Thank you for your question. Please permit me to assist you with your concerns.What you are describing would be considered insurance fraud by the insurance companies. Here is why:The insurance coverage is supposed to cover exactly the damage caused from the covered event and no more. By pocketing the funds and utilizing them for something else, the insurance company can claim that they overpaid on the coverage and compel you to both return the overage received, as well as potentially pursue criminal charges against you. Your bank could act as the lien-holder and negotiate directly with your insurance company--in fact almost all mortgage agreements have language to that effect. The logic behind it is because the bank has collateral in the building, they are as interested in repairs as you are so as to ensure the equity and value in the building remains. Furthermore many mortgage agreements require the bank to hold the insurance proceeds and release them only when the work was completed--they can also send in their own estimators and adjustors for review. Only if the agreement does not state that the bank cannot negotiate could you end up doing so, but otherwise the bank can step in and intercept the payments outright.Good luck.
I don't understand your answer. It doesn't seem to cover the concept of bidding. If say, the insurance company values the cost of a repair at $5,000.00. And I subsequently offer to perform the same repair for $4,500.00 with the proviso that the work can be inspected for suitability, why would that be fraud?
Or, If I could perform general contracting duties, i,e, hiring the subcontractors who in turn would have their work inspected---for an amount that was satisfactory to the insurance company, again, how is that fraud?.
Thank you for your follow-up, AJ. Please allow me to respond to each concern separately.
Because if you still receive the $5,000 directly, perform the work for $4,500, and pocket the $500, then that would be essentially theft from the insurer. Furthermore insurance companies do not pay the land owner to make their own repairs--they can pay for the value of the materials, but they do not allow the land owner to bid on their own repairs and their own work. For example if in the $5,000 example, it will cost you $4,500 to repair of which $3,000 was labor and $1,500 was the material, the insurance company would only cut you a check for $1,500.
It is only fraud if the difference in amount between the initial estimate and your value is pocketed by you. If that was not what you intended to do (but that is what it sounded like you wanted to do as you wanted to divert some of the funds so you could pay your mortgage instead), it is not fraud. The rule of thumb here is all funds received for repairs go toward repairs--anything that goes into your pocket for other expenses is considered insurance fraud.
If you read my answer, you'll see that I stated, "...perform the same repair for $4,500.00" . There would be no intent to "pocket" the extra $500.00. There would be no extra $500.00 The repair would be offered at $4,500.00, thus saving the insurance company the difference.
Obviously the way this would work in theory would be by substituting my own labor at a reduced rate. That was what I was getting at.
However, your admonition to me argues that I can't go that route:
"Furthermore insurance companies do not pay the land owner to make their own repairs--they can pay for the value of the materials, but they do not allow the land owner to bid on their own repairs and their own work.
Thank you for your follow-up, AJ. I am sorry that you feel that your information was not being read. Please allow me to try again.
If it ends up putting money in your pocket that is not being directly used to make repairs, that is fraud. Look to my prior example. You bid $4,500 which is lower than $5,000. However you pocketed $3,000 from the $4,500 as the cost for material was $1,500. Then all you would legally get is $1,500. Insurance companies, fairly or unfairly, will not allow you to take teh remainder and use it for your own needs.
I understand, and my apologies if I came to the incorrect conclusion. Please see my example above, which is what I utilized in the past answer.
That's the problem, you cannot charge them for your own labor. The insurance company would not cover it.
Correct, that is not a possible option.
This is my final response and then I'll end the thread. Generally, I have found that western states are more expansive when it comes to homeowner's repair rights. When I purchased this dwelling, 4 units was the cutoff for a "primary residence" Anything greater than 4 units was considered commercial. So in my case, I am treated the same as a homeowner.
The reason I posted the question was I wondered if I had any homeowner rights in this regard. Typically, a homeowner can perform his own repairs as long as they are inspected by a qualified entity. The fact that an insurance company can deny this surprises me. It feels like restraint of trade.
In conclusion I'll ask you: Are you reasonably confident that my inability to perform my own repairs is cast in stone or do you think it might be possible that I do have some homeowner rights that you are unaware of?
Thank you for your follow-up, AJ.I do agree that western states tend to be more expansive, but with the recent post real estate bubble recovery the lenders are far less lenient in anything that they perceive to be as a loss in potential equity. I see your point that it is a restraint of trade, but actually this something completely separate--it is both a condition of the policy (something that any insurance provider can reasonably place as a condition of obtaining the terms), and an assurance that the funds paid out will go directly toward the repairs rather than somewhere else. I am extremely confident that the answer I provided to you is accurate without reading your policy for myself--you can contact the insurance company and see if they are willing to set aside their own conditions, but it would be solely at their discretion to do so. Please notice I did not say that you could not make repairs yourself--you CAN do so. You just can't profit from it yourself.Good luck.
No need to follow up on this. I took a quick look on the internet and one of the concepts is moral hazard; generally a policy owner should not be able to profit from a loss. In my example above my paid labor would be considered a profit.
Looking at it in that light makes sense to me.
Although it's not the answer(s) I wanted, thank you for the replies
Moderator, how do I close this thread and accept the answer?
DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.
The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).