Roofing Insights Podcast

“Roofers Robin Hood Mentality is WRONG” | Steve Badger

Share episode

Use Left/Right to seek, Home/End to jump to start or end. Hold shift to jump forward or backward.

0:00 | 1:07:39

Dmitry talks to insurance attorney Steve Badger.  

============================
Sponsor of This Episode
GoNano: https://gonano.com/en/partners/roofing-insights
============================
Today's guest:
Steve Badger 
Zelle Law Firm: https://www.zellelaw.com/ 
============================
Dmitry’s coaching program: https://roofing-school.com
Have a question? Text me: 612-558-4881
Connect with Dmitry: https://dmitrylipinskiy.com/
Contractors I recommend: https://directorii.com
Best Deals on Underlayment: https://BemDirect.com
============================

SPEAKER_00

That person ain't gonna have coverage. And don't bitch at my insurance company because of that. Bitch at all the PAs and contractors who submitted crappy claims for those tiny little dents that fractured the pacer sheet that we all knew there would never be a problem. What percent of claims do you believe are fraudulent? Insurance companies have a right to make a profit. So why is it okay to be abusive toward insurance companies because they make a lot of money? But it's not okay to go steal an iPad from Apple who makes a lot of money. So that attitude that your Robin Hood attitude really bothers me. Insurance companies are change resistant. If an insurance company on my side does it wrong, someone's gonna go after them. But if someone does it wrong on this side, this is why I'm having so much fun, because I'm going after them also.

SPEAKER_01

Today in my studio, I have the one and only Steve Badger all the way from Dallas, Texas. But first, let me give a huge shout out to the sponsor of this video, Go Anana. It's something that I'm testing on this very house. So far, after a couple of years on the roof, very impressed. I actually can see the difference in winter and in summertime. And if you're looking for a good solution to extend the life expectancy of Swell Shingles, Go Anana is a very believable product. You can literally see what it does to the granules, how water starts just sliding off like from the glass. When you test it in-house on the roof, test it for yourself, try it for yourself, tell them Dimitri Sendju, Go Nana is what I would put on my own house. Now let's go to Steve Badger's podcast. Steve, how long has it been since we've done it? Four years, three years?

SPEAKER_00

Probably three years or so when we met at my brewery.

SPEAKER_01

Yeah, and then we have uh debate in Dallas.

SPEAKER_00

We did the debate where you had me debate Chad Wilson uh at the cool theme. I thought it was before. I think that the debate came before the interview, isn't that right? I think so.

SPEAKER_01

So some of the questions I would like to re ask if anything changed in the past three, four years. I feel like the industry definitely has changed. And let's start right away with the biggest industry change with a Temco Hale Guard shingles. Yesterday I published a picture with you and me, and a lot of people say, hey, what does he think? So you've said that hail resistant shingles can reduce claims and even suggested mandating them. But who actually benefits most from that, the homeowner or the carrier? Of course the homeowner.

SPEAKER_00

It's not even a close call. If a homeowner has a hail resistant shingle on their roof and a hail storm comes and it the roof is not damaged, then there's no claim. They don't have to pay their deductible. They don't have to worry about anything. Uh so sure, does my insurance company client have a benefit from not having claims? Of course. But at the core, if there's no claim to begin with, how can anyone argue that the real beneficiary of that product is the homeowner?

SPEAKER_01

Not the homeowner. But how is it different from like I we've seen a lot of um demand letters like in uh Florida and other states, like where whether it's a drone flying and seeing the algae and insurance company sending a letter, sometimes to still perfectly fine roofs and say, hey, you must replace it or we drop you, right? And is insurance gonna do the same with class four shingles now? Say, hey, if you're not gonna do it, we'll drop you, or will they push it?

SPEAKER_00

So I think we're uh a number of years away from insurance companies mandating the use of class four shingles, insurance companies mandating them. I think we're a ways from that. What I don't think we're that far from, and in fact I've been posting about this a lot recently, even this morning, I think on LinkedIn, uh I put uh something about uh that perhaps it's time that my state, Texas, mandates the use of class four shingles on roofs in Texas. And let's talk about why. Under our building codes in Texas, we have to design for wind, right? We have hurricanes. We design for rain, we get rainstorms, we design for snow even. But what do we not design for? We don't design for hail. Our building codes have nothing in them about hail, and hail is our number one peril. So something's backwards. So I've been advocating, and I think finally the industry is starting to pay attention to this issue of resiliency. Our buildings have to be more resilient. And in Texas, the number one resiliency issue is hail-resistant roofing.

SPEAKER_01

But the hail guard warranty only triggers if there is a manufacturing defect tied to hail, not just hail damage. So isn't that a huge limitation being grossed over here?

SPEAKER_00

I can assure you that as soon as I saw that and other people started raising it, I called TAMCO. The people who have been coming to me now for a number of months to get my input on this. Uh they and I've sp I've spoken with them for I don't think I I guess I'm allowed to talk about this. They've come to me for some time saying, What do you think? How's the insurance industry going to feel about this? How do you think it's gonna be uh uh uh uh received? And when I saw the warranty and that was in there, I reached out to my contacts at uh TAMCO and I said, What the hell? What is this? And they said, No, no, that's just stupid lawyer language. That was not our intent. Their intent was if the product fails at smaller than three-inch hail, then there must be a manufacturing defect with the product, and therefore, of course the warranty should respond. So their intent was to make it clear that the warranty would respond because something's wrong with the shingle if it's failing with less than three-inch hail. That's how confident they are. I told them, you can understand why everybody's reading this, that it's this is some BS uh clause here. It needs to come out. So I don't speak for them, I don't represent them, I'm hoping they do the right thing, take that confusing language out and have a warranty that truly covers up the three-inch hail. How cool would that be, right?

SPEAKER_01

Well, if you l especially if you lead and advertise the warranty, that warranty better be good. And exactly I mean, I love that lawyer speaks because I'm not a lawyer, I cannot but but but exactly. Like, do you think they'll change it? Have they changed it? Did they say they'll change it? Because they they can do whatever they want. They are a manufacturer, they can tell their lawyer, no, I don't want that in here.

SPEAKER_00

Look, they can do whatever they want, but if it turns out to be a crap warranty and it's not real, uh and it's some type of marketing gimmick, then they're not gonna sell any of the shingles because everybody's gonna know it's a gimmick. I don't think it's a gimmick. I I from all of my interactions with them, I trust what they're doing. Uh they they've came to me knowing there was a problem and there was a need in the market for a product like this. Uh and uh so so far, you know, color me stupid maybe, but so far I trust what they're doing and I believe they have a good objective. Aaron Ross Powell But they have not changed it yet. So we still let's see. Let's see you and I come back in a year. Let's see.

SPEAKER_01

Guys, comment below if you think that TAMCA will actually change it. Uh if insurers start requiring class four roofs for RCV coverage, isn't it just a backdoor way to limit payouts?

