New Law Bars Contractors From Advertising 'No Deductible" Home Repairs In Missouri

St. Louis, Mo., July 21, 2011 – A law signed last month by Missouri Gov. Jay Nixon could keep contractors from promising to pay, refund or discount a project by the amount of insurance deductibles if they do repair work for a customer, the Better Business Bureau (BBB) says.

Such promises often are made by unscrupulous contractors in the wake of a disaster, such as a tornado, flood or hailstorm. The BBB often receives complaints from homeowners who have signed over insurance checks to contractors who fail to complete the repairs.
 
Michelle L. Corey, BBB president and CEO, said the new bill should help consumers by eliminating misleading claims. It should help contractors by setting out rules for consumers who cancel contracts when insurance doesn’t cover the full cost of repairs.

 “While no one wants to pay more than necessary for repairs, consumers should be skeptical if a contractor offers to complete work for substantially less than their insurance company expects the job to cost,” Corey said. “A contractor who offers a low-ball bid may use shoddy materials or fail to complete the job to the customer’s satisfaction.”

The law, which passed the General Assembly as Senate Bill 101, prohibits contractors from advertising or promising to pay or rebate part or all of an insurance deductible as an inducement for a customer to buy goods or services from the contractor. They cannot offer a property owner or manager any compensation, gift, prize, bonus, coupon, credit, referral fee or other inducement connected with the contract.

Provisions of the law apply to roofers and other contractors who do exterior repairs, replacement, construction or reconstruction work.

The law also allows customers to cancel contracts within five days of receiving notice that their insurance company disallows all or part of the expenses as a covered loss. Contractors are required to notify customers that they have the right to cancel and provide a “notice of cancellation” form that customers may use to notify the contractor of cancellation.

Contractors must refund any deposits or other payments made within 10 days after the cancellation, unless they already have performed emergency repairs. Contractors are entitled to be paid for the emergency repairs.

The BBB has the following tips for hiring contractors:

• Seek at least three bids from prospective contractors based on the same specifications, materials and labor needed to complete the project. Homeowners should discuss bids in detail with each contractor and ask questions about variations in pricing. The lowest-priced contractor may not be the best. 
• Consumers should ask whether the company is insured against claims covering workers’ compensation, property damage and personal liability in case of accidents. Consumers should obtain the name of the insurance carrier and call to verify coverage. 
• Ask whether the contractor meets licensing and bonding requirements set by the state, county or city.
• Check with local authorities to find out whether permits are needed before proceeding with the work. The contractor also should be aware of any required permits. 
• Ask whether the contractor will provide a lien waiver upon completion of the job. A lien waiver is a statement by the contractor that all suppliers and subcontractors have been paid for their work.
• Read and understand the contract before signing. Get any verbal promises in writing. Include start and completion dates in the contract.
• Remember the rule of thirds. Pay one third at the start of the project, one third when work is 50 percent completed and one third after completion.