Insured Pocketing Claim Check - Is this LEGAL

Jan 14, 2016

  1. insurance1822
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    So I had an insured that just had a total roof loss & he has a slate roof. They carrier wrote a check for $45,000 to him & his mortgage company.

    He plans on putting on regular cheap 25 year shingles & pocketing the difference (which is like 25k in his pocket.) That's technically OK right? The 45k check he got from the insurance company was after holding depreciation. They'll reimburse extra once the work is done.

    But again, he can just keep the difference between cheap asphalt shingles & the payment he got right? Will the mortgage company care if he doesn't replace w/ slates?
     
  2. djs
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    djs Super Moderator Moderator

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    The mortgage company may or may not care. It it doesn't change the value of the house, they probably won't. If it does and he is over 80% LTV, they probably will.

    He also won't get the depreciation check. His total costs to rebuild are less then they already paid. He can downgrade but they won't cover the depreciation in that case.... or they will prorate it.

    Dan
     
    djs, Jan 14, 2016
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  3. insurance1822
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    But to be clear, if he got 45k and it's only 20k to put on asphalt shingles opposed to slate...he can pocket that difference?
     
  4. BlockO
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    as long as the 45K is legit and not inflated, and the mortgage company is ok with it, I don't see why not...

    would be about the same as if you were hit and your 20K vehicle was totaled, and you decided to replace with a vehicle only worth 10K.
     
    BlockO, Jan 14, 2016
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  5. HoosierLife
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    HoosierLife Want to write $20,000+ Guaranteed? bit.ly/learnfe

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    I used to work on the other side of this equation for a roofing contractor.

    People do this all the time. As was said, he won't get the depreciation.
     
  6. insurance1822
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    I assume the roofer's keep asking "what the insurance company is paying him" because they wanna get as much work as possible?

    One guy told him they won't give an estimate without seeing the claim info?
     
  7. HoosierLife
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    HoosierLife Want to write $20,000+ Guaranteed? bit.ly/learnfe

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    Oh yeah. We always did the work for what the insurance company paid minus he deductible.
     
  8. insurance1822
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    so if an insured says "I'm putting on asphalt shingles & pocketing the difference" are you going to deny the job? like what do the roofers can what the company paid if the person is saying "I want the cost to have a new shingle roof put on"
     
  9. GXR2
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    GXR2 Super Genius

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    Technically insurance is meant to put the person back the way they were before the loss. If they've calculated the indemnification based on a more expensive roof he had, than he should put that same type of roof back on. If he's trying to pocket the difference it becomes an ethics concern and maybe a type of insurance fraud. I wouldn't give him advice to do so because he could blame you that you said it was okay. In fact, now that he has said that to you he sounds a bit shifty. I would send him an email letting him know you're aware of his prior roof type and that you recommend he restore his roof to the like kind and quality it was before the loss and leave it at that. Keep the email in your file in case the situation comes back to bite you in the ass!
     
    GXR2, Jan 14, 2016
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  10. insurance1822
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    ^^^ I don't see how it could. They're required to pay him what it costs to replace the roof. I don't think he's required to actually replace the roof, they're just required to financially compensate him for what that would cost.
     
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