Deductibles & The Law
Can A Roofing Contractor Pay Your Deductible?
No, paying for deductibles, even partially, is illegal in Texas. There really should be no debate over this, yet there are far too many unethical contractors in this world who take part in this practice. Ask your insurance company and they will tell you the same.
Below are a few important facts to know before you do business with a company that offers to cover part or all of your deductible and sections from the state law proving it is illegal to do so. Please note, we offer no legal opinion or advice.
What Does An Insurance Contract Say About Deductibles?
There is a good deal of fine print in an insurance contract, but the basics are not hard to understand. You pay a monthly premium for coverage in exchange for protection against a big loss. Your insurance is not there for every small loss, so there is a deductible amount that must be exceeded before the insurance kicks in. This deductible always comes first.
If your deductible is $1,500.00 and you have a loss that is less than $1,500.00 your insurance owes you nothing. You would cover the first $1,500.00 of any loss. The same is true even if your home is pelted by large hail and the total loss is much greater. If you have a $12,000.00 loss, your insurance company would owe you $10,500.00 as the deductible amount. $1,500.00 would be paid by you. In fact, for any loss above $1,500.00 your part would always be the same, your deductible.
Shopping For A Better Roof Price Does Not Save A Deductible
Continuing with the above example, what if a roofer can do the job for $10,500.00 that your adjuster said would be around $12,000.00? Did you just find a way to save your deductible? No. Your deductible comes first. If your job cost you $10,500.00 then your insurance company would only owe you $9,000.00 - there is no financial reward for finding a lower price. The only way a deductible is saved is by turning in a false invoice that reflects the higher dollar amount, not what you actually paid. It is this false invoice where a bad contractor can get you in big trouble. Approximately one in three claims are internally audited by insurance companies. If a roofing contractor gains a reputation for this practice, all their invoices are highly scrutinized.
The very moment a contractor sends off a false invoice showing a higher dollar amount collected from homeowner / insured, then contractor has committed fraud.
If contractor provides an invoice (or receipt) to the homeowner / insured & they (not the contractor) then forwards it to their insurance company, both parties have now committed insurance fraud, however the homeowner has also committed wire fraud AND they are also committing collusion (conspiring to perform an illegal act).
Insurance Contract Language: Section I & Section II, Conditions:
Below is some of the actual language in a standard insurance contract. There are variations of this in every homeowner’s policy.
•2. Concealment or Fraud
- This policy is void as to you and any other insured, if you or any other insured under this policy has intentionally concealed or misrepresented any material fact or circumstance, made false statements, or committed fraud related to this insurance, whether before or after a loss.
•5. Cancellation
- (2) if this policy has been in effect 90 days or more, we may not cancel this policy unless:
Texas State Law Chapter 35 Insurance Fraud Section 35.02(7)(B)
BUSINESS & COMMERCE CODE
CHAPTER 27. FRAUD
§ 27.02. CERTAIN INSURANCE CLAIMS FOR EXCESSIVE CHARGES.
(a) A person who sells goods or services commits an offense if:
(1) the person advertises or promises to provide the good or service and to pay:
(A) all or part of any applicable insurance deductible; or
(B) a rebate in an amount equal to all or part of any applicable insurance deductible;
(2) the good or service is paid for by the consumer from proceeds of a property or casualty insurance policy; and
(3) the person knowingly charges an amount for the good or service that exceeds the usual and customary charge by the person for the good or service by an amount equal to or greater than all or part of the applicable insurance deductible paid by the person to an insurer on behalf of an insured or remitted to an insured by the person as a rebate.
(b) A person who is insured under a property or casualty insurance policy commits an offense if the person:
(1) submits a claim under the policy based on charges that are in violation of Subsection (a) of this section; or
(2) knowingly allows a claim in violation of Subsection (a) of this section to be submitted, unless the person promptly notifies the insurer of the excessive charges.
(c) An offense under this section is a Class A misdemeanor.
Added by Acts 1989, 71st Leg., ch. 898, § 1, eff. Sept. 1, 1989.
PENAL CODE CHAPTER 35. INSURANCE FRAUD
§ 35.02. INSURANCE FRAUD
(a) A person commits an offense if, with intent to defraud or deceive an insurer, the person, in support of a claim for payment under an insurance policy:
(1) prepares or causes to be prepared a statement that:
(A) the person knows contains false or misleading material information; and
(B) is presented to an insurer; or
(2) presents or causes to be presented to an insurer a statement that the person knows contains false or misleading material information.
(a-1) A person commits an offense if the person, with intent to defraud or deceive an insurer and in support of an application for an insurance policy:
(1) prepares or causes to be prepared a statement that:
(A) the person knows contains false or misleading material information; and
(B) is presented to an insurer; or
(2) presents or causes to be presented to an insurer a statement that the person knows contains false or misleading material information.
(b) A person commits an offense if, with intent to defraud or deceive an insurer, the person solicits, offers, pays, or receives a benefit in connection with the furnishing of goods or services for which a claim for payment is submitted under an insurance policy.
(c) An offense under Subsection (a) or (b) is:
(1) a Class C misdemeanor if the value of the claim is less than $50;
(2) a Class B misdemeanor if the value of the claim is $50 or more but less than $500;
(3) a Class A misdemeanor if the value of the claim is $500 or more but less than $1,500;
(4) a state jail felony if the value of the claim is $1,500 or more but less than $20,000;
(5) a felony of the third degree if the value of the claim is $20,000 or more but less than $100,000;
(6) a felony of the second degree if the value of the claim is $100,000 or more but less than $200,000; or
(7) a felony of the first degree if: (A) the value of the claim is $200,000 or more; or
(B) an act committed in connection with the commission of the offense places a person at risk of death or serious bodily injury.
(d) An offense under Subsection (a-1) is a state jail felony.
(e) The court shall order a defendant convicted of an offense under this section to pay restitution, including court costs and attorney’s fees, to an affected insurer.
(f) If conduct that constitutes an offense under this section also constitutes an offense under any other law, the actor may be prosecuted under this section, the other law, or both.
(g) For purposes of this section, if the actor proves by a preponderance of the evidence that a portion of the claim for payment under an insurance policy resulted from a valid loss, injury, expense, or service covered by the policy, the value of the claim is equal to the difference between the total claim amount and the amount of the valid portion of the claim.
(h) If it is shown on the trial of an offense under this section that the actor submitted a bill for goods or services in support of a claim for payment under an insurance policy to the insurer issuing the policy, a rebuttable presumption exists that the actor caused the claim for payment to be prepared or presented.
Added by Acts 1995, 74th Leg., ch. 621, § 1, eff. Sept. 1, 1995.
Amended by Acts 2003, 78th Leg., ch. 605, § 1, eff. Sept. 1, 2003.
Amended by: Acts 2005, 79th Leg., Ch. 1162, § 4, eff. September 1, 2005.