Advise & Consult, Inc. | September 28, 2015
Many insurance carriers often provide their insureds with a list of “preferred” vendors that are able to perform repair work on their home or property when a covered loss has occurred. While these lists, and how to get on these lists, can vary greatly from carrier to carrier, most carriers will supposedly “guarantee” the work of these vendors, but how effective is this “guarantee” and what happens if your property has faulty work being performed or if they cause further damage to the property?
Recently, Rattan v. United Services Automobile Association 1 looked at answering such questions. In this particular case, Rattan, the homeowners decided to use one of the insurer’s “preferred” contractors with their work “guaranteed” by the carrier for repairs for fire damage. During the renovation process the homeowners accused the contractor of:
“[C]overed up a burned stud in the master bedroom with foam and drywall instead of removing it; allowed [the contractor’s] employees to live in the home; allowed [the contractor’s] employees to make long distance calls from the [homeowners’] telephone; did a poor job of painting; left a smell of smoke in the home; left baseboards missing; and frequently had no workmen at the site.”2
As a result, the insurer pulled the contractor off of the job and another contractor was hired to repair the faulty work, with the permission of the homeowner and at the cost of the insurer. After the repairs were completed the homeowners were still not satisfied and decided to sue the insurer in tort as compensation for all possible consequential damage that would result from the faulty work. The court ruled that the guarantees offered by the insurer “were not themselves contracts of insurance or part of the insurance policy” that was issued to the Rattan’s. Furthermore, the court decided, that the protection for all consequential damage caused by the contractors would in effect make an insurance company the liability insurer for the contractor. Therefore, the court determined that absent any evidence that the insurer took on more responsibility for its preferred contractors other than acting as a guarantor of workmanship, the insurer cannot be held liable in tort for the omissions or errors of contractors engaged to provide repair services.3
The court also rightly explained that many homeowner insurers recommend “preferred” vendors “no doubt for their own convenience and as a means of limiting their claim costs.”4 The lesson to be learned here is that the property owner has a right to hire whomever they choose and should be aware of these rights. Hiring a “preferred” vendor does not increase the level of workmanship provided nor does it mean that there will be no problems with the repairs being made.
1 Rattan v. United Services Automobile Ass’n. (2000) 84 Cal. App. 4th 715.
2 Id. at 718.
3 Id. at 723.
4 Id. at 717.