To O&P or not to O&P...

That is the question...

O&P stands for overhead and profit and is usually included into an insurance claim when a job warrants extra work/coordination of sub crews from a general contractor.  It is extra money allowance of 10% overhead and 10% profit added to the overall claim settlement amount (20% total).  The definition of overhead and profit inclusion is "Complexity of repairs or coordination of multiple trades".  There is a lot of controversy surrounding what warrants O&P into an insurance claim.  Arguments can easily be made on both sides of the fence.  But it all comes down to how well the insurance adjuster can justify O&P inclusion into his or her file notes.

Once upon a time, insurance companies used to automatically include O&P into a job when 3 or more different trades were present in the claim.  For example, if the roof was being replaced along with: an elevation of siding and interior drywall/paint repairs, then this job would quality for O&P for multiple trades (because there would be a total of 4 different trades in this example).  This type of job is also complex (as some of the trades are contingent upon each other), which is also another reason why O&P would be warranted.  However, it only takes a few bad eggs to spoil the batch for everyone... What insurance companies were finding is that some general contractors would purposely hire additional sub crews to perform miniscule/unnecessary tasks (such as hiring an HVAC tech solely to unhook the furnace cap during a roof replacement) or hiring a window installer to replace an exterior window screen, just so they could bill the insurance company for O&P.  It is for this reason, that most insurance companies will look for "complexity of repairs" as another area to consider O&P.

So how could an adjuster justify coordination of multiple trades properly in his or her file notes?  You could take the approach of:

"Overhead and profit is warranted on this job due to coordination of multiple trades and complexity of repairs.  This job has complexity due to the need to coordinate between the roofing, siding, drywall and painting subcontractors and the homeowner.  The painter cannot begin his work until the drywall subcontractor has finished his work and the mud is dry.  The drywall subcontractor cannot begin his work until the roofing subcontractor is finished with his work and the roof stops leaking.  All of this has to be coordinated with the homeowner’s schedule, as interior access will be necessary to complete the repairs; thus adding complexity to the job."

Feel free to paraphrase, but if you want to sound like a smarty pants and get management off of your back about your settlement decisions, then this example would be a good place to start in how you should structure your logic within a file note.  Of course your photographs should also support justification of overhead and profit as well.

What should I do if I am not sure if a claim warrants overhead and profit?

You should review any settlement/coverage questions with your manager.  But if your manager is not available and you are out in the field ready to make an on-site settlement then INCLUDE IT!  If you are on the fence and there is any question in your mind at all about including O&P into a claim; then just include it!

You are more likely to get in trouble for not paying O&P when it should have been warranted, than vice-versa.  There is an old saying that one of my old managers loved to throw around at the office "The tie goes to the runner!"  It is just good customer service to include O&P as much as you can justify it.  This will make the contractor happy, and in turn will make the homeowner happy; because that is just one less step that the homeowner will have to deal with.  Homeowners HATE having to ask the insurance company for supplemental payments!  The same cannot be said for the contractor ;)

Also think of it this way.  If overhead and profit is included in the claim that you are adjusting, then you have a greater chance for the claim to reach eligibility for percentage file billing.  Which is more money in your pocket!  Everyone loves more money! It's a win-win situation!  Just be sure you are not going crazy with it and that you can reasonably justify your thought process within your file notes.  Un-ethical billing on your files can lead to a quick release from the storm and a probable DNR or (do not rehire) black-listed to your employment.

Johnson Level & Tool 750 Pitch and Slope Locator - Product Review

Finding the pitch of a roof is easy!  Especially for those of us who have enough roof inspections under our belt to use our ankles as an impromptu pitch gage.  However, even the most experienced adjuster will need to carry a pitch gauge with them at all times; because most insurance companies and independent vendors require their adjusters to photograph the pitch of a roof (for billing purposes).  Others who have not had the luxury of growing up around general construction practices may have a difficult time determining a roof's pitch (especially if you don't know the math behind it).

