Liberty, Liberty, Li-ber-ty

Last night, the Florida Association of Public Insurance Adjusters (FAPIA) threw a costume party that was a hit! My partner, the stunning Donice Krueger, and I dressed up as Doug and Limu the Emu from Liberty Mutual’s commercials. Speaking of Liberty Mutual, let’s segue into something a bit more serious—a recent case where the insurer found out the hard way that RICO claims aren’t a walk in the park.1

Civil Racketeering cases under the RICO Act are notoriously complex to win. Liberty Mutual recently learned this lesson when a judge dismissed parts of their RICO case against a restoration contractor. Think of a RICO claim like a puzzle—each piece must fit perfectly, showing a pattern of wrongdoing and proving direct harm. Otherwise, your claim may just fall apart, as Liberty Mutual found out. Here are some of the facts alleged:

Beginning in January 2016 through at least the date of the filing of the First Amended Complaint, Defendants have engaged in a scheme ‘to create overinflated and fraudulent charges’ associated with Aftermath’s remediation services, which are then passed on to Plaintiff and its insureds, family members, and their estates. Plaintiff’s policies provide coverage ‘for accurate, reasonable, and necessary charges’ for remediation services performed in insured homes. As such, Plaintiff regularly works with ‘service vendors[ ] and contractors,’ including Aftermath, and ‘receives and pays bills and invoices for [remediation] services completed in’ insured homes. 

Generally, either the remediation services provider or the homeowner puts Plaintiff on notice of the need for such services before any remediation work begins, but Defendants regularly delay giving notice of their work to Plaintiff, sometimes by several days, and almost always submit invoices only after remediation work has begun, Defendants also encourage homeowners to sign contracts to allow the work to commence quickly, by ‘inducement, false promises of full payment [for the work] by the home insurance carrier, and threats of harm to the home should the contracting party not allow Defendants to complete the work.’ In some cases, homeowners refuse to allow Defendants to begin work without Plaintiff’s approval, but Defendants ignore homeowners’ refusal and Plaintiff’s lack of approval and begin their work anyway. Defendants also force homeowners to leave their homes while work is being completed, resulting in them being unable to verify what work is or is not being done. This all ensures that Plaintiff is unable to conduct its own assessment of the damage or the necessity and reasonableness of any remediation services before Defendants begin work, which forces Plaintiff to rely on invoices and other documents provided by Defendants in reviewing and approving claims. As a consequence, Defendants are able to ‘perform [and charge for] excessive, unnecessary, and unwarranted demolition.’ 

Defendants also over-charge for equipment, supplies, and chemicals by, for example, inflating the cost of chemicals and other supplies, as compared to industry standard costs and even common retail prices, and double-billing for the use and cleaning of reusable equipment,  Further, Defendants’ invoices obscure overbilling by using vague and overlapping descriptions of work, such as ‘Hazard Safety & Site Assessment,’ ‘Biohazard Removal,’ ‘Content Manipulation,’ ‘Cleaning / BioWash,’ and ‘Biohazard Waste Management.’ Defendants also claim that all work is conducted by their own employees when in fact they use subcontractors, misrepresent that their employees are specially trained in biohazard remediation services, and then charge more for their work based on this special training, when in fact they have no such training or specialized certifications…

The restoration contractor is similarly having a difficult time getting off ground zero because the judge also dismissed its counterclaims alleging in part: 

Some of Aftermath’s customers have Liberty Mutual insurance. Aftermath and Liberty Mutual do not have a contract that directly governs their relationship. Liberty Mutual has made disparaging remarks about Aftermath and has recommended that customers not use Aftermath, even after customers signed contracts with Aftermath. The Counterclaim Complaint provides the following examples.

i. Customer One

A customer engaged Aftermath to provide remediation services relating to the death of his father. The customer signed a Customer Contract and Aftermath commenced work. After the first day, Aftermath and the customer agreed to pause work while they waited to hear from Liberty Mutual. Three days later, Bryan Fly, a Liberty Mutual insurance adjuster, told the customer that he would prefer that the customer use a remediation services provider other than Aftermath, because: ‘(1) Aftermath is not a reputable company, and (2) Aftermath is notorious for suing property owners for work done when the insurance company does not pay the claim.’ He also stated ‘that Aftermath overbilled for its services.’ When the customer called the alternative provider recommended by Fly, he learned that that company ‘performed clean-up services on a part-time basis [and] was not licensed to do asbestos remediation (which was required for the customer’s remediation),’ but the company ‘offered to remove the asbestos anyway.’ When the customer told Fly that he would not work with that company, Fly told the customer he would still need to use a provider other than Aftermath. 

