full of one-star reviews. One reads, “If I could give these people a zero I would; they are absolute thieves with no skill set to put a roof on…took 4 months [to repair] during hurricane season causing a leak.

Missy Walker should never have a job.”

While, another one reads: “Very poor communication. Gave NCS my claim check and now [they] won’t return my calls. Going on 9 months since I started this process. Haven’t heard anything about a start date.” A majority of these negative were made between 2015 to 2017 claiming no return of their money.

Another notable victim was Susan Stillwell, who was the reason this story was able to get local attention by writing about her experience to Channel 9 news.

In 2017, Stillwell told Detective Jackson she signed an Assignment of Benefits with NCS at the end of 2015, but as of the date of the interview, still did not have her roof replaced, “despite signing her insurance benefits in the amount of $7,769.38 over to NCS.”

So where did that money go? Well, Detective Jackson was able to get help from Sherrie M. Elmahmoud, a Certified Criminal Financial Analyst assigned to the Orlando Bureau of Statewide Prosecution. Elmahmoud completed a financial analysis on bank records between September of 2015 to December of 2016; the account was under Cox’s name. Elmahmoud was able to identify over 1 million dollars of withdrawals on the accounts including to pay contractors, entertainment expenses, consumer goods, services and donation expenses.

Additionally, almost 46 thousand dollars was withdrawn from ATMs.

After weeks of having no work completed Stillwell contacted Channel 9 News.

A month later Gary Wilkerson, an employee of NCS, called Stillwell to apologize and assure her that her roof would be fixed and upgraded. After several attempts to obtain a refund, NCS finally came through…with $1,410.00. This was to cover interior damages, which Stillwell fixed herself. However, when

It became clear after this financial analysis, that Cox was using a majority of the insurance money he collected for his own personal gain. It was concluded by Detective Jackson, “Payment for the victim’s roofs were received by NCS and Timothy Cox’s disbursements to his girlfriend, daughter, her boyfriend, payments for consumer goods, donations, and services resulted in insuffi-

cient funds to complete the roofs for the named victims.”

Justice is Served Detective Jackson argued in his investigation that Cox was guilty of racketeering and grand theft. Cox was arrested and booked into the Polk County Jail in late 2018. He is facing eight counts of grand theft and one of racketeering.

He is currently awaiting trial for all nine counts against him.

Final Thoughts This particular case provides a clear look into how unscrupulous contractors can take advantage of the public during difficult times. With corrupt companies taking advantage of the natural disasters that are constantly making headlines, it is no wonder clients find it hard to trust most restoration contractors.

Restoration contractors provide a tremendous service to the public and frequently deal with people who are going through some of the hardest, worst days of their lives. That is why it is important as a restoration contractor, if you suspect someone in your line of work is committing fraud then it is your duty to report it. Be careful (and ethical) out there!

Are you covered for Cat 3 water (black water) ?

OREP’s Contractor Pollution Liability covers microbial substances, including mold, bacteria, and Cat 3 water.

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Spring 2022 | Working RR 31

Professional Marketplace Like Us on Facebook!

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Liability Insurance for Restoration and Remediation Contractors— Broad Coverage, Peace of Mind

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Broad coverage should never be optional, accordY P R O E SSI F ing to Isaac Peck, Senior Insurance Broker at OREP. “If you want to do the best for yourself, your family and your business, be sure to choose a professional insurance policy that will protect you adequately should the unexpected happen,” Peck says. “A broad policy covers you for the threats that you can anticipate as well as the unexpected ones that you don’t see coming.” OREP policies include General Liability with Contractor’s Pollution Liability and Professional Liability—giving restoration and remediation contractors all three coverages in a single policy. Additionally, it includes CPL coverage for mold, fungus, and Cat 3 water—important coverages that are excluded on many contractor policies. Please ask your OREP agent for details. All members enjoy free claims assistance, risk management and the many additional benefits of OREP membership, including guaranteed delivery of Working RR magazine, discounts on office supplies, technology and more. Call OREP toll-free at (888) 347–5273 or visit OREP.org/RR. OREP Insurance Services, LLC. CA Lic. #0K99465.

Save on Office Supplies, Telecom and More Corporate savings is a little-known but significant cost-saving benefit of being an OREP member. Restoration and remediation contractors who join OREP can save money with Office Depot, Staples, Dell, FedEx, UPS, Sprint, travel, and more. The program is free. OREP/Working RR saves well over $1,000 a year on office supplies alone. Rod Lopez, an OREP member from New Jersey, says that he saved over $100 on the discounts at Staples and Office Depot. Cynthia Traylor, from House Calls Home Inspections in California, said “YES! We are saving 19% on our Verizon

bill and I order all of our office supplies through the discounted Staples portal—they provide overnight, FREE shipping, even on Sunday orders!

Lastly, we are considering the Six Flags discount. So, yes, yes, and yes. We are taking advantage and truly enjoying your program. Great job!” A cost comparison of a typical office shopping list netted a savings on supplies of $500 ($3,500 total order). Large company or small, you can enjoy significant discounts on the goods and services you use most. The corporate savings program is one of the many benefits of being an OREP member.

For details, email subscription@workingrr.com.

California OREP Members—Group Medical $10,000 Life Insurance Included Restoration and Remediation Contractors who are OREP members and who reside in California enjoy group access to several medical plans, including certain Kaiser Permanente and Blue Anthem plans. The group plans provide benefits not available to individuals and at no extra cost. Those who purchase their medical coverage through the OREP group plan, also enjoy a $10,000 life insurance policy included at no extra cost. The policy, written through Mutual of Omaha, is guaranteed-issue without any exclusion for medical conditions and pays double in the event of an accidental death and dismemberment (AD&D). Also included is the New Dental Choice Special Discount Plan that gives you significant discounts of 15–60 percent for dental services. There is no cost above the medical plan itself for these services, including expert help navigating Covered California. If you are a California resident and an OREP member email info@orep.org for more information.

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YOU MIGHT HAVE A COVERAGE GAP!

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32 Working RR | Spring 2022

Introducing…a new publication for restoration and remediation professionals, reaching over 12,000 professionals nationwide.

Working RR is dedicated to keeping you updated with the news, information, and individual stories centered on the restoration and remediation industries.

Stay Informed Opt-In for the Digital Newsletter at WorkingRR.com

The latest news, right to your inbox Write to Us: Do you have a personal story or interesting perspective you’d like to share with your peers? We are always looking for good stories and to share with our readers, please email the Editor at isaac@orep.org.

Advertise with Us: Have a product or service you’d like to put in front of restoration or remediation professionals? We’d love to hear from you! Please email the Editor, Isaac Peck at isaac@orep.org. There’s no better way to reach restoration and remediation professionals with your message.

DON’T FORGET! Opt-In for the Digital Newsletter at WorkingRR.com

COMPREHENSIVE INSURANCE COVERAGE FOR RESTORATION AND REMEDIATION PROFESSIONALS A Policy Designed Specifically for FIRMS like YOU

ONE POLICY that covers you for: • General Liability • Contractor’s Policy Liability • Contractor’s Professional Liability Eliminate the coverage gaps that arise when you carry separate GL and mold/pollution policies—and save money—when you shop with OREP and meet your needs with ONE policy!

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