If there is one line item that insurance carriers fight harder than any other, it's Overhead and Profit (O&P). Standard industry practice dictates 10% for Overhead and 10% for Profit (often referred to as "10 and 10"), applied to the total cost of the job.
Yet, on the initial Xactimate estimate, O&P is almost always conspicuously absent.
Carriers use a variety of excuses to deny O&P. As a contractor, understanding these excuses and knowing exactly how to counter them is the difference between a marginally profitable job and a highly profitable one.
The "Three Trade Rule" Myth
The most common excuse adjusters use to deny O&P is the so-called "Three Trade Rule." They will claim that O&P is only warranted if the job requires coordination of three or more distinct trades (e.g., roofing, gutters, and siding).
The Reality: The "Three Trade Rule" is an internal carrier guideline, not a legal standard or a provision found in most insurance policies. The actual standard, supported by numerous court rulings across the country, is complexity.
If the job is complex enough to require the services of a General Contractor to coordinate, schedule, and oversee the work, O&P is owed. Replacing a roof, managing a crew, securing permits, arranging dumpsters, and ensuring code compliance is inherently complex.
How to Counter the Denial
When the adjuster denies O&P citing the three-trade rule, you need to respond professionally but firmly, focusing on your role as a General Contractor.
1. Document Your Coordination Efforts: Keep a detailed log of everything you are managing on the project. This includes:
2. Cite the Policy Language (or Lack Thereof): Ask the adjuster to point to the specific language in the homeowner's policy that states O&P is only paid when three or more trades are involved. They won't be able to, because it rarely exists. The policy typically states it will pay the "actual cash value" or "replacement cost," which includes the reasonable cost of a General Contractor.
3. Use the "General Contractor" Argument: Clearly state in your supplement letter: "Our company is acting in the capacity of a General Contractor on this project. We are incurring overhead expenses to coordinate materials, labor, permits, and site safety. Therefore, standard 10% Overhead and 10% Profit is warranted and requested."
The "It's Included in the Line Items" Excuse
Another tactic is for the carrier to claim that O&P is already baked into the Xactimate unit prices.
The Reality: Xactimate's own white papers explicitly state that their unit pricing does not include General Contractor Overhead and Profit. Xactimate prices include sub-contractor overhead and profit, but the GC's 10 and 10 must be added separately at the end of the estimate.
Automating the O&P Fight with EstimateDelta
Fighting for O&P manually requires writing detailed justification letters for every single claim. It's exhausting.
EstimateDelta automates this process. When you upload an estimate that is missing O&P, our AI engine flags it immediately. More importantly, EstimateDelta generates a professional, ready-to-send Supplement Letter that includes the exact industry-standard arguments and Xactimate white paper citations needed to justify O&P.
We give you the ammunition you need to push back against the "three trade rule" and secure the margins you deserve.
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