A Q&A with Jim Mellon, president of Mellon Certified Restoration, an insurance restoration company in Yeadon, Pa., about the differences between what his company does and general remodeling.
Remodeling: You started out as a general contractor. How did you end up specializing in insurance restoration work?
Jim Mellon: I had a fire at a rental property that I owned. That happened in the early ’80s when the construction industry was extremely slow. I ended up with a job all winter long. I thought: maybe I’m on to something.
RM: Of fire, water damage, and natural disasters, which provides your company with the most jobs?
JM: Typically there is more water damage than fire damage. But fire damage brings a higher dollar amount per job.
RM: Is it a good business to be in?
JM: It’s much more challenging today than it was. In the past, insurance companies tended to recommend you. But over the years they’ve been more reluctant to recommend contractors because if the client has a problem, they go back to the carrier. We still do insurance referrals, but there aren’t as many as there were in the past.
RM: If a house burned down tonight, how quickly would Mellon Restoration personnel be there? Who would call them?
JM: We would get a call through a myriad of areas and be on site within an hour or an hour and a half. The insurance companies don’t tend to call us with those types of emergencies. They tend to call us for water damage.
RM: Do you still do any types of remodeling or general contracting?
JM: We do, but it’s not an important part of the business. It tends to come from a job we’re already on that has an insurance-related loss where the clients decide they want to expand or even put on an addition.
RM: What are the significant differences between “remodeling” and insurance restoration?
JM: Insurance restoration is very paperwork-laden. Every line item of an estimate you write has to be spelled out. Whereas most general contractors tend to give the customer a lump sum number. With insurance companies, we have to give unit price for removal of an item, installation of that item, painting of that item. Every activity and product has a unit price.
Also, in a fire, you have to deal with odor removal. When you have water damage, you have to be concerned with mold and making sure that the job is dry. Remodelers usually don’t have to deal with those issues.
RM: Is commercial work the big money in insurance restoration?
JM: Our business has been primarily residential. We do some commercial and we have tended to move in that direction. I don’t know if it’s so much the big money as the fact that there tend to be fewer complications dealing with business owners than homeowners.
That would be true in residential and commercial remodeling as well. There’s more emotion from homeowners. The commercial building owner just wants to get his business back in operation. Their first concern is speed.
RM: If a remodeling company wanted to begin doing insurance work regularly, what kinds of resources would it need to invest in?
JM: They would have to have estimating software such as Xactimate and be proficient in it so as to write an estimate. An insurance carrier will want it done in that format.
They may have to invest in training to understand the estimating program. As far as getting the work, they would have to make applications to those insurance companies with direct referral programs to see if they could get on the list of approved contractors. There are a lot of requirements to get on those lists.
RM: What are some of those requirements?
JM: You need to have your own employees to respond to emergency situations. You need to have the equipment, for example, to dry a house that’s been damaged by water. A person could make a decision to not get involved in water damage and just do construction, but he’d have a more difficult time getting business. If you don’t provide emergency services, you more than likely have lost that opportunity to rebuild it from emergency services.
RM: Do you consider franchises like Servpro or Paul Davis as your major competition? Are they more difficult to compete with than independent operators?
JM: They tend to compete on emergency service water damages, since the national franchises have been successful in landing national contracts that have cut out local independent contractors. There are good and bad franchises and independents.