The Johnson Level & Tool 750 Pitch and Slope Locator makes finding the pitch of a roof extremely simple! All you have to do is place the bottom of the pitch gauge on the roof, and it will display the roof's pitch for you!

The Johnson Level & Tool 750 Pitch and Slope Locator features a high impact plastic body and a crystal clear acrylic lens with easy to read graduations.  Personally, despite what the video above says, I have had an extremely hard time finding anything related to a roofing pitch locator at all of the local hardware stores.  Neither Lowes, Home Depot, Sears, Menards, Northern Tool and Equipment nor Sam's Club carry a pitch/slope locator in their stores.  The only place I have had any consistent luck finding one of these is on Amazon.com.  Currently there is nowhere else that sells this item for such a low/reasonable price!  It would behoove you to take advantage of this blog post and buy one right now before they run out of stock! This can be a very difficult item to locate and is essential to your adjuster arsenal!

For a list of adjuster equipment that only the "big boys" will use, visit the Insurance Adjuster Equipment page.

Estimating Ice & Water Shield in Xactimate

For those of you who don't know what ice and water shield is, it is basically a wet suit for your roof.  Ice and water shield is a rubbery membrane that is placed around the perimeter of your roof and also in the roof valleys.  This product started getting popular about 7-8 years ago and it greatly improves a roofs water shedding capabilities.  Ice and water shield will also help prevent ice damming and is a great upgrade to consider adding to your home (if you don't already have it).

In fact, ice and water shield is becoming code in more counties around the United States every year.  When adjusting claims, it is important to know which areas enforce the ice and water shield building code.  Because if a homeowner's insurance policy has the option OL endorsement (ordinance and law) then there is allowance in your insurance policy for your adjuster to bring the damaged portions of the building up to today's building code standards.

As of now, counties who experience an average winter season temperature of 30 degrees Fahrenheit or less, require some sort of ice and water barrier.  But it is important to know that the area where your insurance claim is located in must enforce this building code!  Either the homeowner or the contractor need to provide this paper documentation of code enforcement before the insurance company will be willing to pay for it.

I know... Its a pain in the rear.  You may be asking "But it is code in the entire state, ice and water shield should be included anyway."  While that is true, and I agree 100%; your insurance company will require the town or county to provide some sort of physical documentation proving that this building code is enforced.  The reason for this is because some states will require it as building code, but they will do nothing to enforce it.  For example, when I was adjusting insurance claims in West Virginia, ice and water shield was code in the whole state.  However, nobody ever enforced it, so I was not able to include ice and water shield into any of the structures that did not already have it... :(

You can locate the ice and water shield line item in Xactimate as RFG IWS.



After sketching the roof in Xactimate you can easily calculate the measurements by using this basic formula "(VAL*3) + (P * 2)" this stands for "(Valley * 3) + (Perimeter * 2)".  Building code in most states require that ice and water shield must be installed 2 feet up the warm walls; and there must also be a 3' wide valley lining.  Hence the VAL * 3 variable.  This formula would suffice for a roof with no overhang.  For example, if the roof I am adjusting has a 12" overhang then the formula I would use would be (VAL*3) + (P * 3)   Because this roof has a 12" or 1' overhang, then I would change (P *2) to (P * 3).  If it were a 24" or 2' overhang, then it would be (P * 4).  This will give you the exact SF (square foot) measurement that will be used on the home.  If you want to get fancy and be even more accurate with your measurements; then you will need to use the Pythagorean theorem to calculate the exact amount of ice and water shield to be installed on the roof.

It is also important to note that many contractors are going to request 2 rolls of ice and water shield from you.  They will argue "I will need to purchase 2 rolls of this product due to the overhang being 24" long" (or something along those lines).  Ice and water shield used to be only sold in 3' wide rolls.  However, ice and water shield may now be purchased in 1' wide rolls as well.  There is a company called Grace Construction Products that sells 1' wide rolls called Grace Ice & Water Shield® Strips.  Feel free to direct these contractors to their website! 8-)