SPEAKER_00

No. It's a backdoor way to ensure that we have an affordable insurance product available. And think about that, because that's a really important statement, Dimitri. Insurance companies are not benevolent societies. They're for-profit businesses. They're not government-backed. They don't have a printing press where they can make money. They are a business. They have to make money. Now we can all quibble about how much is too much profit and what profits are one year versus ten years and all of that. But what's happening in our industry is that because of climate risk, so much more exposure to hail, wind, wildfire that the traditional insurance model is becoming more difficult for the carriers to make a profit. So, no, carriers don't want to deny claims. They want to fix damage, but they need to find a model where they can fix damage and still be profitable.

SPEAKER_01

Well, they're pretty profitable. I actually looked uh here's the number of the day. And we'll talk about that number several times. So State Farm in 2024 did$123 billion in revenue, and the profit was$5.3 billion. In 2025,$132 million in revenue, but$12.9 billion in profit. More than double the profit.

SPEAKER_00

So let's so let's pause. Okay. So on that revenue in 2024,$12,000, what if$120 and the and the revenue was five, or the profit was five. So that's about four percent by my simple math. That's a lot less than what my contractors that I'm always fighting with, who tell me that 10% OMP isn't enough. Uh my insurance industry people are making five percent. So are you telling me that a five percent profit is not a reasonable profit? Even in 25, you're telling me it was less than 10%. Uh but contractors are complaining to me that 10% is not enough.

SPEAKER_01

Think about this. Think about what what's your business. So when you collect$100 billion and your profit is five billion, my question is this how much did you pay out? Because you're in in business to pay out claims. So let's say you pay out ten billion dollars, right? My question is where did the money go? Because it's millions of dollars of compensation, it's it's not just overhead. So when you spend eighty billion dollars to run a company, so like if you only pay ten billion dollars and you make ten billion dollars, where's the rest eighty billion dollars?

SPEAKER_00

Yeah. Look, I think what we need to look at is another number, and I'm happy to come back one day and talk about uh insurance math. Uh, but we also have to talk at their loss ratios. That's the big thing that we look at. How much premium came in in a year, and then how much indemnity dollars went out. What is the ratio of premium in versus indemnity dollars out? And that number needs to be consistently, the the dollars out need to be less than the dollars in. And the ratio is somewhere it has to be less than 100. Uh, if you look at the last 10 years, you'll see a number of years where the loss ratio exceeds 100 percent. That means the insurance company is paying out more than is coming in. Now, last year was a good year. We had less storms. There was no really big bad hurricane or really big bad hail storm. But we've got to look overall at relative to what's coming in versus what's going out.

SPEAKER_01

But contractors also will say that it's been harder than ever to get a state farm claim approach. I actually want to do this really quick. Uh just an hour ago, I was checking my Facebook feed and I've seen Adam Sand publish this. Like, have you seen um McDonald's CEO eating uh I did see that. So uh don't stop at fast food CEOs eating burgers. I want to see CEO of all state and state farms successfully get a claim approved.

SPEAKER_00

I think it would be great to see also. Absolutely. Uh it would be interesting to see what the CEO of State Farm's own experience was with his own claim. I would like to see that. Uh and we could talk generally about the state of the claim payment industry and what's happening and why it people say it's getting harder. There's lots of issues. Uh my industry uh, I think is going through some changes. There are some issues on my side, how we come to grips with uh remote adjusting, uh, AI and the claim process. There are a number of issues. Uh, but I'll come back to uh this. At the core, insurance companies are change resistant. They are risk averse. They like the math of what their policies have already covered forever. The actuaries tell them, under this language, here's what you can expect. The only time you ever see changes to insurance policies, most of the time, are when it's a reaction to something going on in the industry. They don't sit around thinking how can we change the policy to pay less? Policies change when something is happening that is disrupting the model where they can maintain the loss ratio. Look at all the big things that have happened. Mold. Everybody started filing mold claims, so we had to have mold limitations. Dents to metal roofs. Everybody started filing claims for their tiny little dent to metal that we can only see at three in the afternoon when you're chalking it from a certain angle. And now we have dent endorsements. Uh so these things are all a reaction. The same thing now with dents to insulation. This morning I helped a draft for an insurance company a dents endorsement that is now excluding dents to insulation. And that's a reaction because now the hot topic is everybody's filing their claims for dents to ISO board underneath the TPO membrane. Uh and that was never a problem before. But now we're gonna exclude it. And sadly, that one person who has a really good TPO membrane and has got three-inch hail that doesn't damage the membrane but does damage the insulation, that person ain't gonna have coverage. And don't bitch at my insurance company because of that. Bitch at all the PAs and contractors who submitted crappy claims for those tiny little dents that fractured the phaser sheet that we all knew there would never be a problem. So I'm sorry, you got me on one of my rant topics already.

SPEAKER_01

And we have a Sam just smiling, smirking here, public adjuster in the studio. Oh, I can't wait for this. I can't. Guys, after this, we're gonna do uh some some sort of debate, some form of debate between Sam and Steve. Uh my question is why should homeowners carry the burden of upgrading?

SPEAKER_00

Uh so uh my post this morning, uh I said that I envision a scenario where it would be fair for an insurance company to help pay the cost of upgrading the shingle. I absolutely could see that uh and I speak for Steve Badger, right? I'm not speaking for any of my clients here. Sometimes I have positions that insurance people hate. I get it, I understand that. But um, in this in this issue, if we were to mandate in Texas, let's say the Texas legislature passed a law that said every roof installed in Texas, every shingle roof must have Class IV hail-rated shingles. We know there is going to be roughly an incrementally, you may know better than me, 20, 25 percent increase in material cost to do that. So your question is who should pay that? I can see a scenario where, in exchange for perhaps some legislative protection to overall fix the problem, that insurance companies should absorb that burden. I could see that. In the meantime, my post this morning was bringing awareness to a company called Fund My Deductible. They came in to help contractors uh create a revenue or a source for people who didn't have money to pay their deductibles, they will finance the deductible for people. This company now has a program where they will finance the increased material cost of the shingle. So, whatever the increased cost is that's not covered by insurance now, FMD will come in and finance that over time for the homeowner. And the cool part about it is that a lot of insurance companies already offer a premium discount for having Class 4 shingles. So you get your premium discount after you install it, your insurance premium is less, and now you're paying off over time the increased costs through financing with Fund My Deductible. There's a cool solution. And when we work together to find solutions like that, we can help the most important person in this uh uh formula, and that's the homeowner. I agree with that.

SPEAKER_01

Got it. Let's switch to Oklahoma Attorney General versus State Farm. So obviously, you know the story you commented, uh we actually quoted you last week on the show. So Oklahoma is accusing State Farm of consumer protection and Riga violations over the hail focus initiative. You said let's wait and see the evidence. But if the allegations are true, cutting payouts, narrowing definitions, would you call that system uh systemic bad faith?

