This is part of a three part series about Gustav's legal aftermath, including a discussion on (1) insurance disputes; (2) increased construction demand; and (3) the risk of fraud. Valuable lessons about post-disaster scams were learned by New Orleans residents post-Katrina. It's with first-hand knowledge and recent memory, therefore, that we echo an alert of the Louisiana Attorney General's office post-Katrina to victims of the Gustav hurricane: Beware of Scams. If you were affected by the recent storm, it is very important to remain cautious during these trying times. In the aftermath of Hurricane Katrina, thousands of New Orleans' residents were scammed for millions of dollars. Our New Orleans office has represented many of these individuals in lawsuits against their "contractors." Unfortunately, in nearly every case, the victims of this fraud experienced long delays in repairing their damages, unnecessary legal expenses and serious cash flow concerns as insurance money was spent for construction work not completed. In some cases, even with a judgment, finding and collecting from the illegitimate contractors is trying, slow and expensive. Why Getting Scammed Can Happen To You and Why You'll Be Faced with Tough Decisions If the price is too good to be true, it probably is. Victims of disasters are vulnerable to scams because of the attractiveness of low bids and problems with their insurance. From our experience, the hands-down number 1 reason why some New Orleans residents ended up with an illegitimate contractor, and a bad disaster recovery experience, was because of money. Go figure. The price quoted by an illegitimate contractor will always be cheaper than the price quoted by a more reputable outfit. After all, without a less expensive bid, it's impossible for a scamming contractor to compete with reputable outfit. An abnormally low bid, therefore, should be your first red flag that you might be getting scammed. Unfortunately, however, disaster victims are pressured by a number of factors to turn their heads from these "warning signs" and accept the low bidder for their project. The uninsured or under-insured victim One reason why low bids might be attractive and tempting to disaster victims is because they could be under-insured or uninsured. In this situation, a nice gentlemen with a low price, who seems to have good intentions, can be convincing. While financial times might be hard, and the low-bid offer might be tempting, a construction nightmare might be awaiting you if you fail to adequate investigate the contractor and take precautions before hiring. The insurance problem - Why even those with adequate insurance are vulnerable Many argue that we have a problem with the insurance industry here in America. Without weighing in on the debate, we will highlight some of the reasons why those with adequate insurance coverage and limits might still find themselves financially pressured to select an abnormally low price:
- Insurance is not immediate. Let's face it, before you get any money from your insurance company, you'll have to make your claim, wait for your adjuster, wait for the adjuster's estimate and then wait for the payment. The entire process can easily take sixty days. Victims find themselves unable to sustain the financial burdens of the wait.
- The first check from your insurance company is rarely enough. First, in the aftermath of a disaster it is common for construction costs to increase. It is not safe to assume that the insurance company's price lists will increase with the times. Further, many insurance policies will cover you for "Replacement Cost Value," but only pay its insureds the replacement costs after replacement! From our experience, with the inaccurate insurance price list and the payment of only the depreciated value of your losses, your first insurance check might only be 20-40% of your damages! Try paying a contractor $100,000.00 for work performed when you've only received $30,000.00 from insurance.