by Guest » Tue Jan 18, 2011 06:08 pm
We had a contractor estimate repairs in our home due to water damage and he dealt on our behalf with the insurance company. The insurance company has cut us a check, but we no longer want to use this contractor for many reasons. We signed a mutual consent stating that we would use him for the repairs or pay him 20% of the estimate if we went with someone else. What happens if the new estimate comes in lower than what the insurance company has sent us?
Posted: Tue Jan 18, 2011 08:05 pm Post Subject:
What happens if the new estimate comes in lower than what the insurance company has sent us?
If that happens, you'll have some money left over to pay the other contractor his 20%. The insurance company has already determined the value of your loss. If you can complete the repairs for less, so be it.
My question is, "Why would you obligate yourself to use a particular contractor, knowing that if you change your mind, he will take 20% of the contract price as liquidated damages?" I don't get it. A public adjuster could have negotiated the claim for 10%, and you could have done it on your own for 0%.
Posted: Wed Jan 19, 2011 12:28 am Post Subject:
My question is, "Why would you obligate yourself to use a particular contractor, knowing that if you change your mind, he will take 20% of the contract price as liquidated damages?" I don't get it. A public adjuster could have negotiated the claim for 10%, and you could have done it on your own for 0%.
I am not a contruction contractor but contract for collision repairs and the wording in my contract is as follows.
Recognition of Lost Opportunity and Right to Expectancy Damages
Customer recognizes and acknowledges that by undertaking this agreement to repair the Vehicle, Repair Facility will have lost the opportunity to accept other repair contracts and perform other repairs by designating personnel and dedicated resources to the preparation for and engagement of the repair of the Vehicle. Therefore, in the event Customer decides to breach this agreement, or is persuaded to breach this agreement by a third party (even one privileged to interfere with a contract between Customer and Repair Facility), Repair Facility shall be entitled to the full measure of the Repair Costs, including charges for towing and/or storage, expected to be paid in the performance of this agreement, together with interest accruing at the statutory rate from the date of the breach.
There is a tremendous amount of time in preparing estimates, drawing contracts, and arranging for parts logistics along with arranging a schedule for timely reparis. I have yet to have to use this clause in mine, but it keeps people from getting weak knee'd and losing their backbone when a third party is attempting to pursuade the contracted party to change contractors. Time is money and money is time.
Posted: Wed Jan 19, 2011 12:43 am Post Subject:
Mike . . . the provision you have posted is reasonable for a couple of reasons, not the least of which is the vehicle is also taking up valuable space at the body shop. But I also think, if push came to shove, that the entitlement to the "full measure of the Repair Costs" if they choose to take their job elsewhere is likely to be unenforceable in court. You could certainly obtain a judgment for storage fees, and any labor expended, but no contract is as iron-clad as this. And the client would have a lot of crow to eat in court at the hands of some judges for agreeing to a contract such as this in the first place.
For example, if an insurance company decided it would not pay for repairs performed at your shop (not that it happens much, if ever), what alternative does the vehicle owner have but to take the work somewhere else? The penalty in the provision seems too severe for that to be approved by a judge.
Posted: Wed Jan 19, 2011 01:01 am Post Subject:
There is good cause for having a clause like this in a contract. We have had insurers go to great lengths to attempt to move vehicles to a repair location of their choosing when it is not the vehicle owners choice to do so. Insurers can save money when they use their preferred shops that give them discounts and do not charge other prevailing rates for procedures and repairs. Some individual adjusters take this to the extreme to make their quotas under duress from their supervisors. Direct repair shops save insurers money because those shops agree to concessions in exchange for the steered work all to the benefit of the insurer and not necessarily the vehicle owner.
If an insurer forced a consumer to move a vehicle and it cost the vehicle owner money to break their contract of repairs, pay damages and storage accrued at the expense of the vehicle owner, their could be issues for the insurer if the vehicle owner desired to pursue them. When the vehicle owner presents the repair contract to the insurer and shows them the clause, we find they begin to relax their pressure on the vehicle owner to move the repair.
Posted: Wed Jan 19, 2011 01:28 am Post Subject:
we find they begin to relax their pressure on the vehicle owner to move the repair.
Then it serves its purpose well.
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