Why is O&P so controversial for GC’s?

[calledandchosen]

Honest question. I always feel like I’m asking for something extra when it’s built into the premiums that the PH pay monthly on their RCV policy calculated during the underwriting process.

Xactware white papers detail this as well as the book “property loss adjusting”.

I could understand if you’re not actually a GC but rather a specific trade that has in house services (plumber doing plumbing, roofing company with in house crews, etc.) but if I’m hired as a GC to hire crews, manage the work, and warranty a project I don’t see any literature saying that O&P should be withheld or that specific criteria must be met. I build my contracts to include 10 & 10 and the homeowners I work with always agree to it in the final scope.

Open to dialogue, is this an internal policy or something actually written into the PH’s contract?

 

[sirvanosnoodle]

@calledandchosen I don’t have a problem paying “reasonable” costs, which is the language built into the policy. Some GCs just don’t know how to charge a “reasonable” price and get caught taking advantage of an unsuspecting homeowner.

 

[calledandchosen]

@sirvanosnoodle True, what would you call unreasonable? I just build my estimate based on the approved insurance scope with xactimate and include GC O&P. Get pushback probably 90% of the time and not sure why.

 

[sirvanosnoodle]

@calledandchosen Without seeing your estimate I couldn’t tell you. My company pays 10/5

 

[bfastpool]

@calledandchosen It's only some GC's that get crazy and make everyone look bad. They do off the wall stuff like try to claim O&P + supervisor hours on a residential project for electrical and drywall.

If it's a true GC coordinating multiple trades, I'll be the first to say that O&P is warranted.

My state even wrote it into the claim settlement laws saying O&P is to be paid when reasonable.

 

[calledandchosen]

@bfastpool Lol they’ll be out of business soon, industry weeds itself out

 

[evan2001]

@calledandchosen If you subcontract it out, show the subcontractor invoices with proof of payment

ezpz Mr. Roofer

 

[resjudicata]

@evan2001 I've always requested this. Never once provided. Lol

 

[evan2001]

@resjudicata Yeah these contractors get super salty and defensive if you ask for them.

"Our pricing is proprietary!"

Like my brother, you're trying to bill us using Xact pricing, don't piss on my leg and try to tell me it's raining.

 

[calledandchosen]

@evan2001 Not a roofer but I get it. Always provide this when requested, don’t see how pricing is proprietary lol especially when it’s contracted out

 

[ifitry]

@calledandchosen i think if you're meeting the three trade rule and getting pushback on 10 & 10, that's crazy and bordering on bad faith

if you're running plumbing & drywall or deck rebuild or fence jobs, well that's a different story lol

 

[calledandchosen]

@ifitry It’s usually like this:
Roof
Gutters
Windows
Interior

See roof and gutters getting lumped as one trade often. None of my roofing crews want to touch gutters and the gutters are made to order and installed by the manufacturer so to me that’s a separate trade.

I’ll also see where O&P will be added to all trades except the roof / gutters. Always interesting. Where did the 3 trade rule come from? Just trying to educate myself and most policies I read just say “when a GC would reasonably be hired”, seems to be a grey area on who it’s reasonable to. Never see any documentation that says it must be 3, I’ve just found 3 to be the number like you pointed out.

 

[ifitry]

@calledandchosen yeah i think it's just an "unwritten rule" kind of thing; i don't have any knowledge that it's actually been adjudicated

my common sense brain says the rule should really be "three or more trades that need to be coordinated" based on kinda what's reasonable

take a siding and windows claim for example -- there is coordination needed between those two subs, but realistically the homeowner can just tell siding guy "abc windows will come in when you're done; can you shoot him and me a text confirming your date so he can get me on the schedule the next day?" no o&p there

but consider siding, windows, and fence -- that's three trades, but there's no coordination with the fence guy, so o&p isn't reasonable imo

but roof, gutters (or even roof/gutters), windows, interior? yeah, there's a significant amount of coordination of the work, not to mention inspections and shit, so o&p quite justified there

but i suppose until this gets adjudicated, rules of thumb are all anyone has to go off

 

[resjudicata]

@calledandchosen Typically I operate on whether there are three overlapping trades.

A roof will almost always never overlap with any other trades, and can typically be done whenever. So there's nothing to coordinate. In my experience, the roofers will do the gutters, as well. So a single non overlapping trade.

I always give 10/10 on interior claims (floor, drywall, paint, etc)

Unless it's like, just flooring/baseboard only.