SPEAKER_00

Um again, uh that's a fair question. If it all proves to be true, uh, and if the allegations that State Farm created a program where they're intentionally not going to pay covered claims, all right, and I chose my words carefully. If they're intentionally not going to pay covered claims, then that does create a bad faith concern for me. Absolutely. How could I say otherwise? It would be intellectually dishonest if an insurance company is not paying covered claims intentionally. Uh but I'd be really surprised if that's what the documents show, if that's what the initiative was. I I don't think State Farm is so dumb that they're going to have a document that says, we have too many hail claims, we need to start denying 20 percent of the covered claims. That's not what it's going to say. If it does, then they're in trouble, I agree. What it probably says was that, hey guys, we have loosey-goosey standards as to what's hail damage, what's a pro uh the proper amount to pay, we need to better formulize our processes, and we need to better identify what we believe is and is not damaged. So we're going to have a hail initiative to do that. Uh and if all they're doing is to try to better explain uh to their people, to have better procedures as to what is and is not damage, I don't see how they can be faulted for that.

SPEAKER_01

At what point business optimization becomes consumer fraud?

SPEAKER_00

Yeah, because at some at the point where they are actually not paying covered claims.

unknown

Yeah.

SPEAKER_01

But well no, they're not paying covered claims. So like I mean, we've seen it, right? Like if you if you meet adjuster on a roof and you both look at a claim, I'll give you one scenario. I talked to a contractor in Wisconsin last week. And you tell me how would you, if you're the contractor, what would you say or do as a contractor, or how would you respond to insurance company? Um contractor meets adjuster on a roof. The hail is big, like everything's shot, like there's no denial. Like I'm talking about two or three inch hail, massive damage. And here's what con uh adjuster told the contractor. He said, It's uh I'm not gonna approve this job, it's manufactured damage. Like it's one of those vandalism, right? And immediately contractor told his company, like, hey, we're not gonna argue this, we're not going back on the roof. Accusations are wild, right? And in that scenario, it was a way out for adjuster to deny the claim. So a jaster can say almost anything, like, oh it's fake, or it's this. Like it contractor just does not have any more tools in the box to to to counter because small contractor is not gonna sue state for him. No.

SPEAKER_00

And he can't.

SPEAKER_01

He can't. So when when they deny the claim, for whatever reason, like r not reasonably, like what tools do we have to fight?

unknown

Yeah.

SPEAKER_00

Uh so I'm gonna accept everything you said is true. Okay. Three two to three inch hail, obvious hail damage, and complete BS manufactured uh damage defense. Uh if I accept all of that as true, uh, then yes, of course the insurance company should have paid that claim. Now, I suspect those are not the facts.

SPEAKER_01

Uh we're actually gonna we're actually gonna drive to Wisconsin tomorrow, meeting that contractor and maybe even going to see that job.

SPEAKER_00

Well, I I look forward to seeing the video of the roof. Um so I'll accept that if that is the true story, that is wrong. Okay. Uh how can I say otherwise? That is absolutely uh wrong. Now, in that situation, what tools does the contractor have to help the homeowner there? Um the contractor has no tools, right? That's just not the contractor's lane. The contractor can suggest to the homeowner saying, based on my experience, you might want to do this or that. Long as they're not giving legal advice, they're just talking about their experience generally. What is this or that? Number one, the homeowner could ask for a reinspection. Hey, somebody else needs to come look at this. This is obvious. Uh the homeowner can do that, obviously, as you know, has the right to request somebody else to come out. They should contact their agent. Uh the local agent uh often can get perhaps more of a response than the homeowner themselves if the agent is someone who has contacts with the insurance company. Uh the next step, of course, is to hire a public adjuster uh who can come in and negotiate on their behalf at a reasonable percentage. Uh, they could also then hire an attorney. There's lots of things available that they could do. Now, I'm not going to say appraisal because of those facts. I don't think that's an appraisable issue. I think it's a coverage question in most states outside the scope of appraisal. But if it was just a dispute as to whether it's damaged or not, not the issue of vandalism, but just whether this is truly hail damage or not, in most states now, that's an appraisable issue. And that's why appraisal has exploded so much. And I love appraisal. We should appraise disputes like that to get them fairly resolved. And we can talk if you want later about appraisal.

SPEAKER_01

So there are tools available, but there are those who don't know what appraisal is, can you explain perfect appraisal process and how does appraisal work?

SPEAKER_00

Yeah, the perfect appraisal process uh is that let me step back. Appraisal is the process created by the policy. Right? Appraisal is generally a creature of contract. Appraisal exists because insurance policies for 150 years have had appraisal in there as a way to resolve disputes as to the amount of loss. Somebody long ago in the late 1800s. Said we should have appraisal as a way to resolve disputes without lawsuits. And the policy says that when we have a dispute as to the amount of loss, each party shall appoint an appraiser, an independent and unbiased person to go out there and the two of them look at the damage. They try to reach an agreement. If they cannot, then their differences, what they can't uh resolve, should be submitted to an umpire, a third party that they agree upon, and then the umpire works with the two of them, and then two of the three, or all three in a perfect scenario, then reaches an agreement as to the scope of damage and cost to repair. They issue an award, and we're done. No PAs, no lawyers, no lawsuits, kumbaya, it works. I love appraisal when that is the process. Sadly, uh, because appraisal has grown so much, and any knucklehead can call himself an appraiser and get into the process, we have growing pains right now in the appraisal process that we're all working through. Uh but I fully 100% support uh the appraisal process when it's used properly and fairly for all parties, because it resolves disputes without litigation, and that's what we want.

SPEAKER_01

Why should homeowners trust carriers if the rules can change without disclosure?

SPEAKER_00

Um the rules should not change without disclosure. But they do. I'm not sure how they do. Perhaps there are some states where an insurance company can change a policy on renewal, change terms without telling the homeowner. Uh I'm uh I would not support that. In Texas, we passed legislation uh a couple of sessions ago that any material change to a policy that restricts or otherwise alters coverage must be disclosed to the homeowner upon renewal. So if we change from R C V coverage to A C V coverage, that needs to be disclosed. And it needs to be, and there's requirements as putting it in the cover letter and making it very clear. So I agree that any material change in policy coverage should be disclosed. Likewise, any change in legislation that affects uh insurance claims and coverage that is out there. People have an obligation to know the law generally as to these issues, but I think the big issue that you are alluding to are policy form changes, and I 100 percent support consumer awareness of any changes.

SPEAKER_01

What's the reason why we see so many uh changes from R C V to A C V policies?

