Co-ordinated effort limited contractor fraud following 2013’s F-5 tornado in Oklahoma

Unprecedented planning and co-ordinated efforts by state and local authorities, law enforcement and the insurance industry provided the means to protect the public from fly-by-night contractors, suggests the National Insurance Crime Bureau (NICB).

“Preparation in advance of the F-5 tornado that devastated the City of Moore and surrounding areas in May 2013 resulted in a well-co-ordinated effort to ensure that roofers and other contractors who swarmed into the area in the hours and days after the storm were properly licensed, insured and authorized to work in the area,” notes a statement Monday from NICB, a not-for-profit organization dedicated to preventing and detecting insurance fraud and vehicle theft through data analytics, investigations, training, legislative advocacy and public awareness.

Local police assisted the Oklahoma Insurance Department Fraud Unit in patrolling the area and keeping suspected fraudulent out-of-state contractors from doing work unless all protocols were followed, the NICB statement notes. “Thanks to the planning efforts, the number of suspected fraud cases has been far less than expected in the aftermath of such a devastating storm,” it adds.

NICB released a video, Limited Insurance Fraud Following 2013 Moore Tornado, updating what has happened since the tornado occurred.

“It’s much easier to fight fraud on the front-end rather than on the back end,” John Doak, Oklahoma Insurance commissioner, told NICB during the recent 2016 National Tornado Summit in Oklahoma City.

Although the co-ordinated approach is touted as a national model for protecting the public in the aftermath of a natural disaster, the NICB reports that contractor and roofing fraud is, nonetheless, still showing up.

Some homeowners who signed contracts or turned over money to contractors before the work was done have found themselves out of luck after the insurance claim money was taken by the contractor, NICB notes. Doak reported at the summit that “insurers have begun issuing bank debit cards to policyholders in an effort to provide funds as soon as possible, while at the same time allowing the victims to avoid turning over their claims check to a possible scam artist,” the statement adds.

Even with suspected fraud cases being less than expected, almost three years later, the Oklahoma Attorney General’s Office is seeing a disturbing trend. “At this point and time, it is local contractors,” says Julie Bays, chief of the office’s Consumer Protection Unit.

“Contractors who have set up shop here or out-of-state contractors who have established a local office, have told homeowners who have already paid out funds that the work is going to get done, but it never gets done,” Bays reports, adding that many homeowners are now finding they have liens filed on their property by subcontractors who may have purchased supplies or done some repair work, but were never paid by the general contractors.

As the spring tornado season arrives, NICB offers a number of tips in the event that damage occurs. These include the following:

• get more than one estimate;
• never let a contractor interpret the insurance policy language;
• get everything in writing, including cost, work to be done, time schedules, guarantees, payment schedules and other expectations;
• demand references and check them out;
• never sign a contract with blanks to avoid unacceptable terms being added later; and
• never pay a contractor in full or sign a certificate of completion until the work is finished and has been verified as meeting code requirements.

In early 2014, the Insurance Information Institute reported that, overall, tornadoes in Oklahoma caused US$2 billion in insured claims payouts in May 2013. These represented the highest costs for natural disaster-related insurance payouts in 2013, the instituted noted at the time.

Outside of Oklahoma, insured natural disaster-caused insurance claims payouts in 2013 were highest in Texas (US$1.51 billion), Colorado (US$907 million), Minnesota (US$845 million) and Nebraska (US$773 million), the institute added.

Related: Tornadoes in Oklahoma caused $2 billion in insured claims payouts last May

Last spring, following a deadly tornado in Illinois, the Federal Alliance for Safe Homes (FLASH) reiterated the need to be better-prepared by changing the construction philosophy in tornado zones. The group has called for adopting devastation prevention measures and the groundbreaking construction philosophy that emerged after the catastrophic Tuscaloosa, Joplin and Moore tornado outbreaks.

Guidelines developed to estimate tornado-induced loads “will provide reasonable targets for designers to use in their future work. Homes built to these newer, research-informed guidelines will have the advantage of better wall bracing, improved roof tie-downs and overall stronger connections,” notes a group statement.

Related: U.S. consumer advocate calls for devastation prevention measures in tornado zones