Following severe flooding in Eastern Kentucky and the Tennessee Valley, insurance brokers are being urged to advise their clients on how to avoid scams when hiring contractors for repairs and rebuilding. The National Insurance Crime Bureau (NICB) has issued a warning regarding fraudulent contractors who frequently target disaster-stricken areas, exploiting homeowners and businesses in urgent need of repairs.
The NICB is collaborating with local, state, and federal law enforcement agencies, as well as insurance carriers, to monitor recovery efforts and prevent fraud. As rebuilding efforts commence, brokers have been asked to remind clients to remain vigilant and to adhere to best practices when selecting contractors to avoid potential scams. The NICB issued a similar warning following destructive wildfires that ravaged parts of Southern California and anticipates a rise in fraudulent activities related to services such as debris and tree removal, home reconstruction, and smoke and ash cleanup.
Avoiding “Storm Chasers”
Fraudulent contractors, often referred to as “storm chasers,” travel to disaster-affected areas, posing as legitimate businesses. They capitalize on the chaos to secure contracts without proper licensing or the intention of completing the work. These contractors may offer services such as debris and tree removal, home construction, and even medical services. Clients should be advised to verify a contractor’s credentials, consult their insurance carrier before agreeing to any repairs, and be wary of common red flags.
David J. Glawe, president and CEO of NICB, emphasized the importance of due diligence. He noted that, while most contractors operate ethically, providing essential services, some disreputable individuals endeavor to exploit vulnerable property owners. Several factors make post-disaster scenarios ripe for contractor fraud:
- **Desperation for quick repairs** – homeowners eager to return to normalcy may concede to agreements without properly vetting contractors.
- **Influx of unlicensed contractors** – disaster areas attract contractors from outside regions, some lacking proper licensing or qualifications.
- **Overwhelmed local authorities** – the surge in repair needs can overwhelm local regulatory bodies, making it challenging to monitor and license all operating contractors effectively.
Signs of potential fraud include high-pressure sales tactics, unsolicited offers through door-to-door solicitation, phone calls, or online ads, and requests for immediate contract signing – especially when blank spaces exist in the contract. Demands for full upfront payment or signing an Assignment of Benefits agreement, which transfers insurance rights to the contractor, should also raise concerns.
Brokers are urged to encourage clients to obtain multiple quotes, check references, and confirm that any contractor they hire is licensed, insured, and in good standing with local regulatory agencies.
