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Author Topic: Do I Owe for O & P on Subcontractors' Work?  (Read 188 times)


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Do I Owe for O & P on Subcontractors' Work?
« on: September 12, 2017, 06:10:54 PM »
      For those of you who don't know I've been in this industry for over twenty-five years.  (Yes.  I'm getting old.)  In that time I can't begin to count the number of times overhead (O) and profit (P) were argued on insurance claims between restoration contractors and insurance adjusters.  Here's one of the latest questions and comments I received from an insurance adjuster:

      I got this water-damage company who worked for our Insured.  He's written this estimate,
       and has marked up the [Heating, Ventilation and Air Conditioning] HVAC work $1,500.00.  It's all O &
       P in the estimate, but it adds up.  I don't think I should have to pay for that.  Seems extreme to me.
        Do you see this often?
      To be honest, I rarely get to see and review estimates between restoration companies and insurance companies.  And, when I do, it usually have to do with a legal battle that I'm consulting someone on.  That said, O & P charges are not uncommon on subcontractors' work.  Here are a couple of reasons for it:

      1.)  The administrative work involved in the claim and the subcontractor's work has to be recuperated in order to prevent liabilities on the restoration company.  Some of these administrative duties could include: assuring occupational safety and health protocols are being followed, organization between the subcontractor and other workers and contractors on the project site, dealing with work change orders (between the restoration and insurance companies), and the like, gaining authorizations for work procedures and change orders, and other administrative duties.

      2.)  The restoration company may have to pay duties or franchise taxes to a corporate office for the subcontractor's work.  Nearly all of the franchise offices out there face this, so it isn't uncommon for them to seek some form of compensation to make up these fees - whether directly in the subcontractor's line item or in other line items.  (Yes.  A mark-up.)

      This is another example of why it is so important to know what policy you're buying includes and when changes are made to your policy by the Insurer, so you can manage your affairs; and, why it is so important to have contractors involved who can clearly communicate things with your adjuster and get authorizations approved ASAP and before commencing work.  If you don't you could be left with the bill.

      You see: Just because it's a justifiable line-item in the restoration company's estimate/bill doesn't mean your insurance company will pick up the line-item.  There are a lot of considerations, nearly all of which could be summed up in the type of policy (or contract) you have with the insurance company and their ability to process the claim wisely.

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      « Last Edit: September 12, 2017, 06:15:09 PM by JasonYost »


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      Do I Owe for O & P on Subcontractors' Work?
      « on: September 12, 2017, 06:10:54 PM »
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