Post-Disaster Fraud and Scams: Protecting Yourself After a Loss

After a wildfire, flood, or other major disaster, scammers descend on affected communities. They know you are displaced, stressed, and desperate to rebuild. They offer quick fixes, discount prices, and promises that sound too good to be true — because they are.

Losing your home to a disaster is devastating. Losing tens of thousands of dollars to a scammer on top of that is something you may never recover from. Knowing the most common scams is the first step in protecting yourself.

Contractor Fraud

Contractor fraud is the most common and most costly post-disaster scam. It takes several forms:

Excessive Advance Deposits

California law limits contractor deposits to 10% of the contract price or $1,000, whichever is less(Business and Professions Code § 7159.5). Any contractor who asks for more than this up front is either ignorant of the law or deliberately violating it. Contractors who take $20,000, $40,000, or more in advance deposits and then disappear or abandon the project are a recurring pattern after every major disaster.

Unlicensed Contractors

After a disaster, unlicensed individuals flood the area offering construction services. They may present themselves as general contractors, roofers, or restoration specialists. Without a license, they carry no bond, no workers' compensation insurance, and no accountability to the Contractors State License Board (CSLB). If they abandon the job or do substandard work, you have very limited recourse.

Always verify: Check the contractor's license at cslb.ca.govbefore signing anything. Verify their workers' compensation coverage and general liability insurance. Ask for references from recent projects — not just disaster work.

The Deductible Waiver Scheme

A contractor offers to “waive your deductible” — meaning they will inflate the scope of work on the insurance estimate to absorb the deductible amount, so you don't pay anything out of pocket. This is insurance fraud. Both the contractor and the homeowner can face criminal charges. Beyond the legal risk, contractors who inflate estimates to cover deductibles typically cut corners on the actual work to maintain their margin.

Assignment of Benefits (AOB) Abuse

Some contractors ask you to sign an “Assignment of Benefits” (AOB), which transfers your insurance claim rights to the contractor. The contractor then deals directly with the insurance company and controls the claim. The problem: once you assign your benefits, you lose control of your claim. The contractor may inflate the claim, settle for less than you are owed, or abandon the project after collecting payment. In the worst cases, the contractor collects from the insurer and disappears, leaving you with an unfinished project and no insurance proceeds to hire someone else.

Unlicensed Claim “Negotiators” and Consultants

After a disaster, individuals and companies may approach you offering to “negotiate your claim” or “get you more money from the insurance company.” Some of these are legitimate, licensed professionals — Public Adjusters and attorneys. Others are unlicensed individuals operating illegally.

In California, anyone who negotiates insurance claims on behalf of a policyholder for compensation must be either a licensed Public Adjuster or a licensed attorney. Unlicensed claim negotiators are violating the law and have no regulatory oversight, no bond, and no accountability.

• Verify Public Adjuster licenses at the California Department of Insurance website (insurance.ca.gov)
• Verify attorney licenses at the State Bar of California website (calbar.ca.gov)
• Be wary of anyone who contacts you unsolicited and pressures you to sign immediately

Other Common Post-Disaster Scams

• FEMA impersonators: Scammers pose as FEMA representatives and ask for personal information, bank account numbers, or upfront fees. FEMA never charges fees for disaster assistance and will never ask for your banking information by phone.
• Fake charities: Fraudulent charities solicit donations for disaster relief but pocket the money. Verify any charity at charitynavigator.org or guidestar.org before donating.
• Price gouging:California Penal Code § 396 prohibits raising prices more than 10% on essential goods and services after a declared emergency. This includes building materials, temporary housing, gas, food, and emergency supplies.
• Debris removal scams: Unlicensed operators offer cut-rate debris removal but dump hazardous materials illegally, potentially creating environmental liability for the property owner.
• “Insurance buyout” offers: Companies offer to buy your insurance claim for a lump sum — typically a fraction of its value. Once you sell, they collect the full amount from the insurer. Never sell your claim rights.

Red Flags to Watch For

• Anyone who pressures you to sign immediately or says the “offer expires today”
• Requests for advance deposits exceeding 10% or $1,000
• Contractors who refuse to provide a written contract before starting work
• Anyone who asks you to make checks payable to an individual rather than a business
• Claims negotiators who cannot provide a valid California license number
• Contractors who want to deal directly with your insurance company without your involvement
• Offers that sound too good to be true — “no deductible,” “free roof,” “guaranteed settlement”
• Door-to-door solicitation immediately after a disaster
• Out-of-state contractors with no local references

Where to Report Fraud

• Contractor fraud: Contractors State License Board (CSLB) — 800-321-CSLB
• Insurance fraud: California Department of Insurance — 800-927-4357
• Price gouging:Local District Attorney's office or California Attorney General — 800-952-5225
• FEMA impersonation: FEMA Helpline — 800-621-3362
• General fraud: Federal Trade Commission — reportfraud.ftc.gov