Restoration firms beware: Did clients authorize payment for your work?

A recent flood damage claim in B.C. speaks to the importance of getting in writing from clients exactly what restoration services have been authorized for payment, be it a repair or a full investigation into the cause of the water leak.

Restoration services firm Paul Davis Greater Vancouver recently lost its challenge in the B.C. Civil Rules Tribunal to have its clients pay a $4,364.10 invoice for “emergency mitigation work.” The firm claimed the money was owed for asbestos abatement and investigating a possible water leak from a perimeter drainage issue.

The clients, on the other hand — Jungho Kim, Jongyi Lee, and Saeyun Kim — lost their counter-claim against Paul Davis. The tribunal dismissed their claims that Paul Davis was negligent in repairing the water damage because the firm did not correctly identify the cause of the damage; also, no expert testimony was given to prove that the firm’s remediation efforts were not up to standards.

The dispute arose from water damage that occurred on Apr. 11, 2019. A week after the damage occurred, Saeyun, a lawyer representing Jungho and Jongyi (the tribunal referred to the clients by their first names), signed a work authorization and agreement for Paul Davis to conduct restoration and repairs at the property.

Paul Davis conducted an investigation and asbestos abatement work before advising the clients’ insurer, Gore Mutual Insurance Company, that it thought the leak resulted from a perimeter drainage issue. Gore ultimately denied coverage for the loss, noting the policy wording did not insure direct or indirect water damage caused by “continuous or repeated seepage or leakage of water.”

“Since Gore declined coverage, [Paul Davis] did no repairs or restoration work beyond limited water extraction,” Tribunal vice chairwoman Shelley Lopez wrote in her decision.

Paul Davis also advised Gore about a suspected second source of loss, namely failed caulking around an upstairs bathtub. Gore asked Paul Davis to investigate this cause, but the firm didn’t do any substantive investigation into this possible cause since, by that time, Jungho had hired a plumber to reapply caulking around the bathtub.

The clients contended that Paul Davis was negligent because it had failed to identify the bathtub as the only source of the leak. They said they had not authorized any of the remediation work done regarding the perimeter drainage.

“Saeyun argues that the authorization [form he signed] does not mention anything about a cause of loss investigation, which he says is inherently different from the task of repairing,” Lopez wrote. “I agree…

“There is nothing in the authorization [form] that mentions an investigation into the cause of loss, and so I find Saeyun did not authorize such an investigation, which I find included [Paul Davis’] asbestos abatement work. While [Paul Davis] may have done some admittedly limited water extraction work, its invoice provides no breakdown of that cost and the evidence shows the invoice is primarily for the investigation and abatement work.”

Elsewhere in the decision, Lopez suggests that the clients did in fact implicitly authorize an investigation into cause of loss. They just did not authorize any payment for it.

For example, in April, Paul Davis received an email from Gore saying that the insurer had “received ‘the signed nonwaiver letter back [from the clients]’ and that [Paul Davis] could ‘proceed looking for the cause of loss,’” as described in the tribunal decision.

Even so, the client failed to prove that Paul Davis’ work was negligent. Jungho’s plumber, for example, suggested that work be done on the exterior, suggesting that he thought the caulking may not have been the only source of water damage (as Jungho submitted before the tribunal).

“It is undisputed the home had asbestos,” Lopez wrote. “Further, Saeyun’s submissions make it clear he did not stop [Paul Davis] from tarping off parts of the basement with opaque plastic to deal with the asbestos issue….

“Since they authorized it, and given the absence of expert evidence about the investigation’s reasonableness, I find Jungho cannot succeed in his claim that the investigation was unauthorized or unreasonably done.”

Feature photo courtesy of iStock.ca/Cunaplus_M.Faba