SPEAKER_00

Uh yeah, I did an interview this morning early for Bloomberg uh about the new uh Fannie Mae, Freddie Mac changes, uh, about um uh now that Fannie and Freddie will allow ACV only policies. And so that goes to the heart of your question uh that uh why are we seeing ACV policies? And it's simple, uh, because the roof uh risk, the roof exposure has become so great that the insurance companies cannot afford to insure that risk any longer. That's it. This is a change that is being driven by the exposure that exists, the increased exposure. So insurance companies are have said, all right, uh if it's a 20-year-old roof, 25-year-old roof, uh it is beat up. It's been hit by 20 prior storms, but they never filed a claim. And we know now that after every storm there's gonna be 30 door-knocking, storm-chasing contractors and and 13 PAs knocking on everyone's door, and we're gonna get a claim for that 25-year-old roof that's been getting hailed on forever. Uh, and now we're gonna have to fight about whether it's old or new damage. It's easier just to restrict to ACV only and uh have less exposure. Those are the thoughts that do go through insurance company minds in limiting coverage. They do because of the uh the exposure they're facing now. That's just the reality. But for me, this is just the common sense.

SPEAKER_01

And I I've said it for years. This is not popular opinion. My industry is gonna absolutely hate me for what I'm about to say. Which I don't care. Common sense is common sense. But no, I'm not sure.

SPEAKER_00

Dimitri, you say a lot of things that upset people, which is one of the reasons I'll give you any time that you want me to give you, because I tell people you are an honest commentator on industry issues, and I value that and appreciate it.

SPEAKER_01

Thank you. But the the the reality is this like if you have 20-year-old roof, right, it's already past, you know, lifetime, like, and then hail happens. So now a contractor knock at the door and say, we can get you insurance, pay for the entire thing, right? So let's say it has one missing shingle. My question always has been like, does insurance really owe you for entire thing because of this one tiny thing? And I'm not saying that insurance should not pay and this and right, because the uh contractor's argument, the homeowner's argument, oh, I've paid for 20 years to insurance, and now, but we don't have that in any other industry. When I buy a car, you know, and I get in a car accident, insurance does not owe me$120,000 for a brand new vehicle, they owe me for 100,000 miles, like what it's worth today on the market. So we did not have that in the roofing industry 10 years ago, 15 years ago. We were paying for brand new roofs, even though it's a lot of jobs. I mean, think about like even you know, defected shingles. Like insurance were paying for defective shingles for very old-age roofs, and I don't think it was reasonable to insurance companies. Now, insurance companies also were not reasonable for some claims they didn't pay, but as far as ACV, RCV, I'm more an ACV. Like if I would open an insurance company today, I would only do ACV policies. Like I would only that would be my only product. Why would I pay for the entire thing if you already got 10 years out of it?

SPEAKER_00

Yeah, and and let's do a little history of insurance 101. Insurance typically began as an ACV product, uh played depreciated value.

SPEAKER_01

But it was worse today.

SPEAKER_00

Yeah, but but and it's but it's it moved because of the need for people's homes uh to be rebuilt. If you had ACV only coverage and and your home was destroyed by fire or your roof was blew off with only ACV coverage, most people could not afford to fix their home. That's just the reality. Uh your car, you can go buy a used car. You can buy a comparable used car that is depreciated. You can't go buy a comparable used home. Uh you so there was a need for society to have R C V coverage.

SPEAKER_01

But but then what do you should w w I think the on to answer that is you do full coverage, limited coverage, you have two different products. If you want everything bumper to bumper to be covered, you know, for brand new, here's your price. And if you want ACV, here's your price.

SPEAKER_00

Yeah, and that's what's happened now with the new Fannie uh and uh Freddie uh regulations. And if what's really interesting is that the regulation change only applies to roofs. You still have to have full coverage for the structure, the home, fire, uh, the fire apparel is still RCV, but they've made the change only for roofs. That's really telling, isn't it, uh, Dimitri, that the problem is really only with roofs. Uh and in the interview I did this morning, I said, here's the issue with this. I get it. People are saving money now on premiums. They can buy ACV only. But we're not fixing the fundamental problem. We're just trying to address the symptom, and that is increased costs that people are having to pay. So to help them pay less, they can buy less insurance. Well, that's obvious. You just said that. If you want to buy ACV only, buy ACV only, but you're not getting your roof fixed. Now, why aren't people getting their roof fixed? Because they only have ACV coverage because carriers don't want to offer RCV coverage or it's too expensive. So why don't we fix the underlying problem and get back to some equilibrium in the process where we can afford to give RCV coverage at a reasonable cost? How do we do that? That's two things I said this morning. One, resiliency, come back to class four hail-rated roofing, and two, a lot of people aren't going to like this on your side, but we got to get all the abuse out of the process. The one shingle warranting replacement of an entire roof is bullshit. You wouldn't do that on your house. You'd go buy a shingle and replace it even if it's a little bit off. You'd cut the corner off, you'd you'd shave it, you'd make it work. But since it's insurance money, oh repairability. It's a repairability issue. So you gotta pay the whole roof. You're ahead of me. It's like No, no, no.

SPEAKER_01

Let's talk about a repair versus replace. So you have called out contractors for abusing the system when they replace entire roof with discontinued shingles, even if only one or two are damaged. But what about matching requirements?

SPEAKER_00

Yeah. So it's I've got to play lawyer first. It's a state-by-state analysis, policy-by-policy analysis, law by law. There's lots of variables that go into the matching issues and discontinued shingles repairability. So the law varies state from state. Uh but as a fundamental practice, uh my clients owe the reasonable cost to repair or replace. So if we can repair, if we can put them in a like kind and quality position with a repair, with like kind and quality, meaning by most courts to have interpreted as similar, not exact. Like means similar, not exact. If we can put them in a like kind and quality position by a repair, we have satisfied our obligation under the policy. Um that's a a general answer. Now we get to this issue of what about repairability? Uh if the roof cannot be repaired because of uh the shingles are discontinued, or you walk around the roof and all the old hardy slate uh tiles of the fabric or the uh synthetics are all crumbling. How where does how does uh uh repairability play into all this? That is really state-specific. In my state of Texas, we don't have a repairability doctrine. There is no repairability doctrine in Texas because we apply something in Texas called concurrent causation. And in my state, all we owe is the cost to repair the damaged shingles, period. End of story. If the shingles cannot be repaired because all the other ones around them are old and crumble when you try to repair them, I'm sorry, but that's the insured's burden. I only owe what is actually damaged. In other states that apply a doctrine called efficient approximate cause, the analysis then goes into what's the main reason the overall roof has to be replaced? Is it those 13 tiles that are bad, or is it the sh the whole problem overall that they're all old and coming apart? So my industry used to pay for a lot of uh roofs under the repairability doctrine that they didn't have to. But because of the abuses, the one shingle, I gotta have a whole new roof, they are now paying attention more. This may be one of the hail initiatives that State Farm had. I don't know, but they may have said we need to really only buy roofs that we we really owe. Uh so there's changes, uh, but it's and we could get in the matching, we could get in the tile, tile matching is a huge issue. I just learned, Dimitri, that there are two companies out there that if you send them any tile, any tile, take it off a roof and send it to them, they will make a mold and they will give send you new tiles that's an exact match. Color and shape. So it eliminates this whole game where I got to go to a bone yard and look for matching tiles at a bone yard, and I gotta make sure there's enough, and I gotta count waste factor and breakage. Nope. So any claim I have now with my clients, and I represent some homeowners insurers who insure high-value homes a lot of time. I will send them to you. Okay. And I'd love to have you post them. We posted them at our recent Hale conference for the industry, and it was probably one of the top three issues where everybody went, wow, that's a game changer that they are available now for any tile roof.

