Do You Have to Use Your Insurer's Preferred Contractor in DC?

Short answer first, then the paperwork behind it. The District of Columbia Department of Insurance, Securities and Banking publishes a consumer guide for property owners. People search this question as an insurance preferred vendor program, or as whether they must use an insurer preferred contractor. The regulator's published answer is the place to start: a homeowner "may select a contractor suggested by the insurance company but he or she is not required to do so," and "The homeowner can choose any contractor to make the repairs."

Guidance is guidance, though, and the distinction matters if the question becomes contested. We also looked for a District statute or regulation granting a right to choose a contractor, or barring an insurance company from directing repair work to a particular firm. We did not locate one. What we read, and where, is set out below.

A preferred vendor program, sometimes called a managed repair program, is a commercial arrangement between an insurance company and a contractor. The contractor agrees to terms: a rate structure, a documentation format, a response window, a review process. In exchange it receives referrals. The regulator's guide describes the visible end of it, saying that "Many insurance companies will provide policyholders a list of contractors with whom the insurance company is familiar. The insurance company may even suggest a contractor."

Its terms sit between the two parties to it, and a property owner is not one of them. A program is also neither a credential nor a disqualification. Membership tells you that a contractor and an insurance company reached terms. On its own that says nothing about who is licensed to work in the District, who carries the right coverage, or who has opened a plaster wall in a hundred-year-old row house.

The word program covers a wide range in practice. On some claims the arrangement extends no further than a referral. On others the insurance company manages the repair end to end and the contractor works to a scope the company's estimator wrote. Which version you are looking at is a fair thing to ask in writing.

Two documents govern a restoration job, and confusing them is where most of this goes wrong. The policy is a contract between you and your insurance company. The work agreement is a contract between you and whichever contractor you hire. The guide puts the second one flatly, and the word always is the regulator's: "In either case, the contract for the work will always be between the homeowner and the contractor."

The same guide draws out what follows. The homeowner selects the contractor, signs the contract and manages the work. On money, the company is "not responsible for making the repairs, only providing the funds needed to make the repairs," and the guide states its legal obligation as paying the homeowner enough to restore the home to its pre-loss condition. The guide is blunter still about supervision: the insurance company "has no responsibility for providing oversight of the contractor or the work."

Emergency work does not change that, and who pays whom is set out in who pays the restoration company on a District loss. An authorization signed at two in the morning is still your agreement, worth reading before you sign and worth keeping. The guide notes that an adjuster will sometimes call in contractors to secure a property and limit further loss, then adds that "Even in these cases the contractor will have the homeowner sign the authorization for the work and agree to pay the contractor."

Not one that we could locate, and saying so plainly is more useful than implying otherwise. What we searched for was the kind of provision sometimes called an anti-steering rule, meaning one that bars an insurance company from requiring an insured to use a named repair firm. We did not find one in the District. What the District has instead is published regulator guidance, which answers the practical question without creating a right.

Here is exactly how we looked. We read the section list of the District's unfair insurance trade practices chapter, Chapter 22A of Title 31 of the D.C. Code. It runs to twenty-six sections, and no section title names repair work, contractor selection or a vendor list. We then read the full text of the four nearest by title: its claim settlement section, its boycott-and-coercion section, its favored-agent section, and its unfair discrimination section for property and casualty insurance. None of the four decides who repairs a building. They govern claim handling; concerted acts that restrain the business of insurance; lenders and the insurance a borrower buys; and premiums and rating. We finished with the regulator's published pages of insurance laws and consumer guides, where the right-of-choice sentence turned up.

The District's municipal regulations for insurance sit in a viewer that returns nothing to an automated request, and the mirror we tried was down, so we did not read them end to end and this post cites none of them. A sentence in a consumer guide is the regulator telling residents how the relationship works, and it is reasonable to quote back in writing. It is not the same instrument as a statute a court would apply.

The guide gives the question its own heading, asking whether insurance companies have their own contractors. Then it repeats the line quoted at the top of this post: a homeowner "may select a contractor suggested by the insurance company but he or she is not required to do so."

