Originally published by Andrew G. McCabe on LinkedIn. Read the original on LinkedIn →
A contingency agreement standard to insurance restoration quietly transfers pricing authority, scope control, and payment rights from the contractor to the carrier. Most contractors sign it before they understand what it says.
This is not a hypothetical. A contractor client sent me their current customer agreement this week. The price line read: Insurance proceeds (revenue + supplements). That is not a price. It has no number and no floor.
A zero-dollar contract is a null contract. There is no consideration, no defined obligation, and no basis for enforcement. You signed a piece of paper, not a binding agreement.
The specific language at issue is worth reading in full:
“This Agreement is contingent upon insurance company price and approval. This does not obligate the Customer or Company in any way unless it is approved by Customer’s insurance company and accepted by Company. In situations where supplements for additional work are necessary outside of the original scope of work, Company will seek approval from insurance company and payment from owner. Customer’s out of pocket expense not to exceed deductible, plus any upgrades.”
Four sentences. Each one transfers authority the contractor should hold to a party with no duty to use it fairly.
The adjuster’s number becomes your number. Not because the law requires it. Because you agreed to it in writing.
The Carrier Is Now Setting Your Price
Ed Cross, restoration attorney and author of The Book on the Assignment of Benefits, has stated plainly that the insurance industry is legally required to adapt to what the restoration industry charges. It is not the other way around. Carriers must have an objectively reasonable justification for any denial or they face liability for bad faith.
That legal protection disappears the moment a contractor signs a contingency agreement accepting “insurance company price” as the contract amount. The right that the law otherwise protects is voluntarily surrendered in writing. The adjuster’s number becomes the project budget, not because any statute compels it, but because the contractor agreed to it before a single day of work began.
Cross has documented the downstream effect: when restorers allow insurers to make significant changes to prices and scopes, policyholders risk receiving something less than what the contractor’s professional judgment would call a full restoration to pre-loss condition. That consequence lands on the insured as directly as it lands on the contractor.
The Restoration Industry Association’s peer-reviewed Advocacy Position Statements address this directly. The RIA’s published position is that third parties, including carriers and their adjusters, cannot unilaterally dictate restoration procedures, scope, price, or billing. Absent a direct contractual relationship with the carrier, a restoration contractor has no legal obligation to an insurer, its adjuster, or any third-party consultant. A contingency contract built around carrier approval replaces that independence with voluntary submission.
The Supplement Clause Is a Trap
Read the supplement language again: “Company will seek approval from insurance company and payment from owner.”
For any work outside the original scope, the contractor agreed to seek carrier pre-approval before proceeding, then separately pursue the homeowner for payment. The carrier owes no duty of cooperation here. No timely response. No fair review. Granting them a veto over supplement scope gives them the power to kill additional work with no contractual consequence to themselves.
The next sentence contradicts the preceding one. The homeowner’s out-of-pocket is capped at the deductible plus upgrades. Those two provisions cannot coexist. If the carrier denies a supplement and the contractor turns to the homeowner, this document simultaneously says payment can and cannot be collected from them. Contract ambiguity resolves against the drafter in a dispute. The drafter is the contractor.
Ed Cross, in developing the RIA’s Pricing Position Statement on cost-of-doing-business denials, explained that valid adjustments to contractor invoices can only stand when they follow a system grounded in the written terms of the insurance policy itself. An adjuster who simply “doesn’t pay for that” has not made a lawful adjustment. But when your own contract required their approval to proceed, the leverage to challenge that denial is gone before the dispute begins.
No Direct Right to the Money
Without an Assignment of Benefits or an Assignment of Insurance Rights, the contractor has no independent legal standing to recover insurance proceeds. The carrier issues payment to the insured. The insured controls the funds. If they delay, go dark, or dispute the invoice, there is no direct legal path to the money intended to pay for the work.
Ed Cross puts it directly in his collections framework: “Securing payment for restoration work starts before the customer signs a contract.” The contract is where rights are either established or surrendered. A contingency agreement with no AOB and no defined price surrenders them completely.
The Insured Gets Hurt Too
This extends past the contractor’s bottom line. When a contractor agrees to work within whatever the carrier approves, the insured loses their most important advocate in the claims process. The carrier’s number becomes the project budget. If the adjuster underpays the scope, the restoration stops wherever the estimate stopped, regardless of what the property actually needs.
The insured paid premiums for full indemnification. What they receive is a repair calibrated to the adjuster’s line items, not the actual scope of the loss.
Cross has written that these dynamics force restorers to cut corners, encouraging unsafe and unprofitable projects that are not sustainable for carriers, property values, or the businesses doing the work. That is not coincidence. It is a structure. And a contingency contract built around carrier approval is how that structure gets agreed to in writing, before the first truck pulls up to the job.
What a Real Contract Does
A properly structured restoration contract names the contractor as the party who determines scope. The price must be defined, or at minimum subject to a mechanism controlled by the contractor and the insured rather than the carrier. An Assignment of Benefits or Assignment of Insurance Rights belongs in that document, giving the contractor direct legal standing to pursue payment independent of the insured’s cooperation.
The supplement process needs to be defined without requiring carrier pre-approval to proceed. Upgrade costs need to be separated from covered work with language that does not contradict itself. These are not obscure legal refinements. They are the basic structural requirements of a contract that actually protects the party doing the work.
The RIA and attorneys like Ed Cross have built entire bodies of work around giving restoration contractors exactly these tools. Those resources exist and are accessible. Using them is not complicated. But it starts with understanding what a bad contract actually costs, and the one quoted above costs the contractor everything before the job begins.
Your contract is either working for you or working for the carrier. There is no middle ground.
Andy McCabe is the founder of Claims Delegates and a licensed public adjuster (NPN 6228736). He has more than 25 years of restoration industry experience working alongside contractors to document their full scope of loss and advocate for what is owed under the policy. Claims Delegates provides Xactimate estimating and claim consulting services for restoration contractors nationwide.
If you would like us to work up a compliant contract that protects you and your client, head over to YourContractSucks.com.
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Claims Delegates provides Xactimate estimating, appraisal, and claim consulting for restoration contractors and policyholders nationwide.
