How Not to Manage an Insurance Claim

After hanging up the phone with Dave, I felt like a fool. How could this happen to me? With 10-plus years of experience in real estate, you would think I could prevent something like this from happening.

Why did we not ask for a material submittal?

Why didn’t we request the manufacturer’s material spec and verify the materials onsite during installation?

Insurance claims are never easy, especially when you are dealing with commercial roof replacements. With big money comes big problems.

Over five months had passed and we still did not have the 20-year manufacturer’s warranty in hand. How did we even get here?

Almost 11 months prior we signed a contract with the roofer, Jimmy.

280 squares (aka 28,000 square feet) of modified bitumen low slope roofing with 20-year warranty on materials and a 3-year warranty on labor. As a one story retail center, the roof replacement should have been easy.

Anyone that has been involved in construction knows that insurance claims are different. It’s almost like the “black market’”where traditional free market economics are thrown out the window.

Carriers overpay and contractors know it. Pricing is not “real” and most of the contractors are “storm chasers” moving from town to town. Some contractors take advantage of unsuspecting property owners, others take advantage of the carrier’s willingness to overpay.

Our contract was for $331,000. For anyone keeping score, that is $1,182 per square (SQ) or $11.82 per square foot (sf). Not great… not bad, but wait – it gets better.

One line in the roofer’s contract read:

Payment upon completion: Remaining ACV Insurance Funds **

**(for a primer on ACV vs. RCV, check this out here)

Wait, what?!

How can the roofer ask for ACV funds that the insured (ie, property owner) have coming in the door? Well in this case, the roofer was leading the discussions with the adjuster. That kind of arrangement can be tough.

What is being communicated? How is the claim being “adjusted?”

After some negotiating, we were able to finally settle on some decent terms to sign the contract and get the work underway.

Fast forward three months after the contract, the roof repair was finally complete. At least so we thought. For those of you still keeping score, 280 SQ of roof replacements in three months is slow.

Turns out the roofer had underestimated the quantity of material by about 31%. Instead of 280 SQ of roofing, the total replacement was actually 367 SQ.

After accounting for about a 10% waste factor, total squares ordered from the manufacturer was about 408 SQ.

It gets even better!

With the additional material, the insurance adjuster was called back out to review and (hopefully) approve the added costs. Why was this important?

Because the roofer was now asking for a change order to the tune of $125,000. Somehow our per square price on paper jumped to almost $1,500.

Anyone who owns enough commercial property in the US and has performed enough roof replacements should know that $15 per sf is expensive for a new modified bitumen low slope roof.

I wish the story ended there. But unfortunately for us, it does not.

Every two weeks for the better part of five months, I emailed and called the roofer to see how we were coming along with the warranty from the manufacturer.

Almost every time, the answer (or “reason”) varied:

Sorry, I’ve been out of town. We have not been able to set a date to walk the roof.

Sorry, our email has been down. We still don’t have a date to walk the roof.

Sorry, I’ve been trying to coordinate with the manufacturer’s rep to schedule a warranty walk.

Sorry, the weather has been bad. Still no date set. I will let you know.

Sorry, but did you see the news recently, the entire internet was down. So the material rep did not get my note. [seriously, that was an answer during one of my many calls].

Sorry, I’ve been out of the office.

Sorry, I’ve sent in the paperwork, there is an issue with the roof caused by one of the tenants. We are working with the rep to propose repairs and get the warranty issued.

Sorry, I’ll send it over to you next week. I should have some time once I’m back in the office.

The list goes on. Imagine these types of responses by phone and almost zero replies by email.

I was stuck. Not sure whether I should call the adjuster or the manufacturer, I reached out to the national office of the manufacturer to inquire on the status of the warranty.

Since we did not have an application number from the roofer, after some quick back and forth, Dave was able to locate our property and application.

“Um, we cannot provide any comments based on the status that is showing on our end, we will reach out to the local rep to see what we can find out.”

Weird. Right?