Ill throw a bone and give it on siding/window, especially if we are far apart on pricing and I want the claim to go away. But if it is just siding, no windows, then unlikely. There's nothing to coordinate.

I laugh when companies like "John's Roofing LLC" cry for O&P on a roof only job. I'm like, bro, you have roofing in your name, you are the contractor doing the work...

 

[calledandchosen]

@resjudicata Yeah lol, I would say if you’re just doing a roof and you’re a roofing company, O&P isn’t warranted.

 

[resjudicata]

@calledandchosen In this case roofing is a one trade job, you call a roofing company they replace your roof. What coordination do you use as a GC for the gutters and flashing? Can they be done individually post roof? The insured could also call a siding company and a gutter company if needed. O and P for roofs is rare unless structural damage like a tree through it. Are your prices inflated? Xact without o and p for roof is greater than most roofers in my area other than insurance ones.

 

[calledandchosen]

@resjudicata Flashing on the roof gets handled by the roofers, as it’s directly tied into the system. Gutters are made to order and installed by a separate trade. This has to be coordinated with the tear off and installation of the roof so they aren’t damaged or filled with construction debris. Prices aren’t inflated just the price set forth by xactimate which doesn’t factor in over head and profit, just material and labor from what I understand.

The confusion on my side comes from there not being any language in the policy the homeowner is paying for that dictates number of trades or specific trades being excluded. Seems to depend on who the adjuster is that day and what they feel is reasonable or not. Never any consistency or anything in the policy they can point to that supports the decision. From what I can tell RCV underwriting factors in GCO&P as part of the premium paid by the PH.

 

[mohanmon]

@calledandchosen It's a reach to try and say that the policy, in any way, is worded to obligate the insurance company to pay O&P. Contractors alone do not determine the fair RCV of a claim.

If a contractor expects O&P, then they should let the insured know up front in writing that they'll require a 20% premium on all the work they do regardless of insurance approval. Then they don't have to even bother with fighting the insurance company! I'd be interested to see how many people sign that contract.

Reminder that adjusters put out hundreds of estimates a year. The majority don't end up with ridiculous pricing disputes. Sometimes work is even done for less than our estimate! It's a vocal minority that still thinks their tactics are the first time we've seen it. The days of the snake oil roof salesmen are numbered. No matter how many "art of the supplement" books are published.

Storm chasing door knockers will continue to lose market share as carriers ramp up the ability to provide vetted contractor options to their insureds. It's happening where I work. We have contractors that are local, licensed, bonded, background checked and provide a craftsmanship warranty.

The sun is setting on the glory days of shell company "GCs" fleecing people on roof replacements that they subcontract to the lowest bidding, shoddy, out of town traveling labor.

Also, and this should be emphasized, more insured's will unfortunately be seeing roof schedules or other less than ideal coverages in the near future. This is a direct result of the roofing sales culture. Many storm chasing shops you see will fold when roofing claims dry up because coverage is 55% of the RCV. It's happening.

 

[calledandchosen]

@mohanmon Totally agree that the industry of roofers is weeding itself out which is good. Like I said I’m not a roofer and my jobs aren’t limited to roofs alone. I’ve just been finding that when I’m contracted on an insurance for someone’s damaged property GC O&P seems to be this mysterious line item that’s sometimes given and other times not. Or it will be given to all other trades except the roof.

These fly by night roofers sub contracting to the lowest bidder will be out of business in no time because the consumers on the receiving end of their work will undoubtedly run into issues that are not resolved.

I do exactly that, include the 20% over head and profit. I wouldn’t call it a “premium” or an “extra though”. Managing storm claims is a lot different than retail. Many more steps involved and it is in general more of a headache than a retail job.

I don’t find it ridiculous in the slightest to pay the GC O&P when like I said it’s part of the underwriting process when determining the premiums paid by the policy holder. The 10 and 10 is part of the replacement costs when hiring a general contractor and the policy holder should be indemnified for incurring that cost.

Again. If it’s a simple roof has hail and only roof is being replaced by a roofer, yeah they have no business getting GC O&P but when you’ve got 3-5 trades you’re managing I don’t see how the roof would be excluded from O&P.

Generally I don’t take on jobs if they’re just a roof only as I’m not really needed as a general contractor for those jobs. If it’s just a roof needing to be replaced I’ll refer that to a roofer who has in house crews to do that. I think what the industry is seeing is exactly what you describe, roofers pretending to be GC’s and trying to maximize profits to 50%+ on their jobs.