Opinion ID: 2671506
Heading Depth: 3
Heading Rank: 1

Heading: The defendants and their operation of DRI

Text: In 1986, defendant Griggs formed Disaster Restoration, Inc. (DRI), a Denver, Colorado-based corporation, and subsequently served as its owner and chief executive officer. DRI repaired and restored commercial and residential properties throughout Colorado that were damaged by fire, flood, or other disasters. DRI had four divisions, each of which engaged in a separate part of the restoration process: (1) the emergency services division, which responded immediately to disasters; (2) the contents division, which both moved and restored personal property; (3) the structural repair division, which performed needed structural repairs on the damaged commercial and residential buildings; and (4) the environmental division, which addressed environmental concerns arising out of a disaster. Approximately 85% of DRI’s restoration work was performed by its own employees; the remaining 15% was performed by subcontractors hired by DRI. In carrying out its business, DRI contracted directly with the owner of the damaged property. DRI would often, in turn, work directly with and be paid by the property owner’s insurance company. In doing so, DRI would submit to the insurance company an estimate outlining the scope and proposed cost of the 3 repair and restoration work that was to be performed. In preparing these estimates, DRI used Xactimate, a software program commonly utilized by insurance adjusters to calculate repair and construction costs. DRI’s estimates also sometimes included manually-input line items relating to work to be performed by its subcontractors. Those line items referenced the name of the subcontractor and typically included the words “per invoice” or “per proposal.” In 2003, Griggs hired defendant Sharp to work as the chief executive officer and operating manager of DRI. Both Griggs and Sharp established company policies, and also trained and supervised DRI project managers and estimators. Beginning in approximately 2004, Griggs and Sharp began instructing DRI employees who prepared DRI’s estimates to add 20-30% to the price that DRI’s subcontractors were charging DRI. As a result, the estimate sent by DRI to an insurance company would, in the case of a line item relating to subcontractor work, list an amount 20-30% higher than the subcontractor’s bid for the work (and that DRI knew it would be paying the subcontractor for its work). Griggs and Sharp also instructed DRI employees to require DRI’s subcontractors to provide DRI with two invoices: one that listed the actual amount the subcontractor would charge and receive from DRI, and a second invoice that listed a total amount 20-30% higher than the first invoice. The invoices reflecting the actual charges to DRI went to DRI’s accounts payable department for payment 4 and were not shared with the insurance companies. The inflated invoices were kept in DRI’s job files to be provided to insurance adjusters upon request. Thus, the sole purpose for the inflated invoice was to provide DRI with a document that would support the amount listed on the subcontractor line item of DRI’s estimate. On most DRI estimates, DRI employees also added 10% for overhead and 10% for profit, a total of 20% markup that was known and generally agreed to by insurers and was standard in the industry.