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DEDUCTIBLES

posted Nov 23, 2015, 11:43 AM by Christopher Kidd   [ updated Feb 5, 2016, 9:13 AM ]
Contractor's Waiver of Deductible Equals Felony Insurance Fraud
Few decisions you will make as a property owner are more important than the ones you make when involved in a property insurance claim. Very few property owners are experienced in the insurance claims process. This inexperience is a major liability when dealing with an insurance claim. Many involved in the insurance claims process may not have your best interests at heart. One of the most important indicators of this is the willingness of someone seeking out your business who suggests bending or breaking the laws of your state or local jurisdiction. Your insurance policy is a contract between you and your insurer and the terms of the agreement apply to both you and the insurer. One of the contract terms of most insurance policies is the deductible which is the portion of repairs you are responsible for paying out of pocket. This amount is identified in your policy and may vary depending on the type of loss suffered. An effort by you or any other party to reduce or offset your deductible is considered insurance fraud in most states and is also a leading cause of high premiums for policyholders. If your insurance company estimates your repairs at $10,000 and you have a $1,000 deductible the insurance company will issue payments totaling $9,000. This leaves you responsible with paying the remaining $1,000 deductible out of pocket. Many "insurance restoration contractors" will agree to perform the repairs outlined in your insurance estimate for the dollar amount shown. This situation becomes fraudulent when the Contractor agrees to perform the repairs for $9,000 but invoices the insurance company for repairs totaling $10,000. The insurance company has now suffered a $1,000 fraudulent loss. A contractor wishing to do the repairs for $9,000 should invoice for $9,000 at which point the insurance company will issue $8,000 in payments leaving the policyholder responsible for the $1,000 deductible as contracted for in the insurance policy. 

Many of you in Maryland are likely being inundated with fliers and mailers from Contractors who tell you that you can get a new roof and/or siding with no out of pocket expense courtesy of your insurance company. The simple fact is that you cannot do this without being party to a felony criminal act. If you are approached by a Contractor offering to waive/rebate all or part of your deductible on an insurance claim they are not someone you want to do business with. The individual offering to do this is committing insurance fraud and should be reported to the National Insurance Crime Bureau, The Maryland Insurance Administration, and The Maryland Home Improvement Commission immediately. The crime is a felony punishable by up to 15 years in prison and a fine of 3 times the amount of the total insurance claim. This type of fraudulent action on the part of Contractors and property owners results in higher insurance premiums for those that abide by the law. 

You should be very careful about any Contractor claiming to be a licensed insurance adjuster in the State of Maryland. Maryland does not license Insurance Adjusters. Claiming to be a licensed Insurance Adjuster is considered Insurance Fraud under Maryland Law as of 2009. The only type of Insurance Adjuster licensed in the State of Maryland is a Public Adjuster which is an Insurance Adjuster that works for the Policy holder. 

Senate Bill 736 was signed by the Governor on May 2, 2013 and is enacted effective October 1, 2013 as Code of Maryland Insurance Article § 27-407.2. It repeals and replaces §§ 27-408(a) and (b). The bill makes it a “fraudulent insurance act for a person to pay or otherwise compensate, directly or indirectly, or offer or promise to pay or compensate, an insured for all or part of an insurance deductible provided under the policy as an inducement to enter into a contract to furnish goods or services.” The new section also specifically references contractors who are performing repairs to a private residence caused by weather, when the services will be paid for from the proceeds of the policy. 

The Maryland Home Improvement Commission can be reached at: 1-410-230-6309 via email at: mhic@dllr.state.md.us (Subject: Contractor Insurance Fraud) or on the web at: http://www.dllr.state.md.us/forms/mhiccomplaint.doc

The Maryland Insurance Administration can be reached at: 1-800-846-4069 or via email at: steve.wright@maryland.gov (Subject: Insurance Fraud Division)

The National Insurance crime Bureau can be reached at: 1-800-835-6422 or on the web at: https://www.nicb.org/speak_up/speak-up

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