SPEAKER_01

What's the price point there? Like, is it going to be like premium price?

SPEAKER_00

Uh it is certainly a premium price, but it's a hell of a lot less expensive than either replacing the whole roof or argue it in litigation for three years about whether the whole roof has to be replaced. And shouldn't we all support that? Can't you agree with me that that if there are tiles that can be manufactured that look the same or like like kind and quality and can be properly installed, that we should all want that. Yeah, the only person who doesn't want that is the contractor who gets less of a job, or the PA whose 10% commission is less on a repair than a replacement. But otherwise, those of us who really want to ensure that the insured is getting their damage repaired and nothing more or nothing less, we should all support that.

SPEAKER_01

Why home insurance so different from auto insurance? As far as like even a repair factor, because if I get in a car accident, my insurance will say, Well, here's my shop. But they pay premium, pr not premium, but decent rates to fix like quarter, bumper, whatever. So there's you know, labor. I feel like in our industry, insurance often just you know, they'll give you like$1,500,$2,000, and the roof looks at it like it's just not enough money. Like we have to fight it from profit standpoint. You want to make money, we want to make money. Um, because that exactimate make uh labor prices make sense on the full jobs, but on the repair jobs, I feel like it should be more. Do you feel like if insurance pay pre like you just said, like it's a premium product for those tiles, and if insurance is willing to pay for it, are they gonna also pay premium price to do the repairs? Do you think that's the answer?

SPEAKER_00

Uh I'll just say this very candidly. They should pay whatever the market price is to complete those repairs in that market. Absolutely. Uh and if Zac if if Xactimate is failing to provide that information, a true market price, uh then that contractor needs to uh to raise that issue uh and say, here, here are my labor costs. I'll show you what I'm having to pay my labor, Mr. Insurance Company. Now I'm not telling them to go negotiate the claim. We can have the whole UPA discussion later, but why not say? Xactimate's saying my labor cost here is 26 bucks uh an hour. It's not. And here, look, look at the time cards. I'm having to pay these dudes 42 bucks an hour. Uh and I'm I'm willing to work with you and just do a repair. And I'm not advocating for replacement. I want to do a repair, and I've gone to your guy and bought the replacement shingles. We should be reasonable in that situation. And if if someone if a file ended up in my office and it was supported by labor records showing what that contractor was actually having to spend, uh. State your price. Here is what I charge. Make sure that it's within spitting distance of Xactimate so you can tell the adjuster, here, I ran it through Xactimate, it's 28 gram, but my price is 31 gram. All right, this is a fair price, this is what I charge, okay, here's my labor rate, whatever. Get out of the insurance proceeds contract, because here's what insurance companies think now when they see an insurance proceeds contract. And I get a dozen of these in my office every week in residential claims. Insurance proceeds contract, contractor does the work for our insurance proceeds, and then what happens? Then I get a supplement. I get a call from a supplementing company in Colorado who's lying to me and telling me they're the contractor, but we all know they're not. They got some professional Xactimate writer who's juicing up the Xactimate estimate and adding a bunch of line items for other crap. They don't care what was actually supplemented. They're just adding a bunch of stuff to get the dollar up so they can take their 20 percent contingency fee. Then, if that's not enough, then we're gonna go to appraisal. And then the appraisal process goes, and the contractor leads the appraisal process and he appoints his fish and buddy as the appraiser, and they all got this scheme, and the appraisal costs get passed on to us, and then if they're not happy there, then it goes to litigation. We know that's the game now when we have insurance proceeds contracts. Be a real brick and mortar contractor and put down your price and tell us why that's your price. Sorry, there's another one of my rant topics.

SPEAKER_01

So it's good. I love it. Um Do you think homeowner can use can be used as a major leverage here? Because here's how I see this process. If I'm a contractor, I work for the homeowner, I come to them, hey, I don't care what the insurance companies will pay, here is my price. Like in your example, my price is$31,000 and they pay$28,000. Can a homeowner send it to insurance and say, hey, this is my contractor of choice, his bill is higher than yours. Can you approve like approve? Because insurance love to say no to the contractors. They usually don't say no to the homeowners as often, but if you're here, I'll tell you. But but insurance companies also love to say, but we have someone else who will do it at our price.

SPEAKER_00

Well, let's get to preferred contractor networks in a minute, because that's a big growing topic right now, and I know it's very controversial. The worst case scenario for my client, my insurance company client, is a situation where we have a uh retail contract that says the amount and the insured has paid it. If those two things have happened, uh my client is typically in a lot of trouble in saying no, as long as that number is within the realm of reason with Xactimate. Because we all know, right, Xactimate is the middle number. Some are higher, some are lower. That's just the nature of Xactimate. So if the amount is paid and there's a retail bid contract, it puts tremendous pressure on the insurance company to pay it. Uh because what are they gonna say? Uh now, we see a lot of them or it's completely ridiculous and out of control, but if the homeowner has paid it uh and it's a the contractor that says it, most insurance companies are gonna say, okay, what are my options? It's only$3,000. I can go to appraisal and incur$3,000 in appraisal costs, I can go to litigation and incur$100,000 defending it over$3,000. They're gonna pay it. And let me give you one hint. In that situation, what the smart adjuster would do is if it's$3,000, the adjuster can go back and he can add some supervision to the to his Xactimate estimate. He helped that adjuster figure out what line items are missing, that he can get those into the Xactimate estimate on his side that his bean counters above him are going to look at and say, okay, I've added these items, it comes to the contractor's number, we're done. Uh now it's not the perfect fix, but I've seen a lot of claims get resolved quicker and easier under those scenarios.

SPEAKER_01

I love it. So you are a big advocate for preferred contractor network?

SPEAKER_00

I am, Dimitri. That's where we're headed. Uh like it or not, this industry is moving to preferred contractor networks.

