Overhead and Profit on a Water Mitigation Invoice in Virginia
BYSteve Jafari, General ManagerNORTHERN VIRGINIA, MARYLAND & D.C.
Overhead and profit on a restoration estimate is a charge for general contractor coordination, not for each individual trade task. Whether any insurer pays it is the insurer's decision under the policy, and the Virginia rules quoted here govern how a denial is explained in writing rather than what a policy covers.
Call 1-888-29-FLOODWhat is the overhead and profit line on a restoration estimate?
Overhead and profit on a restoration estimate is the charge for general contractor coordination: sequencing separate trades, holding the schedule together and standing behind the finished result. It is not a markup applied to every task on the page. Whether any insurer pays it depends on the policy and on the insurer's decision.
On an estimate written in the industry's standard software, the line sits near the bottom of the summary page as two figures, general overhead and profit, shortened by restorers to O&P. Both are calculated against the job total rather than any single line item, which is why the number looks large on its own.
One note before the detail. Restoration Doctor is a restoration contractor. This post explains what the line is and what published Virginia rules say. It is not legal or insurance advice, and nothing here describes what your own policy covers.
| Activity on a restoration project | Inside the coordination line | Priced on its own line |
|---|---|---|
| Sequencing five trades so the rebuild runs in order | Yes | No |
| Running one air mover for a day | No | Yes, as a unit-day |
| Holding a subcontractor to a schedule and re-inspecting the work | Yes | No |
| Extracting standing water on the first night | No | Yes, as labor and equipment |
| Cutting out and hauling away wet drywall | No | Yes, by the measured quantity |
What is not inside the overhead and profit line?
Three separate charges get confused with one another on a water loss, and the confusion is common: general contractor overhead and profit; job-related overhead, meaning project-specific supervision and site costs; and sales tax.
The coordination line is also not a second charge for the work itself. Taking coordination out would leave the other lines intact, and the estimate would still price the physical work. What it stops pricing is the management of it.
Who decides whether overhead and profit is paid?
Coverage depends on your policy and your insurer's decision. Questions about coverage belong with your insurer, your agent, or a licensed public adjuster or attorney.
Restoration Doctor is a restoration contractor, not an insurer or a public adjuster. This post does not say whether any insurer owes the coordination line on any loss, and it does not predict how an insurer will decide.
What does Virginia's claim-handling rule require a denial to say?
The text below describes what Virginia's claim-handling rules say; it does not describe what any policy covers. 14VAC5-400-70 provides that “Any denial of a claim shall be given to a claimant in writing and the claim file of the insurer shall contain a copy of the denial.”
The same section adds that an insurer “shall provide a reasonable written explanation of the basis for any claim denial.”
The next sentence is the one that gets misquoted, so read it closely. The written explanation “shall provide a specific reference to a policy provision, condition, or exclusion, if any.” Those last two words carry weight. Where the decision rests on policy language, the explanation has to point at that language. Where it does not, the rule requires nothing more specific than a reasonable written explanation.
14VAC5-400-90 adds a standard for the carrier's own estimate: “the estimate shall be an amount for which the damage may reasonably be expected to be satisfactorily repaired.”
That rule continues: “The insurer shall give a copy of the estimate to the claimant.”
14VAC5-400-30 requires that “Detailed documentation shall be maintained for each claim file in order to permit reconstruction of the insurer's activities relating to each claim.”
Who enforces Virginia's claim-handling rules?
Va. Code § 38.2-510 lists the conduct that counts as an unfair claim settlement practice.
The statute's own preamble reaches conduct performed “with such frequency as to indicate a general business practice.”
Subsection B adds that “No violation of this section shall of itself be deemed to create any cause of action in favor of any person other than the Commission.”
The same subsection then preserves “the right of any person to seek redress at law or equity for any conduct for which action may be brought.”
The regulation is drawn a little differently. 14VAC5-400-25 makes it a violation if any person “Willfully violates any provision of this chapter” or commits a violation “with such frequency as to indicate a general business practice.” A willful single violation is reachable there. Either way the enforcer is the Bureau of Insurance, not the policyholder.
- “Refusing arbitrarily and unreasonably to pay claims”
- “Not attempting in good faith to make prompt, fair and equitable settlements of claims in which liability has become reasonably clear”
- “Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement”
What does a coordination line cover on a mitigation invoice?
Mitigation is the emergency phase of a water loss: stopping the spread, extracting water, removing unsalvageable material and drying the structure. It often runs before anyone has written a repair estimate. An extraction-only job is one crew, one trade and a few days of equipment, with little sequencing of separate specialties.
Larger mitigation projects look different. A loss that needs hazardous-material testing before demolition, a plumber for the source, an electrician to isolate circuits and a drying plan re-sequenced around each of them involves coordination whether or not anyone calls it a rebuild. The project record shows which trades were involved and in what order.
The three-trade rule is the phrase many property owners hear, usually secondhand. We could not locate a source for it in any Virginia statute, regulation or reported decision. It is industry shorthand rather than authority.
This is also why the invoice itself matters more than any rule of thumb. Our guide on how to read a water mitigation invoice walks the anatomy, including how equipment is counted in unit-days, meaning one machine for one day. For general timing information, see insurance claim response deadlines; no day counts are printed here.
Where do insurance questions go?
Coverage depends on your policy and your insurer's decision. Questions about coverage belong with your insurer, your agent, or a licensed public adjuster or attorney.
The Virginia State Corporation Commission's Bureau of Insurance regulates insurers in Virginia. Its file a complaint page explains what it accepts.
What Restoration Doctor provides is project documentation you may share with your insurer. If your insurer requests our records, we provide them with your permission.
- The scope of work we performed
- Daily moisture and equipment records
- Photographs of the work actually performed
- A line-item invoice addressed to the property owner
What can a restoration contractor do here, and what can it not?
The boundary is statutory. Virginia licenses public adjusting, and Va. Code § 38.2-1845.3 lists who is exempt from that requirement. The exemption covers “a person employed only for the purpose of obtaining facts surrounding a loss or furnishing technical assistance to a licensed public adjuster, including photographers, estimators, private investigators, engineers, and handwriting experts.” Restoration contractors are not on the list.
What a restoration contractor can properly do is document and price its own work, then explain the documents it wrote. Restoration Doctor writes the scope, records the moisture and equipment data behind it, and provides project documentation you may share with your insurer. We invoice the property owner, and you are responsible for payment under your signed agreement, whether or not your insurer pays. We do not negotiate or settle your claim, and we do not tell you what your policy covers.
For the same reason this post stops at what the published rules say. Our note on what a drying file contains lists what belongs in the project record.
- Sources:
- 14VAC5-400-70, denial in writing and the written explanation
- 14VAC5-400-90, claims settlement standards for property policies
- 14VAC5-400-30, claim file documentation
- 14VAC5-400-25, compliance standards
- Va. Code § 38.2-510, unfair claim settlement practices
- Va. Code § 38.2-1845.3, exemptions from public adjuster licensing
- Virginia State Corporation Commission, file a complaint
- Each jurisdiction answers this question under its own law, and our sister sites publish it separately: restorationdoctordc.com for the District of Columbia, and restorationdoctorfl.com for Florida.
