For Immediate Release - July 07, 2006

Attention North Shore Communities: Be Aware of Contractor and Insurance Scams

Attention North Shore Communities: Be Aware of Contractor and Insurance Scams

As residents continue to clean up after the devastating spring floods, homeowners in Essex, Middlesex and Suffolk counties are being urged to take important steps before hiring a contractor to protect their rights and guard against fraud. With the arrival of hurricane season and as residents continue to deal with flood damages, Massachusetts consumers also need to be alert for fake insurance scams.

"All homeowners; especially those whose property was damaged by the floods should be sure to check references and complaint histories first, then hire a registered contractor and obtain a signed contract," said state Consumer Affairs Director Janice S. Tatarka.

Tatarka added, "We need to raise the level of awareness because many people on the North Shore and other communities affected by the floods want to have their homes repaired quickly so they can return to normalcy, these contracts should not be entered into hastily. The small amount of extra time needed to follow our Nail Everything Down Before You Start checklist secures your rights if the project does not go as planned."

Many consumers are not aware that contractors installing roofs, siding, replacement windows, or doing exterior painting all must be registered as home improvement contractors with the state Board of Building Regulations and Standards. "Many of these jobs also require building permits and if the consumer obtains it instead of the contractor, they may not qualify for Guaranty Fund compensation if problems arise," Tatarka warned.

Last year, more than $1.9 million was awarded to homeowners in arbitration settlements with home improvement contractors and $685,000 was reimbursed through the state-administered Home Improvement Contractor Guaranty Fund. "These programs are back-stops for consumers if problems result, but the first line of defense must be a smart consumer offense." Tatarka recommended homeowners undertake all of the following steps to minimize contractor problems:

Nail Everything Down Before You Start

  1. Research at least three candidates:
    • Make sure a home improvement contractor is actively registered with the state. Call the Board of Building Regulations and Standards at (617) 727-3200 or look-up the contractor on the web at www.mass.gov/homeimprovement.
    • Referrals are helpful, but always ask for and check provided references.
    • Find out if a contractor has a complaint or judgment history. There are several resources to do this:
      • The Board of Building Regulations & Standards ("BBRS"), 617-727-3200, Option 4.
      • The Better Business Bureau (if the contractor is a member), 508-652-4800
      • The Office of the Attorney General, 617-727-8400
      • The Office of Consumer Affairs (to check judgment history), 888-283-3757
    • Never agree to unsolicited offers and be wary of pricing that seems too good to be true.
  2. Before you sign a contract:
    • Get a detailed, written estimate that includes price quotes for all special materials, installations and labor.
    • Ask for proof that your contractor carries insurance to cover your home improvement.
    • Make sure the contractor understands that he must apply for and obtain a building permit if one is required.
    • Review the contract carefully! It should include the contractor's registration number, a street address (not a P.O. Box), dates work is to begin and be substantially completed, the total amount agreed to be paid and a payment schedule, a list of specifications and materials to be used, provisions for changes or "extras".
    • State law requires contracts over $1,000 to be in writing, but the Office of Consumer Affairs recommends a written contract for any amount. If a contractor will not agree to a written contract, consumers should re-consider hiring the contractor.
    • State law prohibits contractors from collecting more than 1/3 of the total cost upfront, unless special materials must be ordered.
    • State law also allows consumers three business days to cancel a contract they enter into at a location other than the contractor's normal place of business.
  3. Disputes or Problems? Consumers' Options & Rights:
    • Arbitration: Consumer Affairs administers an arbitration program that is a cost-effective way to resolve disputes between homeowners and registered contractors. A professional, neutral arbitrator will hear the case and issue a legally binding decision, which may allow consumers to recoup some or all of their money from a contractor. An arbitration application must be filed within two years of the contract date/
    • Guaranty Fund: If a consumer wins a case in arbitration or in court and the contractor files for bankruptcy or fails to pay, the consumer can apply for relief from the Guaranty Fund for up to $10,000 of the actual losses. To access the fund, a consumer must prove that a reasonable legal effort has been made to collect the award or court judgment payment. A Guaranty Fund application must be filed within six months of the court or arbitration judgment. To qualify for arbitration and the Guaranty Fund, a homeowner must have a written contract with a registered contractor for home improvements to a pre-existing, owner-occupied, primary residence with no more than four units.

Consumers are encouraged to understand their rights and options under the Home Improvement Contractor Law (M.G.L. c. 142A) by consulting the information provided on the Office of Consumer Affairs website at www.mass.gov/homeimprovement or calling our Hotline staff at (888) 283-3757.

Consumers should be aware of these possible signs of insurance fraud:

  • Policies that cost significantly less than what other companies are charging for the same amount of insurance. If it seems too good to be true, it probably is.
  • The agent or company representative becomes evasive when asked about state insurance licenses.
  • The agent or company representative demands cash payment.
  • The agent or company representative describes a one-time offer or a last chance for special savings.
  • The company boasts that they will insure anyone, regardless of history or risk.
  • The agent or company representative requests detailed personal information, such as bank account information, that is not necessary for insurance purposes.

Consumers questioning the legitimacy of an insurance policy are encouraged to call the National Association of Insurance Commissioners (NAIC) at 1-866-470-NAIC, Insurance Fraud Hotline at

1-800-323-7283 or the Massachusetts Division of Insurance at 617-521-7794 or www.mass.gov/doi.