SPEAKER_01

But isn't it a contradiction of what you said earlier? Because you you're saying that contractors should present his price, not Xactimate price. Because insurance companies will always go like, here's what we pay. This is what Xactimate is, right? So when you have a contractor who is charging a little bit more, you pushing him away. He's like, No, don't go with this guy, go with the preferred because they're cheaper essentially. Insurance will always choose cheaper, not more expensive. Um how do con how does a homeowner pick his contractor of choice who's a little bit more money? Because we know the marketplace, right? Like, usually people who do better work charge a little bit more. Like, not always, but a lot of times. How do we move towards quality and preferred? Because for me, better contractors have a better warranty, better product, charge a little bit more. Insurance companies want to play this wholesale game. I mean, how do we fix that issue?

SPEAKER_00

Well, there's an assumption in your uh statement that the contractors who participate in preferred contractor networks are only the lower quality contractors and they do shittier work. That's not what I said. Well, but there's an assumption in there, right? They're the lower quality contractors, okay? Uh I never said that. I didn't you didn't say it, but that is the assumption that a higher quality contractor is going to charge more, they're not going to participate in a preferred contractor network. And I hear that all the time. It's only the crap contractors in those programs. And that's not true. And what I am always very clear whenever I speak about preferred contractor networks is any network that I support has to be like a three-legged stool. A three-legged stool only works if all three legs are solid. Right? You've got to have all three legs working. What are the three legs of the claim process? The contractor, who has to make an honest buck, be paid fairly for the work, the insurance company who wants to pay a fair price for the work, and the insured, who wants a code and manufacturer compliant roof. If all three of those are working in a preferred contractor network, I'll support that network. I acknowledge and recognize that some of the early programs, uh, we won't name any names, but they didn't do that. Some of the Florida programs didn't do that. But what I'm seeing now are preferred contractor networks where they're being asked to Work for exactimate pricing, with the only change being that materials are being bought through a discounted program and being shipped directly to the site, which doesn't concern me any because the contractor is still being paid a uh a regular price for his work, exactimate price. What is wrong with that program so long as the contractor puts on a code and manufacturer compliant roof?

SPEAKER_01

What's wrong with that is a huge conflict of interest. Uh because you and me agree on one thing, and we always agree on it, that we want to do what's good for the homeowner, and you always say the homeowner is your client, we work for the homeowner. Here's the problem. Uh when an insurance company chooses a contractor, not the homeowner chooses. In you in your scenario, I would say it would be fair if a homeowner choose the contractor from the network, it's a win-win. So that contractor from your program should still win a business of the homeowner. They still should uh have equal opportunity, right? But if a homeowner says no, because the problem is insurance companies pick the contractor, so they you pay out and you make a decision. Of course, you're always gonna do what's it's a conflict of interest uh problem. You're always gonna do what's good for you. But if a homeowner does not agree with you and say, I want to choose this contract, we're not talking about contractors competing. We we're talking about contractors competing not between each other, but for the homeowner's business. And if a homeowner says, I think this contractor is better, how can insurance company force them to use someone else when uh when when there's a reason why they don't want to use that contractor?

SPEAKER_00

Um it's a fair question. And it really we need to focus on what type of preferred contractor program we're looking at here. Um right now uh there's two types of programs mostly. There's the voluntary program, where the insurance company is sending out a contractor saying, use me, use me, use me. And the homeowner can still choose whoever they want. So I know because of my work with some preferred contractor networks, that when they send contractors out, they've only got about a 25 percent close rate, 30 percent close rate. Most of the time the consumer says, eh, I want to work with my guy. So that is very common now. And because that close rate is so low that the carriers are saying, okay, what other options do I have? Uh and what they're doing now, and I'll tell you there is a very large national middle market insurer uh that insures a lot of residences across the country. They are rolling out a program where they are invoking our option. Our option is a provision that's pretty much in every policy that says, instead of making a monetary payment to you, we have and can invoke our option to send someone out and repair the damage. And that's happening now. And that's the scenario you don't like and believe is unfair. Uh but that is that is coming. That is the option now that is being more widely used. And we can talk about your conflict of interest issue in a minute, because I acknowledge it. Uh that up that is happening. Insurance companies forever have been loath to do that. They don't want to invoke our option. They don't want to become the contractor on the job. That's not what they want. But what they've realized, Dimitri, and this one middle market insurer that's rolling this out has said we got two choices. We can either make sure we have good contractors on our network and put contractors out there, have them do the work, and when one or two out of a hundred gets screwed up, we're gonna own it. We acknowledge that. That's option A. Option B is the what we're doing right now. That out of those hundred claims, I'm gonna have appraisal in 30 of them and lawsuits in 15 of them, and I'm gonna have to deal with all the bullshit going on. Uh and it's just gonna take forever, it's gonna be a hassle. They are choosing the our option provision or option, uh, and now more often. That's just happening, and it is a reaction to all the problems. There are the insurance proceeds contract, supplement appraisal litigation model. That's why they're doing this. They'll take the two out of a hundred that goes south. Now, what is the answer to this? What's the better solution? And you'll see this in everything I advocate for. Insurance companies are starting to offer, and I've drafted a few of these in the last few months, they're offering a policy endorsement at the time the homeowner buys the policy. And the endorsement says that in exchange for a lower premium andor a lower deductible andor of Class IV hail-rated shingle extra. No. You are choosing to go into this network where you will choose a contractor out of this network. So the homeowner makes the choice that, okay, I'm saving money, I'm gonna go into the program, you're gonna give me a list of contractors in my community, and I'll go choose one. Uh now, they may not be able to use their church buddy, but they can choose from a number of people or companies that are in the program in that community, or perhaps, you know, they're gonna have to use the insurance companies. But that is where it's headed. And if the homeowner says, I'm willing to do that in exchange for a premium or deductible discount, I think everybody wins there. Because I think there are very few jobs where the insurance company's contractor screws it up. Every week I get multiple calls from homeowners who have been screwed by bad contractors. Everybody knows to call Badger, because I do all these for free, just as a courtesy to people, and they're fun, and they give me people give me tequila after, so it's great. And um I get lots of calls from people ripped off by bad contractors, but I almost never get a call where one of them is a preferred contractor network. I got one two weeks ago, uh, and I put them in touch with the insurance company and the network, and they're fixing it. They're stepping in and fixing their problem. Now, that's my beautiful success story. That's not always the case. Uh so I'm uh I support it. Uh I think it's where we're headed, but I do acknowledge that it has to be fair. I also, this conflict of interest issue, you're right, the contractor wants to get more jobs through the program, 100%. But the metricies that decide how many jobs they get, because I've seen the metricies that the preferred contractor networks use, the metricies, am I saying that word right? I think so. The metrics, whatever. I'm the wrong person to ask that question. The metrics are that how many complaints do you have from your homeowners? Are they do they like you or not like you? How quickly are you getting the job done? What's the leak call that we're getting in the next year? How many leaks? So they have the same motivation to do it right.

