by David S. Jackson
Surviving a hurricane in South Louisiana can be harrowing enough, but avoiding contractor fraud can be just as detrimental as a Category 5. After a major natural disaster, criminals and con artists usually descend on vulnerable communities including the elderly, ethnic populations, and women.
According to Civil District Court Judge Nicole Sheppard, cases of contractor fraud will increase exponentially after a disaster of this magnitude.
“It’s highly likely that we will see contractor and owner disputes being filed in court as a result of Hurricane Ida,” said Sheppard.
New Orleans Attorney Lamont Hill said there are several things homeowners can do to protect themselves from contractor fraud.
The number one thing is to make sure that the contractor is actually a legitimate business.
“People should go to sos.la.gov to search the secretary of state website, to see if the entity is actually a licensed Louisiana business and has a service address locally,” said Hill. “If the person had just become a licensed business person in Texas during the months of September or October, and the address appears to be a home or a house other than an office building, that’s a major problem.”
Homeowners can also check the business status of a contractor by calling 225.765.2301 or visiting the website lslbc.louisiana.gov.
Claims and complaints filed against licensed contractors are also recorded on the website.
Using a local contractor is also a way to avoid future issues. If there is a dispute between the homeowner and the resident, the local authorities won’t have to extradite someone from a different state. A local contractor can easily be found by local sheriffs if a warrant needs to be served. Lawsuits can also be better filed locally if there is a dispute.
Hill said having a licensed and insured contractor is also another key to avoid scam artists.
“Make sure they are licensed and add you as an additional insurer under that policy,” said Hill. “Make sure they have worker’s compensation for their contractors. I would also get three written estimates. I would call the BBB (Better Business Bureau) to make sure there are no reviews against them, specific itemization off materials that will be used, and call and verify those references.”
There are several things that should cause a homeowner to suspect a contractor is fraudulent one of which is someone asking for large cash advances.
“After you verify that a person represents a legitimate business,” said Hill. “Try to have a schedule with the contractor. Do not give a major portion of the insurance proceeds to them. Divide the payment in fours and don’t make the second and third payment until the project is complete or substantially complete. I would not make a large down payment at first.”
Hill said homeowners should document everything from the beginning of the project to the end of the project. They should also keep the written contract with a corresponding schedule, and monitor which subcontractors are also on the job. Subcontractors are those businesses that may work in part for a large contracting business. As an example, a subcontractor may be used to do mold remediation, but not roof repair. If the main contractor does not pay the subcontractor for their services, the remediation crew could walk off the job and leave the home in a state of disrepair before the job can be completed.
“The homeowner should want to have all the information for the subcontractor,” said Hill. “I’ve had some cases where the general contractor, they may still have money, but then the job kind of falls apart.”
Hill said another huge red flag is if a contractor actually approaches or solicits the homeowner. Usually, homeowners will search for their contractor of choice. But if someone knocks on a homeowner’s door or calls them randomly, more than likely it is a scam.
“People and females over the age of 50 are usually the primary target,” said Hill. “It’s the sweet talking, pushing for a big down payment upfront person who walks up to your door that is usually problematic. If you have a contractor knocking on your front door, that is a huge red flag. And it’s a high pressure sale.”
Hill said, people should monitor quantities as well. If the contract states a certain price for materials and the contractor requests more money for materials, check on the prices of plywood, roofing shingles, and sheetrock yourself.
“The homeowner should really act like they are the project manager,” he added.
Many times insurance companies may include the insurance company on the check so that it will be placed into a trust account and disburse funds once the job is complete. But, the insurance company does not usually require three quotes. They will use any contractor that you approve, which puts more responsibility on the homeowner to make sure the company is reputable.
Homeowners should request three references and follow up on them. Hill said reading their reviews should also help you make the best possible decision.
Hill said insurance may also require certain things in order to receive payment instead of sending out a large check for damages. When your homeowners insurance pays your settlement, the check will probably be made out to both the homeowner and their mortgage servicer or lender. Most mortgage agreements require this in order to protect the lender’s interest. Typically, the mortgage company will release a portion of the settlement money before work begins so you can hire a contractor.
“Some insurance companies are going to want different things,” said Hill. “Photos and receipts should all be kept. It shows that you did the work. You should also make sure that the contractor has a permit from the city of New Orleans.”
One of the biggest fraud claims took place in the wake of Hurricane Katrina with the Terry Ferguson case in September 2009.
The Georgia man received 21 years in prison for defrauding more than eight different people out of more than a half million dollars. Because of his out of state residence, US Marshals were called to extradite him.
The majority of his victims were elderly Black women who lived in Gentilly and New Orleans East.
“It could be devastating. People could lose everything they had in their house from a natural disaster and then lose all of their money to replace their homes,” said Hill. “Sometimes they may lose the house in its entirety. Let’s say that you lose your roof, you have rain coming in you’re risking mold. Once it’s all compounded and if you are working class, and working poor. How will they get the money to actually repair the home if you’ve given away your insurance money to a fraudulent contractor? There are a lot of people who have credit challenges and that means the property can sit there and become dilapidated.
If you believe you have been a victim of hurricane-related fraud, contact the National Center for Disaster Fraud (NCDF) at 1-866-720-5721 or email it to firstname.lastname@example.org. You can also report suspicious email solicitations or fraudulent websites to the FBI’s Internet Crime Complaint Center at http://www.ic3.gov.