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It's illegal for a contractor to offer to pay the property owner's insurance deductible as part of the deal in China

It has been suggested to me that it is illegal for a contractor to offer to pay the property owner's insurance deductible as part of the deal. I can think of no reason, legally or economically, that this would be problematic. I suppose there are opportunities for actionable misrepresentations but. . . what say the learned masses? Why would an insurer care who pays it?

Depending on how it is structured, it could be considered criminal fraud or theft by deception. It has been awhile since I actually read a broad form insurance policy, but I think it would violate the terms of the homeowner's policy and invalidate the claim. It is a common practice regardless, but I would never advise a client to participate and would advise them of the potential risks if they do.

I offers the following tips to property owners hiring contractors:

  • Beware of possible scams. Watch out for contractors in unmarked trucks or for companies requiring advance payment.  Don’t succumb to high-pressure techniques, such as notices that the price is good for one day only.
  • Try to verify the business’ true identity.  Get a business card and a physical location of the company.  It is always better to deal with well-established businesses in the area than those that come in from out of state and may not be around to honor warranties.
  • Ask for references.  Make sure the company that wants your business has satisfied customers.
  • Read contracts carefully and make sure you understand what you are signing. Watch for language that may require you to pay a fee if you decide to cancel.
  • Understand that when an insurance company issues a settlement check for damages, that payment is going to you, not to the contractor.  Just because you have been dealing with one company doesn’t mean you can’t decide to hire a different one if you are uneasy about the first.
  • Do not pay the full amount in advance of the work being completed.  A good rule of thumb is to pay one-third when the contract is signed, another third while the job is underway and the final third when you are satisfied with the completed job.

Owner and contractor relationship is subtle in China. Watch out when a contractor to offer to pay the property owner's insurance deductible as part of the deal. Consult a China construction lawyer before proceed with such action.

 

 
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