SPEAKER_01

Finally got you on my territory, qualifying contractors, because obviously it's my actual my biggest business, you know, uh qualifying contractors, recommending them. So my question there is besides So since you you so you left your contractor network besides uh requirement to work with Xactimate, besides the price, what else is important for insurance companies? What uh other reviews, length of business, like what else are they looking for? Like, how do you contractor start working with insurance company besides the because to me from looking from outside in, it's all about a price. If you agree not to supplement us, we give you the jobs, right? And if you have a pulse, what other requirements?

SPEAKER_00

There are so the preferred contractor networks who I have been working with and helping, one of them actually had me appear at their booth at IRE. At the last two years, I've appeared at their booth and they said, Come talk to Badger about these programs. And contractors came up to me and they said, Okay, yeah, I'm interested. I heard you speak, Badger, in your session this morning. What do I got to do to get in the program? They're not just signing up any Joe Schmoe, schmuck, paper contractor, as I call them, someone who went to wind the storm and learned from uh um Del Medico how to write an inflated exactimate estimate. That's not who they're signing up. They're signing up real brick and mortar contractors, and that's what we want. So they have a vetting process. Are you insured? Their contractors have to carry insurance. That's a requirement. Uh do you have good reviews? Uh all the things that you've talked about, they want good contractors in the program. They don't want bad contractors. I've just dealt with one uh involving a bad contractor, and they're out of the program. They kicked them out. They screwed up a job, they kicked them out of the program. They don't want the headache. So if you're a good contractor and you're willing to work for Xactimate pricing, and you don't have to hire a salesman, right, because the insurance company is sending you the job, so you're not having to pay a salesman on the job. So that increases your profit, obviously, under any salesman uh sharing model. Uh why would you not want to be part of this program? Because we all know that if you're getting the jobs and you're getting Xactimate pricing, you're gonna be okay. And in fact, one of the big networks just posted uh the last couple of days on LinkedIn uh that uh they're looking to expand their network in the Midwest. They need contractors in the Midwest. I gotta tell you, uh, I think it's a program that they uh as a real brick and mortar contractor, you ought to be taking a look at.

SPEAKER_01

Got it. Let's talk about abuse versus system design. You often say that abusive claims are the problem. But isn't it the system itself that incentivize those behaviors? Because I feel like on the insurance side, you know, they have to make money. When you have to make money, you have to optimize, not to cut corners, but to limit your um you you have to design a system to make money, which benefits you paying less claims?

SPEAKER_00

Um I think in any business model, uh the company needs to optimize to make a profit. Of course. And uh so do insurance companies do things to ensure they make a profit? Of course they do. But when they overreach, when they do too much, there's all kinds of safeguards out there to come after insurance companies when they overreach. There are regulators, the State Departments of Insurance, who every couple of years do conduct market exams and they go in and they audit hundreds of their files and they look at it and see if they're doing things right. There's lawsuits and individual lawsuits. There's what's happening in Oklahoma now. So there's lots of ways to regulate insurance company conduct when they overreach. Absolutely, and it's required. Uh and there's no shortage. If anyone out there is ripped off by an insurance company, legitimately ripped off, and you need a lawyer referral, I'll tell you who to use. I'll tell you the good policyholder attorneys who were good and that you ought to hire. If it's one of my clients, first I want to know what happened. I want to hear your story, and I might call my client and say, hey, will you take a second look at this claim? This sounds like a legitimate issue. So all those protections are out there. But what's out there to protect people from the bad contractor? What? Nothing. Calling Steve Badger and me working for free for tequila. That's about it. Nobody wants to help Mrs. Smith with being ripped off by a$20,000 claim by a contractor. There's no help out there. And that's a real problem. No lawyer wants to sign up those cases. If it's true fraud case and they've ripped the homeowner off, basically the local police departments don't care. It's a small matter unless the guy did it 50 times. So that's where the problem is. And the other thing along those lines, and abuses of ripping off uh homeowners or even ripping off insurance companies, is that let's remember insurance companies have a right to make a profit. It doesn't allow you to go in there and pretend you're a modern-day Robin Hood and try to rip off insurance companies because you think they're too profitable. And that's the mentality that really drives me crazy. Oh, they're bad insurance companies, so it's okay for me to push the boundaries of bad conduct. It's wrong. Apple makes a shit ton of money. But does anyone go out there and say it's okay to go to an Apple store and steal an iPad? No, of course that's wrong. So why is it okay to be abusive toward insurance companies because they make a lot of money, but it's not okay to go steal an iPad from Apple who makes a lot of money. So that attitude that your Robin Hood attitude really bothers me, and I've covered nine different topics there, but um uh we need to get away from this belief that uh uh it's okay uh to go after insurance companies just because they're big and make money.

SPEAKER_01

I'm with you on uh Robinhood. Uh I hate that too, but the only reason people like Robin Hood because there is a greed in the first place somewhere else. When when there's abuse, people like Robin Hood. Without one, another one does not exist. That's fair. I get that. My question is how do we incentivize good practices instead of just punishing bad behavior?

SPEAKER_00

Yeah, we should approach every claim with the approach of how do I get to a proper and fair resolution of this claim for the benefit of the insured as quickly as possible. That is my overreaching principle whenever I talk to adjusters, whenever I talk to teach to appraisers, we want to figure out what is the fair claim measure as quickly as possible. And I, my clients, I see, let's get out there, let's do a fair assessment of the damage, let's figure out the reasonable cost, let's work with the contractor to identify a fair scope and the fair damage. We're gonna have disputes and disagreements, let's try to resolve those. I know this is very utopic in saying this, but we need to have an open mind and work cooperatively. We should not, on your side, figure out how I can extract every last dollar out of those assholes because they're rich insurance companies. That's not the right attitude. Nor should my clients have the attitude of paying as little as possible uh simply because they want to make extra money. That's um my clients don't do that. I don't see that. My my clients measure a claim, they pay it fully and fairly. Now, there's this area of legitimate dispute, right? There is this big area of legitimate dispute, and we need to work cooperatively to bring those disputes to resolution. But outside that area of legitimate dispute is the bad conduct. And there's some on my side, I get it, and there is some on the other side. Those are the times where if an insurance company on my side does it wrong, someone's gonna go after them. But if someone does it wrong on this side, this is why I'm having so much fun, because I'm going after them also. That's just the way it should be. Uh when the when the people on the edges do bad stuff, they should all be held accountable.

SPEAKER_01

I agree. Would you agree that doesn't pushing for the maximum covered scope benefit the homeowner in the most cases?

SPEAKER_00

If it's legitimately uh damaged and owed scope, absolutely it does. And then and my client should pay that. Uh but uh what drives me crazy is when I hear PAs advertise, I'm going to maximize your claim. And what does that mean? You know, maximizing the claim.

SPEAKER_01

We'll discuss that with the PA. We'll save that for a later. Um Rapid Fire, I have four questions. I think it's four, and then uh we'll take a break after. Okay. What percent of claims do you believe are fraudulent?

