A Board Member wishes to submit our Insurance Company's estimate of damage to common area property (pool equipment building) as a claim. It is well understood that local contractors will complete the repairs for much less. The Insurance's monatary payment, less the actual repair costs, would be added to the HOA general account.
It could constitute fraud. But, the analysis would be fact specific. More facts would be needed to know for sure. I believe it is best to err on the side of caution when there is a question of a nefarious act. When you are engaged in the performance of a contract (an insured is a party to an insurance contract) you don't want to misrepresent facts to the detriment of the other contracting party. Plus, all parties to a contract have a duty to act in good faith.
You can look at the Department of Insurance's website for more information:
Also here's a number for a hotline:
The California Department of Insurance has a Consumer Hotline to serve the needs of the public. If you have any information regarding fraudulent insurance activity, you may call the Consumer Hotline at 800-927-HELP (4357).
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No, not necessarily. The answer would depend upon how the HOA's insurance policy works. If a claim has been made, and the insurance company is making payment to the HOA on the claim, the HOA ought to have discretion in hiring the contractor(s) who will actually do the work. If the HOA can get the work done for less money than the insurance payout, the HOA should be entitled to keep the difference in its general account.
Frank W. Chen is licensed to practice law in the State of California. The information presented here is general in nature and is not intended, nor should be construed, as legal advice. This posting does not create any attorney-client relationship with the author. For specific advice about your particular situation, consult your own attorney.
Generally the insurance company will do its own analysis of the reasonable cost of repairs. Just because a certain amount is included, does not mean that the insurance companywill pay that amount.
Any LEGITIMATE estimate can be submitted to the insurance company. If the estimate was inflated solely for the purpose of sending it to the insurance company, that would constitute fraud.
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