Following the severe flooding in Eastern Kentucky and the Tennessee Valley, brokers are urged to advise their clients to exercise caution when hiring contractors for repairs and rebuilding efforts.
The National Insurance Crime Bureau (NICB) has issued a warning about fraudulent contractors who often target disaster-stricken areas, taking advantage of homeowners and businesses in need of urgent repairs.
NICB said that it is working with local, state, and federal law enforcement agencies, as well as insurance carriers, to monitor recovery efforts and prevent fraud.
As the rebuilding process begins, brokers were asked to remind clients to be vigilant and follow best practices when selecting contractors to avoid potential scams.
The NICB raised a similar warning following the destructive wildfires that razed parts of Southern California. It has since anticipated a rise in fraudulent activities related to services such as debris and tree removal, home reconstruction, smoke and ash cleanup, and even medical services.
Fraudulent contractors, often referred to as "storm chasers," travel to disaster-stricken areas, posing as legitimate businesses. They exploit the chaos to secure contracts without proper licensing or intention to complete 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 cautious of common red flags.
David J. Glawe, president and CEO of NICB, emphasized the importance of due diligence, noting that while most contractors operate ethically and provide essential services, some bad actors seek to exploit vulnerable property owners.
Several factors make post-disaster scenarios ripe for contractor fraud:
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 contracts contain blank spaces.
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.
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