Your Legal Questions Answered

Your Liability Under the Contract

If you've hired a contractor to reshingle your roof based on an insurance claim for hail damage, and the contractor is now billing your insurance double the amount of the signed contract, you're in a complex situation. First, it's important to note that you are generally responsible for the cost of the work as per the contract you signed, regardless of what the insurance company pays. If the insurance company doesn't cover the full amount, you would typically be liable for the remaining balance. Having said that, your liability to the roofer is what you contacted for. We would have to review your contact to determine your actual liability for the overage to the roofer. So, the specific language of your contract with the roofer is key in this situation.

Appraisal Demand

The contractor sending an "Appraisal Demand" letter to your insurance sounds like they are invoking a formal appraisal process to resolve the dispute over the claim amount. This is usually a step taken when negotiations between the contractor and the insurance company have stalled.

Most insurance policies include an appraisal provision. Appraisal is either one party or two party. One party means that if there is a disagreement, either party may unilaterally demand appraisal. Two party means that both must agree to and appraisal. Appraisal is an agreement to submit the coverage dispute to appraisers and an umpire to make a binding determination on the amount of coverage benefits owed. Ordinarily you end up with the umpire splitting the amount owed.

It is likely that the roofer may look to you for the amount the carrier does not pay. Even if the appraisers and umpire reduces the roofer's fee, you can still sue the insurance carrier.

We have similar cases ongoing right now. Review the Insurance Bad Faith information below for more information.

Lien Rights

Regarding the clause that states the "property is security on the contract," this likely means that the contractor has the right to place a mechanic's lien on your property if you fail to pay for the services rendered. Since you own your home, a mechanic's lien could be enforced through a foreclosure action to forcibly sell your house and satisfy the debt if you don't pay the amount due.

I would point out that even without the phrase that the "property is security for the contract," contractors generally have lien rights. Under Colorado Revised Statutes Title 38, Article 22, a contractor has the right to file a mechanic's lien to secure payment for labor, services, or materials provided in the improvement of real property. Specifically, according to C.R.S. 38-22-101, those who furnish labor, materials, or other services for the construction or improvement of any building have a lien upon the property for the value of the labor or materials provided. This lien attaches to the property itself, essentially making the property collateral against the unpaid debt.

Thus, if you did not want the roofer to have this right, you would specifically need to specify that in the contract. Deleting the phrase is not enough. It sounds like the contract was already signed so this option does not appear available to you.

Insurance Bad Faith

Finally I would point out if your contractor's claim to the insurance carrier is proper you may have a right to force the insurance carrier to pay the claim. This is called an insurance bad faith claim. In Colorado, insurance bad faith refers to an insurance company's failure to fulfill its obligations to you, the policyholder, in a reasonable manner. This could manifest in various ways, such as unreasonably denying or delaying your claim, failing to investigate properly, or misrepresenting policy terms. Or, as I mentioned above, not paying the entire claim from the roofer if it is reasonable.

Colorado law allows you to recover not only the benefits wrongly withheld but also double the damages and get reimbursed for attorney fees and other costs. The law is designed to hold insurance companies accountable and to ensure they act in good faith when processing claims.

Understanding your insurance contract is crucial, as both you and your insurer have specific obligations. For example, you must provide timely notice of a claim, while the insurer must investigate your claims and cover the cost of eligible damages. Failure to adhere to these duties could result in a breach of contract or even a bad faith claim. Insurance companies sometimes employ tactics like misrepresenting policy language, causing unacceptable delays, or underpaying on claims to avoid fulfilling their obligations. See our legal guide "Understanding Insurance Bad Faith: A Comprehensive Guide for Colorado Policyholders" for more information. If you would like to speak to one of our attorneys please contact us by phone or chat. Based on the facts provided please ask for Attorney Jon Topolewski who handles our insurance bad faith cases. If it turns out you need a bad contractor attorney we can set you up with a conversation with one of our real estate litigators. For more information on dealing with bad contracts, check out our legal guide "How to Deal With a Bad Contractor."