SPEAKER_00

Very few. One percent or less. One percent or less. Very few. There's true fraudulent claims where someone says I'm going to intentionally rip off the insurance company, less than one percent. Yeah. I don't believe there's that many. Uh again, I'm talking about the fringes. Sure. Yeah. Uh I only see the claims where there is a legit uh dispute. I will put most of those into this bucket. In the last 15 years since I entered this hail world, remember I used to be a a subrogation attorney for 20 years before this. Uh, in the 15 years I've entered the hail world, I have only sued people twice for fraud. And I've handled thousands of claims. Uh but when I see real fraud, uh I'm not going to hesitate to sue someone for it, and I've seen it twice. That's a very small percentage. What percent of denials do you believe are wrong? Yeah. Well, wrong. Okay, wrong versus fraud. Okay? So two different issues. Uh a fraudulent denial, I believe, is virtually nil. I don't believe insurance companies sit down and say we intentionally are denying this claim even though it's covered. That would be fraud, right? That would be a decision to deny a covered claim. Insurance companies don't do that. Now, we'll see if I'm wrong about State Farm in Oklahoma. I don't think I am. I don't think that's what they did, but time will tell. So then you said what but your actual word was wrong, right? What decisions are wrong? Insurance companies make wrong decisions sometimes. Absolutely they do. Sure. Yeah. They've got someone who maybe was having a bad day and didn't look properly, or an inexperienced adjuster. Sure. Insurance companies can make wrong decisions. Those are within this area of resolving disputes. Are you going to quote me on that?

SPEAKER_01

No, no, no, no. I'm going to like with that, I want to hear your opinion on this. So this is aerial view. So you have like lots of homes everywhere, right? Like, and then because now with the AI, with all the tools we have, so this is all homes. So let's say hail goes through one mile, right? Destroys everything. And then if you look at the top, you'll see approved, approved, denied, denied, denied, approved, approved, approved, denied, and then you see that most claims are denied, let's say all state. Right? Like you'll see like on the same street, you know, you have state farm and state farm, next houses together, one approved, one denied. You're telling me that insurance companies don't deny intentionally. How do you explain legit damage where hundreds of homes being approved, hundreds are denied, but w we see the pattern. How do you explain logically how two houses next to each other, one can have a damage, like no nobody argues with it, and the next one is being denied. But you're saying, like, oh, they don't do it intentionally. If it's not intentionally, w like what gives?

SPEAKER_00

So what gives, I think, let's take out who the insurance company is, and let's just look at those hundred homes in a vacuum. You and I both know that some of those are going to be newer roofs, some are going to be older, some have been maintained if there's a maintenance factor, some have not been. There's going to be different reasons why some roofs are damaged and others are not. I agree as a general principle that if the same severity hailstorm hit all the roofs, then we're thinking, okay, most of those are probably down.

SPEAKER_01

When you see like three-inch hail, we've seen the cleavage come through.

SPEAKER_00

I admit it earlier, Dimitri, okay, I get it. Uh so I but I've got to qualify first saying there are legitimate reasons why some roofs behave differently than others in a hailstorm. That that is a given. Now, taking that factor out of it, you then said, and as you go over these roofs, all of insurance company A, B, C, and D's roofs are bought. Insurance company E's roofs are all denied within this same region. And you can color code them and see that. All right. Um Steve Badger speaking candidly and honestly here, I would say that is an issue that someone should look at.

unknown

I agree.

SPEAKER_01

Yeah. Uh two more questions, I believe. Should insurance companies ever be punished for systematic underpayment the same way contractors are for fraud?

SPEAKER_00

Um again, uh the assumption in your statement that an insurance company has engaged in an intentional, systematic underpayment, that they did their underpaying claims intentionally less than the covered reasonable cost of repair. Accepting everything you said is true, of course they should. Okay. If that happens, of course they should. Uh but again, I don't I I have to reject that premise as something that goes on on a regular basis in the market. I also reject the premise that contractors are systemically being targeted for fraud. I'm only targeting contractors who fabricate damage, make up invoices, uh, or try to rip off my clients. I'm not targeting contractors who maybe charge a little too much, uh more than they should, get aggressive, are a little more uh apt to think something's damage as opposed to that. As long as we're in these these goalposts of reasonable disagreement, we all live there and we work things out.

SPEAKER_01

Got it. Last question. If you were a homeowner in California or Florida, would he trust the insurance system as it stands today?

SPEAKER_00

I would. I absolutely would, Dimitri. The vast majority of claims are resolved fairly and promptly. Absolutely.

SPEAKER_01

But we're in California, there's in Florida, it's very hard to get insurance.

SPEAKER_00

Florida, but the market is improving in Florida. In the past two years, since their changes three to four years ago, the law changed, and now insurance premiums are going down. That that cannot be disputed. Companies are coming back into the marketplace, citizens is depopulating. Things have happened now in c in uh Florida to improve the marketplace. In Texas, we have a fairly stable market now because of the changes we enacted in 2015 and 2017 to the law to root out some of the systemic abuses. So we're all in Texas now equally unhappy with the law. There's things I don't like, there's things the PAs and policyholders don't like. So we have a good marketplace in Texas now. California is on the verge of a problem. And the California problem is not just the fact that they had wildfires that caused billions in damage. No question. The insurance industry in California was set up to handle and could handle that exposure that happened. But two things arose from that now. Number one, the risk of additional wildfires. Can we continue to absorb that cost? That is a concern. The other issue now. And this is another example of uh the abuses driving the narrative are ass claims. Ash, soot, and smoke. Ass claims are becoming the new mold. Even though you weren't damaging the fire and you're two miles away from the fire, you can go buy a$39 smoke map showing where the smoke cloud went and it went over your house, so now you can argue that everything in your house has ash, soot, and smoke in it, and the insurance company has to tear everything down because of carcinogenic concerns. That is the issue that is now driving the concerns in California. Are there some claims that are legitimately uh legitimately filed that do have an ash, soot, and smoke exposure? Sure they do. But I can give you lots of examples and recent court opinions of ones that are not legitimate. And so this new ash, soot, and smoke world is gonna be the next mold. That is what's driving the concern in California right now. Uh Chip Merlin and I have talked about this issue. Um April and her husband are big on this. There's a lot of discussion, and I keep telling them this is the new mold. You can have fun with it now, but what's gonna happen if you keep pushing these is in two years from now, all every policy is gonna have a$10,000 sublimit for ash, soot, and smoke, just like we have a$10,000 sublimit for mold. And don't blame us. Blame all the people in California who overreached on these claims, and the insurance company just reacted and sublimited ass claims. And that's just what we do.

SPEAKER_01

Got it. And that's wrap for this episode. Comment below what you think, and I'll see you in the next one. Thank you.