ii. Customer Two

In June 2022, another potential customer contacted Aftermath ‘to perform trauma cleaning and biohazard remediation.’ Aftermath conducted an onsite assessment on July 11 and gave the customer a recommended scope of work. On the same day, Aftermath contacted Liberty Mutual to verify the customer’s insurance coverage, the customer signed a Customer Contract, and Aftermath began ‘some initial work.’ Within hours of this work, Aftermath called Liberty Mutual to file a claim and sent ‘photographs [and] a breakdown of the initial estimate, and inquired about onsite inspection by a Liberty Mutual adjuster.’ 

Over the following weeks, Aftermath reached out to Liberty Mutual numerous times, but was unable to get authorization to resume work. Toby Puls (‘Puls’), a Liberty Mutual claims adjuster, eventually informed Aftermath on July 20 that an on-site inspection was scheduled for the following day. On July 21, a Liberty Mutual field adjuster inspected the property and recommended a scope of work that was more extensive than what Aftermath had recommended. Aftermath did not hear anything from Liberty Mutual for several days, so Aftermath reached out again, and Liberty Mutual responded that they were continuing to review Aftermath’s proposal. On July 29, Aftermath reached out again to Puls, who responded: ‘[t]he adjuster still needs to discuss with the customer. From the field inspection there is no remaining damages [sic] and you can submit for what work you have completed so far.’ Aftermath communicated this to the customer, and the customer said this contradicted what the field adjuster had recommended. [When Aftermath responded to Puls, copying the customer, Puls did not respond. 

On August 11, after some additional back and forth, the customer informed Aftermath that they had spoken to Puls who explained that Liberty Mutual ‘would like [the customer] to use a different company for any remaining work, as … the cost of Aftermath in particular is significantly higher than other similar companies.’ After some additional back and forth, on August 22, Aftermath sent Liberty Mutual and the customer an invoice for their initial work for the customer.

…

‘On July 29, 2022, Aftermath was called to a scene that required trauma cleaning and biohazard remediation.’ The on-site team made an assessment as to the scope of the work required, a supervisor communicated that recommendation to the customer, the customer signed a Customer Contract, and Aftermath began initial work. After completing this initial work, Aftermath contacted SafeCo, the customer’s insurance provider and a Liberty Mutual subsidiary, to file a claim, and sent an email with ‘initial photos and a breakdown of the initial estimate.’ 

On August 3, Aloyis Gray (‘Gray’), a Liberty Mutual field adjuster, contacted Aftermath to get a ‘rundown of damages [and] a brief description of the scope of work, and to [set up a meeting] with the Aftermath team in the coming days.’ …On the same day, Puls informed Aftermath that he would serve as the claims adjuster for the case. On August 6, ‘[d]uring [an] onsite inspection, … Gray stated to Aftermath’s on-site team that Aftermath takes advantage of the elderly during a vulnerable time and that Aftermath is going to be sued by many carriers for its actions…. Gray also asked how much the Aftermath supervisor makes and suggested that Aftermath was overcharging its customers and underpaying the supervisor.’

Neither Liberty Mutual nor Aftermath Services seem to be having any success so far in this litigation. The facts seem diametrically involved. The views, however, seem to be fairly common. Insurers tend to look at restoration contractors not in a preferred network as the enemy and charging more than reasonable through nefarious means. The view of many restoration contractors is that insurers will do or say almost anything to interfere with their customer relations. 

I will keep readers up to date if this lawsuit ever gets past the initial pleadings stage. 

Thought For The Day 

Things are never as easy as they look; they’re never as hard as they seem. Reality usually sits somewhere in the middle.

—Jason Fried

1 Liberty Mut. Ins. Co. v. Aftermath Services, No. 22-cv-11052 (D. Mass. Aug. 23, 2023).