A record year for storms, floods and wildfires left homes damaged across the country. By November, the federal government declared 93 major disasters in 2011 - a dozen more than any year in U.S. history.
Catastrophes attract shifty contractors who travel hundreds of miles to prey on homeowners' panic and know reputable businesses are swamped.
"They make promises they can't keep — they give low prices and get a deposit to get the job started, then leave," says Michael Jones, owner of highly rated Harmony Remodeling in Birmingham, Alabama. "I see it with all the neighbors of our customers from the recent tornadoes."
In an online Angie's List poll, 17 percent of members said their homes suffered storm damage in the past year. Of those, 46 percent encountered out-of-state or door-to-door contractors soliciting work in their neighborhood. A number of them reported having a bad contractor experience after a storm.
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Hundreds of homeowners in Pennsylvania and New Jersey say they fell victim to Precision Builders, which went door-to-door after thunderstorms. The company's accused of causing fake hail damage on homeowners' roofs to collect insurance money, according to criminal and civil court documents. Three company associates face felony criminal charges, including fraud and theft by deception.
After Hurricane Irene battered the East Coast in August, officials from six states cautioned citizens about home improvement fraud. And in October, the Federal Emergency Management Agency advised Texas wildfire victims to be wary of fly-by-night builders.
Missouri Attorney General Chris Koster warned homeowners against scammers one month before the costliest tornado in U.S. history struck Joplin on May 22. Three months later, a Missouri law went into effect in an effort to protect homeowners from bad contractors.
Companies in Missouri can no longer offer to pay a customer's deductible. They also aren't allowed to negotiate insurance claims on a homeowner's behalf unless they have a public insurance adjuster license. Unscrupulous service providers often make such offers in the wake of a disaster to entice consumers, yet both practices are illegal in the majority of states.
Fifteen percent of members polled said a contractor offered to pay their deductible this year. Companies typically do so by inflating the job's costs, which constitutes insurance fraud. Most insurance policies state homeowners are responsible for the cost of the deductible, says Loretta Worters, vice president of communications for the Insurance Information Institute.
"A homeowner is committing fraud if the contractor promises to pay the deductible," Worters says.
A repair company can't legally negotiate an insurance claim without an adjuster's license in the 44 states that regulate public insurance adjusters. "Contractors can defend their pricing if the insurance company is challenging it, but not negotiate a claim settlement," says Amy Bach, executive director of nonprofit United Policyholders.
Unlike adjusters who work for the insurance companies, public adjusters are hired by homeowners and typically charge 5 to 15 percent of the settlement. A 2010 study by Florida-based Office of Program Policy Analysis and Government Accountability found homeowners who hired public insurance adjusters received higher payouts but took longer to settle claims.
"With the increase in storms and catastrophic activity comes the need for these types of services," says Raymond Altieri Jr., CEO of Tampa-based Altieri Transco American Claims and president of the National Association of Public Insurance Adjusters. "There's a massive increase in the number of contractors proclaiming they can perform the work of a licensed adjuster. This is all false marketing to get them to sign a contract."
Many reputable contractors are storm repair experts. "There are two types of insurance restoration companies: Guys who specialize in it, like us, who travel the country using our own name," says Joe Hoffman, CEO of highly rated Minneapolis-based Hoffman Weber Construction. "The other type goes into a town and buys a local company's license, and it's a pretty dishonest situation. They have no incentive to do what's right."
Peter Svaras, owner of highly rated Svaras Roofing in McHenry, Illinois, is accused of allowing Godfather Construction to fraudulently use his roofing license in exchange for a percentage of the profits.
According to the Cook County lawsuit, Godfather used Svaras' license "as a foil" to deceive consumers, suppliers and subcontractors. Godfather also used it to secure a bond, insurance and memberships in trade groups such as the National Roofing Contractors Association.
Prosecutors say Svaras, whose company Angie's List profile includes a notice to members about the lawsuit, pulled permits for Godfather Construction but never visited the job sites. Instead, Godfather allegedly used unlicensed subcontractors from Texas.
Svaras tells Angie's List Magazine Godfather Construction ripped him off, too, and denies the allegations. "They took me hook, line and sinker," Svaras says. He claims the company hired him as a roofing subcontractor. After he pulled five permits for Godfather jobs, Svaras says they got into a fee disagreement and stopped working together.
"They had a copy of my license and insurance and pretended to be me," he says. "I had no idea until homeowners started calling. Come to find out, they've done this before in other places."
Godfather Construction is also registered to do business in Missouri, and in Texas under the name Portrait Roof Tech, say Cook County prosecutors. It defrauded numerous consumers after Hurricane Ike in 2008, using the name Portrait Roofing & Construction and a false address, according to the lawsuit.
Missouri has not received any complaints, but the Indiana and Kentucky attorneys general each received two complaints against the company between 2007 and 2008. Portrait Roofing landed in the Penalty Box in Indianapolis in 2007.
Godfather founder Steven R. Anderson and partner Thomas Kamin, both of Texas, and manager Freddie Miles, of Indiana, face $560,000 in penalties and restitution, says Cook County State's Attorney spokesman Andrew Conklin. The state also seeks to bar Godfather from working in Illinois.
Kamin denies the lawsuit allegations and has filed a response in court, says his attorney Lia Rardin. She maintains Kamin was merely an investor in Godfather. "We believe Mr. Anderson forged Mr. Kamin's signature on contracts and guarantees," she says. "He didn't get any money and didn't sign anything." Anderson and Miles could not be reached for comment.
Czach eventually got her $1,000 back after contacting Godfather's bond company. She also won her case before the Des Plaines Consumer Protection Commission, which ordered Godfather to pay $8,500 in restitution and fines, but a city staff attorney says the company hasn't paid. The mayor recently appointed Czach to serve on that commission. "I'd like to catch all storm chasers," she says, "but I know that won't happen."
- Additional reporting by Gretchen Becker and Ellen Miller