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General Contractors should get O&P

How to get Contractor Overhead and Profit on an Insurance Claim

You completed the job but the insurance carrier doesn’t want to pay for overhead and profit (O&P). Contractors run into this issue all the time. So, how do you overcome it? Let’s start with the basics…

WHAT IS OVERHEAD AND PROFIT?
Overhead and profit are actually two different types of costs but they’re typically paired under the label O&P and stated as two separate numbers. 

  • Overhead costs are operating expenses for equipment and facilities.
  • Profit is the difference between the amount earned and the amount spent. It is what allows a general contractor to earn a living.

WHEN SHOULD YOU GET O&P? 
As a general contractor, you are owed general contractor’s O&P on all claims that a carrier determines a general contractor is needed to complete the job. 

That means, if it is reasonably expected that the homeowner should use a general contractor for the project, then O&P should be included on the scope of loss. 

HOW MUCH SHOULD YOU GET FOR O&P?
O&P is usually estimated at 20 percent of the total amount of the contractor’s estimate (10% to cover profit and 10% to cover overhead).

WHAT ARE SOME COMMON OBJECTIONS FROM ADJUSTERS?
You are probably already familiar with some of the excuses given by the insurance adjusters: 

  • “The job is not complex enough.”
  • “There are not enough trades to consider O&P.”
  • “We do not consider the roof a trade.” 
  • “We need subcontractor invoices.” 

There are ways to present your O&P case, but you’ll need documentation and in some cases, help from your homeowners.

HOW TO TALK TO ADJUSTERS AND HOMEOWNERS ABOUT O&P
In order to state your case effectively, you need to be comfortable talking to both your homeowner and the adjuster about why you are charging this fee. 

Very simply put: “Overhead and profit is placed on our estimate to help us stay in business. It covers office fees, travel fees, training, supervising and scheduling. It basically covers all of the items that are not listed on our Xactimate but that we have to do on every job.”

You can use obtaining a permit as an example: “You don’t see a line item for obtaining a permit on our scope, but someone from our office fills out the permit, emails or drives it in, posts it on the job site, and calls in for inspections. We should be compensated for this.” 

WHEN SHOULD YOU FIRST BRING UP O&P? 
Bring it up on your first meeting with the adjuster. When Elite is discussing the O&P after work is completed, most desk adjusters will look through the field adjusters notes to see if O&P was discussed during your adjuster meeting. We will have a higher success rate if you talk to the adjuster in the field and explain up front that you are a general contractor, you will be coordinating all of the repairs and therefore will be expecting O&P. 

The carrier usually will not pay it upfront, but if you had this conversation on-site then we have set our expectations upfront and we have a better chance of getting it on the back end!

Want to learn more about talking to adjusters about Overhead and Profit? Ask us about our coaching and consulting services.

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