Two weeks goes by, and guess what? Yup, nothing happens…ugh.

So I call back to the national warranty office office of the manufacturer. Luckily I took notes on the last call, in case I needed to ask for Dave by name. Thankfully, he answered. But ironically, he still had no update and had not heard back from his local rep.

Disappointed. I thanked him and hung up.

Now what?

A few hours later, he called back.

Dave: “We recommend that you reach out to the roofer to discuss the paperwork related to the warranty in getting it corrected before refiling.”

I was thinking, great. This guy must believe that I’m psychic. What am I supposed to get fixed on the paperwork?

Me: “Dave, that is great information. Thank you so much. Can you help provide me just a little context on what I should talk to Jimmy about when we discuss the paperwork and the changes needed for refiling?”

The line goes quiet. I mean really quiet. Dave does not answer immediately.

Uh, oh. This can’t be good.

Dave: “Well it seems like the paperwork was filed for a 20-year warranty, but only a 15-year warranty can be provided by us based on the type of installation.”

Me: “Okay, thanks. Just curious, what is the difference between a 15-year warranty install and a 20-year install? How do you install a roof with a different warranty other than the type of product that was installed?”

Dave: “Well…um… I guess… the material installed is not as heavy as a thickness or gauge to receive a 20-year warranty. Yes, it is basically a ‘lighter’ material.”

Me: “So you mean we paid for a heavier duty roof, but the material installed is not what we paid for?”

Dave: “Um… yes… I believe so.”

My heart sank.

HOW DID I MISS THIS? Why did we not ask for material submittals? I guess not all modified bitumen roofing is created equal. What a bummer.

Honestly though, it was also a relief. Because at this point in our saga, it all started to make sense. And frankly, the only disappointment is that we paid for a 20 year product but only got a 15 year product.

Now it made sense why Jimmy had been avoiding our calls and had been unable to produce a warranty.


With Hurricane Harvey recently hitting the Texas coast, there are going to be an unbelievable amount of storm damage claims. Flood, wind, water damage. It will be ugly.

So what does this mean for you? We hope you do not have to suffer through the same mistakes that we did.

Here are some of the lessons we learned:

  • Do be relentless and thorough in your follow up. If I had not taken detailed notes, continued to call and follow up, we probably would still be wondering where the material warranty was.
  • Do be cautious in the insurance claim world. Insurance carriers overpay, and carpetbaggers… I mean snake oil salesman… I mean contractors (and roofers) know it. Beware of roofers and contractors who have traveled great distances to “help.”
  • Don’t send a final payment without a warranty in hand. We knew better. But we thought the contractor was doing us a favor by helping work with the adjuster to get all the repair work “covered” by the claim. What is worse, is that less than 6 months prior, we finished a $1,000,000 roof replacement related to an insurance claim where the contractor was paid in full only after the manufacturer’s warranty was provided to us.
  • Don’t let the contractor dictate the terms of the agreement. You need their help, but they are not the only ones capable (or willing) to help. Keep the terms fair, but be firm. It is your asset that they are working on. You want to get what you paid for.

Most importantly, consider and beware the risks of doing business in a post-catastrophe environment.

Hurricane Harvey has hit the east coast of Texas hard.

As a commercial real estate owner, you need to be the one communicating with your adjuster, negotiating scope, agreeing to costs associated with the repairs. At least if not you, work with someone that you know and trust. It’s a bonus if they are familiar with planning, design, and construction.

While you do want a contractor to help you “prove up” the costs of the repair work that the insurance carrier is offering to pay for, you do NOT want them knowing how much money is involved in your claim whether related to actual cash value, replacement cost value, depreciation, business interruption, etc.

Finally, if possible, we recommend triple-bidding any repair scopes of work over $50,000.

We have noticed when contractors compete, the good ones are ready to compete and the average to mediocre contractors move onto “easier” targets.

Got questions?

Got a question related to your claim, scope of work, contractor’s proposal, or contractor? Great! Drop us a line.

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