ChatGPT's Thoughts on Overhead & Profit in Colorado
Colorado Insurance Department Guidance: The Colorado Division of Insurance has long acknowledged general contractor Overhead and Profit (“O&P”) as legitimate components of property damage claims. Notably, Colorado Division of Insurance Bulletin B-5.1 (originally issued in 1998 and reaffirmed in 2007) explicitly prohibits insurers from deducting O&P (typically the contractor’s 10% overhead and 10% profit) when calculating claim payments under replacement cost policies, even if repairs are not yet made. In other words, for a replacement-cost policy, the actual cash value (ACV) settlement must include full replacement cost less depreciation without additionally withholding O&P. This Colorado bulletin established that O&P should be included on every covered loss that would reasonably require a general contractor, reflecting the industry practice of treating 10% overhead + 10% profit as part of the cost of repairs. Colorado has opted to keep this bulletin in force, underscoring the state’s support for including standard O&P in claim valuations.
Colorado Statutory References: Colorado’s insurance laws also reinforce that O&P is an expected part of rebuilding costs. For instance, Colorado Revised Statutes §10-4-110.8 (Homeowner’s Insurance Provisions) now requires insurers to consider “specific reconstruction expenses” when setting coverage limits – and it explicitly lists “a contractor’s overhead and profit” among those cost factors. This means Colorado law recognizes that any realistic replacement-cost estimate for a loss must account for contractor overhead and profit as part of the total cost. Recent legislative updates (e.g. in the wake of Colorado wildfire disasters) have continued to ensure that policies factor in O&P, along with other expenses like permits, debris removal, etc., when calculating replacement cost coverage. While the law doesn’t dictate the exact percentage, the 10% + 10% markup is the generally accepted norm referenced by industry professionals in Colorado.
“10 and 10” as an Industry Standard: In practice, “10 and 10” (10% overhead and 10% profit) has long been the de facto standard markup applied by contractors and recognized by insurers in property insurance claims. Colorado insurance experts and consumer guides affirm this norm. For example, United Policyholders – a respected insurance consumer organization – advises Colorado homeowners that “10% overhead and 10% profit is standard in Colorado” for property claim estimates (though higher percentages may be warranted for especially complex projects). Likewise, insurance industry literature describes 10%+10% as a typical benchmark nationwide. As one legal commentary explains, **“overhead and profit is otherwise known as ‘10 and 10’” – these two ten-percent add-ons represent the typical percentages allocated in the insurance industry for a general contractor’s overhead and profit. Similarly, an Adjusters International publication notes that “the overhead and profit percentage commonly utilized in the insurance industry is 20 percent of the estimated repair or replacement cost” (i.e. a 20% total markup, usually split 10% for overhead and 10% for profit). This 10%/10% rate is so ingrained that many estimating tools default to it, and most insurers will include “O&P (10% & 10%)” on claims involving a general contractor’s services.
Legal and Industry Support: Beyond Colorado’s own rules, the prevalence of the 10%+10% standard is supported by court decisions and regulatory bulletins in multiple states, reinforcing it as an industry-wide custom. Insurers sometimes debate when O&P should apply (often invoking the “three-trade rule,” meaning a GC’s O&P is owed if three or more trades are involved in repairs), but the percentage itself (10 and 10) is rarely in dispute as a fair allowance in property claim estimates. In Colorado, the combination of state guidance (Bulletin B-5.1) and common practice means that policyholders are generally entitled to a 10% overhead + 10% profit allocation in property loss estimates whenever the job warrants a general contractor. This consensus is reflected in Colorado insurance forums and directives, helping ensure that claim settlements include reasonable O&P so that homeowners can hire a contractor and rebuild without out-of-pocket shortfalls..
Each of these sources supports the conclusion that in Colorado, as in most states, a 10% overhead plus 10% profit allowance is the general industry standard for property insurance claims, and state-level guidelines ensure this standard is honored in claim settlements. All citations above reference Colorado-specific regulations or authoritative discussions confirming the 10%/10% O&P norm.
Sources:
Colorado Division of Insurance, Bulletin No. B-5.1 (1998, reaffirmed 2007) – requires inclusion of contractors’ overhead & profit in ACV calculations, prohibiting insurers from withholding the standard O&P even if repairs aren’t completed c3adjusters.com
c3adjusters.com.Colorado Revised Statutes §10-4-110.8(8)(c) – lists “a contractor’s overhead and profit” as a factor to consider in dwelling reconstruction cost estimates for homeowners’ insurance law.justia.com, solidifying O&P as a component of covered loss valuations.
United Policyholders (Colorado FAQ) – confirms that 10% for overhead and 10% for profit is the standard practice in Colorado property damage claim estimates uphelp.org.
Property Insurance Coverage Law Blog (Chip Merlin, May 2019) – notes “overhead and profit is otherwise known as ‘10 and 10’”, with 10% + 10% being the typical insurance industry allocation for O&P costs propertyinsurancecoveragelaw.com.
Adjusting Today trade publication – observes that the industry-common overhead & profit margin is about 20% on top of repair costs (usually expressed as “10% overhead and 10% profit”) adjustersinternational.com.
Each of these sources supports the conclusion that in Colorado, as in most states, a 10% overhead plus 10% profit allowance is the general industry standard for property insurance claims, and state-level guidelines ensure this standard is honored in claim settlements. All citations above reference Colorado-specific regulations or authoritative discussions confirming the 10%/10% O&P norm.