It then does something unusual for a consumer page, which is to argue the other side. It sets out a practical advantage of hiring from the list, worth reading even though it cuts against any contractor's interest. Many repairs turn up something nobody could see on day one, and a change may require an adjustment to the payout. A contractor the company has worked with before is likely to get that change approved with minimum delay, the guide reasons, while an unfamiliar one may prompt a site visit. Its summary line is that homeowners "can always select their own contractor but it's usually better to select a contractor that has a working relationship with the insurance company."

The guide's checklist is where the screening questions are, and none is about a list. Check that the contractor is licensed in the District, through the District's licensing and consumer protection agency. Check for liability and workers compensation coverage, and ask for a Certificate of Insurance. Check the permits. The guide also says the adjuster prepares an itemized scope of loss, and that the homeowner "should ensure that the contractor uses the scope of loss as the work plan for repairing the damage."

D.C. Code § 31-2231.17 is the section people reach for on a claim dispute. It sets out two lists of conduct. The threshold in its opening words is part of the rule rather than a footnote, so the section describes a pattern of business conduct rather than one decision on one claim. Both lists open the same way: "No person shall commit or perform with such frequency as to indicate a general business practice any of the following."

What the section does not contain matters just as much. Read end to end, it has no provision about repair work, no provision about a contractor list, and none requiring or forbidding a particular firm. The conduct it names is claim handling conduct. Two entries give the flavor: refusing to pay a claim "for a reason that is arbitrary or capricious based on all available information," and failing "promptly upon request to provide a reasonable explanation of the basis for a denial of a claim."

So this statute is not a contractor choice provision, and presenting it as one would not survive scrutiny from the other side of a file. Its relevance here is narrower and real. If you have asked in writing for a reasonable explanation of the basis for a denial of your claim and nothing has come back, that is the conduct subsection (a)(6) names, and only where it is done with the frequency the section requires. The District's insurance regulator accepts consumer complaints. How long the earlier steps take is covered in the District water damage claim timeline.

A referral list decides who might do the work. A review arrangement decides who gets an opinion about the scope and the price after it is written. Third-party administrators and outside estimate reviewers are ordinary parts of how property claims get processed, and describing what one does is not an accusation about motives.

The Restoration Industry Association, the trade body for this industry, published a series of position statements on precisely this point. Its first statement says that "third parties cannot unilaterally dictate restoration procedures, scope, price, or billing," while a qualified third party engaged to do so may offer opinions about those things. It adds that "Absent a direct contract with an insurer, restoration contractors are under no legal obligation to an insurer, its adjuster, or a third party," and that a consultant's opinions "are not binding on the restorer."

Read that for what it is: a trade association's position rather than a law, binding nobody. What it explains is the structure. Where a contractor has a contract with an insurance company, it has agreed to that company's terms, which is what a program membership is. Without such a contract, the relationship runs through the property owner instead. The estimate line most often argued over is the coordination line, covered on its own in overhead and profit on a District insurance estimate.

Asking is not arguing, and a written question costs nothing but the time to send it. What follows is questions and documents rather than a letter to copy, because drafting your letter would cross the line described below.

The boundary here is statutory rather than a matter of preference, and it turns on first party claims, meaning a claim on your own property under your own policy. Section 31-1631.02(5)(A) defines a public insurance adjuster to include a person who acts for compensation or any other thing of value. The definition reaches one who acts or aids on behalf of an insured individual "in negotiating for, or effecting the settlement of, a claim for loss or damage covered by an insurance contract."

Section 31-1631.03 provides that "No person shall, directly or indirectly, act as a public insurance adjuster without first procuring a license from the Commissioner to act as a public insurance adjuster."

Restoration Doctor is a restoration contractor, and nothing in this post is legal advice or insurance advice. Those provisions are why this post quotes rules and documents and then stops. A restoration contractor can scope the work, price it, record what was done and hand the file over. Without that license it cannot negotiate or settle your claim. Reading your policy for you is not something we do either, whatever the licensing line permits: what it covers and what it asks of you are questions for you, for your agent, for a licensed public adjuster, or for an attorney. What a District contractor may and may not do on a claim is set out at length in what a DC restoration contractor cannot do.

This post makes no prediction and no recommendation about which contractor to hire, and it does not say that any insurance company requires a firm from its list or may not ask.

Every quotation above comes from a document anyone can open, including the consumer guide that is guidance rather than law and the association statement that is a trade position.

Sources referenced in this article: