Insurance Claims
Wisconsin Joins Other States Which Regulate Exterior Storm Repair And Insurance Claim Practices
Alan G. B. Kim, Jr. - von Brieson
September, 2013
On July 5, 2013, Wisconsin’s Governor Scott Walker signed Wisconsin Act 24, popularly known as the “Stormchaser’s Law,” which further regulates contracts entered into by exterior repair contractors. The new law found at Section 100.65 of the Wisconsin Statutes creates significant new trade practice requirements for contractors who enter into contracts for certain roof and exterior work on single-family or two-unit residential properties after the law’s effective date of January 1, 2014.
While the law’s nickname refers to “Stormchasers,” that may be a misnomer because it sweeps many more parties into its regulatory net. Indeed, the new law contains numerous requirements that must be complied with by any contractor which performs any exterior repair, replacement, construction, or reconstruction of residential real estate. The requirements are new and compel all contractors performing exterior residential work to update their contracts and trade practices.
A summary of the core elements of the new law are as follows:
Payment of Deductible Prohibited
Contractors are prohibited from promising to pay all or some of a property insurance deductible as a method of enticing an owner to enter into an agreement for exterior repairs.
Negotiation of Insurance Recovery Forbidden
Contrary to longstanding industry custom, contractors are forbidden from representing or negotiating with a homeowner’s insurer on behalf of their homeowner customer. However, the contractor can, with the express consent of the customer, simply discuss damages, repairs, and costs associated with the work with the insurer.
Questionnaire Required Regarding Insurance
Before entering into a contract with a customer, the contractor must give the customer a questionnaire to determine whether the work requested is related to an insurance claim. There is specific language and formatting which must be included in the insurance questionnaire.
Notice of Right to Cancel Required
The contractor is required to give the customer written notice of the customer’s right to cancel within three business days of being notified that their insurer has denied all or any part of the claim for work. There are also specific formatting requirements that contractors must use for this language. This notice is different than the three day right of rescission currently required in most situations.
Reasonable Pay for Emergency Services
If the contractor is notified of the cancellation, the law requires that the contractor return all payments made by the customer. However, the contractor is entitled to the reasonable value of any work it performed for emergency services done with the customer’s consent to prevent further damage to the home.
Penalties $500-$1,000 per Violation
Violations subject the contractor to penalties between $500 and $1,000 per violation.
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In summary, the law elevates contractor requirements in residential projects, especially with respect to insurance and requires every contractor who performs exterior work on one or two unit residential properties to update their contracts and practices. The purpose of the new law is to protect unwary owners from being preyed upon by unscrupulous transient roof and siding contractors who follow bad weather. Insurers are certainly expected to also benefit through smaller claims paid and more streamlined claims processing.
But many have noted practical gaps in the new law, at least from a contractor’s perspective. For example, owners are commonly expected to initially believe that insurance will not be involved with their project and engage a contractor for repair. Later, the homeowner may indeed decide to submit a claim to its insurer and which may be denied. In that instance, may the owner still legally cancel the contract? And, if they can, what of the contractor’s payment for the non-emergency labor and materials already provided? Given the many questions, it is expected that contractors will also adjust their contracts and trade practices to mitigate the new risks imposed upon them by the new law and thereby test its limits.
The content of this article is intended to provide general information and as a guide to the subject matter only. Please contact an Advise & Consult, Inc. expert for advice on your specific circumstances.
SOURCE: www.vonbriesen.com