Who Decides the Skill Level and Cost of Labor Involved in a Claim?
Short Answer: The need for labor (in general) must be established by meeting the ‘necessary’ component of reasonable and necessary. The ‘market,’ however, sets the reasonable price (cost) for the labor regardless of who completes the task.
Discussion: Whether the adjuster believes unskilled labor is only required to remove the roofing materials (for example) is irrelevant. The market decides, for the specific tasks at issue, the going rate for the ‘task’ requested. If labor for a necessary task [removing the shingles for example] is required, the choice of who performs that labor is up to the contractor while the cost associated with the requested task is set by the market.
The reasonable or going rate in the market (all costs reasonably likely to be incurred by the policyholder) is not determined by the whims of the insurer. If, for example, the market determines the going rate for the job at issue includes paying a skilled labor rate to remove the damaged roofing, then that is a cost the policyholder is reasonably likely to incur. Neither the policyholder nor the insurer can dictate to the contractor what skill level of labor to utilize when effectuating the requested proper method of repair –such hubris would amount to the tail wagging the dog.
Practice Pointer:
It should not come as a surprise that component pricing, at the level practiced by adjusters and insurance carriers, does not accurately reflect how the real-world market functions. The market does not set prices based off a micro-level A la carte menu.
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