Owners intent on rebuilding their shops and offices are cautioned to be wary of scams perpetrated by so-called building repair contractors.  While most contractors are reputable, there are others who take advantage of those needing repairs by using inferior materials, performing shoddy work not up to code or attempting to manipulate disaster victims into making claims for losses that did not occur, which is insurance fraud. 

Case in point is the current situation in Florida, where one in every five structures has been damaged.  The sunshine state has taken a real beating, becoming the first state to withstand a four-hurricane pounding in one season since Texas in 1886.  With two months remaining in the hurricane season and likely more storms on the way, it will be months before all the damage will be assessed by insurance estimators and turned over to qualified contractors to begin rebuilding.  Experts caution small business owners to follow some basic rules when proceeding with repair plans.

Insurance Fraud Becoming a Serious Felony With so many small business owners devastated by the recent hurricanes, it's hard for some not to be tempted to exaggerate or falsify claims. But the National Insurance Crime Bureau (NICB) warns policyholders to not allow contractors or others to talk them into filing fraudulent claims. For those found to be exaggerating a claim it could mean lost insurance coverage, legal bills and criminal prosecution. An estimated 15,000 insurance company claims adjustors from the U.S. and Canada are now in Florida to speed the claims settlement process. It's a good bet that investigators will get wind of some fraudulent schemes while they are sorting through all the paperwork. Depending on the type of scheme, insurance companies have special investigative units to delve into suspicious claims, says Jeanne Salvatore, vice president for consumer affairs for the New York City-based Insurance Information Institute. This non-profit, communications organization is sponsored by the property/casualty insurance business. Business owners should get in touch with their insurance company, keep track of the extent of their losses and specifically document what their losses are. They should also make some reasonable repairs to prevent additional damage. "In terms of claims, you're always better off starting to do that on your own," said Salvatore. "If for some other reason you want to hire a third party, look for somebody that's good and reputable. Check references, check with the Better Business Bureau and make sure that if you hire a third party that they have got a good reputation." If you suspect fraud, Salvatore says to contact the insurance company immediately. Most special investigation units are comprised of former law enforcement officers skilled in tracking databases that spot patterns and the methods used by scammers. On assessing the paper trail left by fraudsters, "there's no magic to it," added Frank Scaffidi, NICB's public affairs director. Often it's the little things that add up to be important clues such as the same address, phone number or contact information. "When you don't see all of the information it's a small piece and not much of an indicator," he said. "But when you assess a lot of them -- obviously that's a pretty good bet that something’s going on sideways." Scafidi says many people don't realize that engaging in fraudulent activity -- which can be described as submitting fraudulent claims on a top of legitimate claims -- are being prosecuted in many states for those kinds of violations. "They are putting themselves in for some serious jail time because insurance fraud is finally getting the attention from prosecuting authorities that it deserves," he said. "What used to be 'everybody does it' now is becoming a serious felony." Those who suspect fraudulent activities are urged to call 1-800-Tell-NICB.

Check those IDs at the door

Fiducial's Jim Rizzolo has his franchise office in Port St. Lucie, Fla., one of the areas hardest hit by Hurricane Jeanne last weekend with winds in excess of 120 miles per hour.  In the storm's aftermath, he urged owners to take a close look at those representing themselves as legitimate contractors to make them prove their case.

"Make sure the person is licensed and insured," said Rizzolo who is currently dealing with a damaged roof courtesy of Hurricane Frances.  "You can check their contractor's
license number on the Internet as well as their certificate of insurance.  I'm here with a contactor right now because I have to have a new roof."

Business owners now have to play the waiting game -- waiting for an insurance adjustor to appraise the damage and then waiting for the work to be performed.  Taking precautions for an oncoming storm always needs to be done but there are limitations.

"There's only so much you can do with your building," he said.  "Many structures have storm protection.  Plywood helps so there are not a lot of windows that get blown out.  But roofs do come off and water comes in that soaks into your sheetrock, your furniture, your interior walls and flooring."

The agency charged with investigating insurance fraud says there hasn't yet been a flood of these types of fraud cases since entrepreneurs usually want to get repairs made as soon as possible to reopen their businesses.

"People are more interested in getting their property fixed," said Nina Banister, press secretary for the Florida Department of Financial Services in Tallahassee.  "That's all they care about right now."

She advises residents with damaged homes and businesses to be patient and remember there are protections in place to help them.  This includes a 10% cap on fees that public adjustors can charge.

"You have 14 days to back out of a contract with a public adjustor if you've changed your mind," said Banister. 

Fraudsters face stiff fine, penalties

Penalties could be severe for those committing insurance fraud, industry watchers say. 

Public adjustors could lose their licenses to work in the insurance industry while adjustors, contractors and business owners involved in perpetrating these crimes face charges of insurance fraud and grand theft.  The degree of grand theft is based on the amount of money received from the crime.  First degree grand theft under Florida's statutory law is punishable by up to 30 years in prison and up to a $30,000 fine per count depending on the type of insurance.

With business owners intent on getting their offices structurally sound as quickly as they can, Banister reminds them that adjustors are working hard but thousands of people are looking to get this work done.

"Be wary of fly by night contractors, especially if they make promises that sound too good to be true like fixing some huge loss in a couple of weeks," she said.

State Farm Insurance, the state's largest insurer of homes and vehicles, estimates that there is $1.3 billion in claim payments from Hurricane Charley alone, the first hurricane this season to hit Florida.  State Farm spokesman Tom Haggerty, who works out of Winter Haven, Fla., says business owners should take preventive steps to protect their property.

"Board the windows and try to have a good inventory of all your possessions so in the event of extensive damage this can expedite the claim process," he said.  "If your property is damaged, as long as it is habitable make any temporary repairs such as on the roof to keep water from coming in.  Keep your receipts and make those repairs."

Haggerty says it's important for business owners not to jump the gun when it comes to hiring a contractor to repair the damage, no matter how gung-ho they are.

"Make sure you see a license [from the contractor] and don't let yourself be rushed into anything," he said.  "Like the old adage: if it sounds too good to be true it probably is."

The National Insurance Crime Bureau (NICB), a not-for-profit organization that partners with insurers and law enforcement agencies to facilitate the identification, detection and prosecution of insurance criminals, says that small business owners must maintain their vigilance after tragedies strike.

"A massive rebuilding effort is underway now and you have more than likely the bigger risk for contracting trades people who purport themselves to be licensed to do this work," said Frank Scafidi, public affairs director for NICB.  "That's what we're finding -- that's where the bulk of the fraud comes in."

Get everything in writing

Warning business owners about these scams, Scafidi reminds them to always get everything in writing such as the cost of the work, the time frame, guarantees, payment schedule and to ask for references.

"In a post-storm scenario the pressure is tremendous to get back on your feet," he said.  "But don't forget to ask for forms of identification like a driver's license."

NICB's investigators and analysts work hand in hand with special investigation units with the insurance companies to uncover any fraudulent activity.  There is literally an army of adjustors now in Florida trying to make a difference amid a massive rebuilding effort.

After Hurricane Andrew struck in 1992, Florida saw a toughening of its building codes.  One way to shave corners on costs is to skimp on the materials for the construction process.

"Most of these folks [fraudsters] if they can convince owners to ‘buy materials' then you will never see them again," Scafidi said.  He tells those seeking to rebuild to take a deep breath, really study the paperwork and check references.  "The bottom line is to follow your instincts," he said.  "If you think it's a little fishy, pass it by."

STEPHEN PAREZO is the Media Manager for Fiducial.