When a pipe bursts or water starts pooling where it shouldn’t, most homeowners are focused on one thing: stopping the damage. You call a plumber who assesses the situation, and connects you with a restoration company that can handle the cleanup. It feels like you’re in good hands, right? Maybe not. . .
You see, behind the scenes, there’s a system at play that isn’t always in your best interest. What looks like help may come with hidden costs that only surface much later. Today we’ll cover how restoration referrals from plumbers can be problematic, and what you can do to protect yourself.
The Profit Motive
In the world of emergency plumbing, referrals to restoration companies can be big business. Some plumbers are paid hundreds of dollars simply for passing a client’s name along to a restoration firm—an arrangement that creates a powerful incentive to recommend services that may not actually be necessary. The more lucrative the referral fee, the more likely it is that a plumber will steer the job toward that restoration company, not necessarily the most qualified or reasonably priced provider.
This becomes a problem when restoration companies are recommended for jobs that don’t require them, or to do work they don’t need to do. Instead of drying a small area or fixing a leak, homeowners may find themselves facing full-scale demolition, drying equipment rentals, and five-figure insurance claims—all of which could have been easily avoided. The plumber walks away with a load of cash, and the homeowner is ultimately left to swallow the steep price through insurance premiums.
It’s important to note just because this behavior is incentivized, it doesn’t mean all plumbers engage in this practice. Many operate with integrity and genuinely want what’s best for their clients. But it may not be wise to rely on the goodwill of a plumber you just met. A little healthy skepticism is in order here.
The Role Restoration Plays in Inflated Costs
Restoration companies play a central role in this cycle by offering cash incentives for referrals from plumbers and prioritizing profits over actual need. Once a restoration company is called in, they may inflate the scope of work—tearing out walls, deploying industrial dryers, and billing insurance companies thousands for what could be minor repairs. Since these companies know that if the insurance is covering the cost, few homeowners will question the bill.
To keep the referrals coming, some restoration firms build ongoing relationships with plumbers, rewarding those who send frequent business. This arrangement shifts the focus from restoring damage efficiently to maximizing claims, regardless of what’s truly in the client’s best interest.
While some plumber-restoration company relationships are based on fraud, some restoration companies maintain relationships with plumbers based on trust and mutual professionalism. These partnerships often develop from consistently good service and satisfied clients. While less common, they are a sign of honesty and integrity rather than financial incentive.
How Insurance Responds To Inflated Claims
The insurance industry is well aware of inflated claims tied to plumbing and restoration referrals but face challenges in curbing the practice. Initially, insurers may approve high restoration costs to expedite service and avoid disputes. Over time, however, they respond by raising premiums across the board, tightening coverage terms, and increasing deductibles—especially for water damage claims. In some cases, insurers may drop policyholders with frequent or suspicious claims. Though some companies investigate for fraud or abuse, proving intentional cist inflation is difficult. Ultimately, the financial burden gets passed to consumers, who pay more, even if they never even filed a questionable claim.
Shouldn't This Be Illegal?
In Arizona, the legality of referral fees between plumbers and restoration companies exists in a gray area. Unlike certain professions—such as home inspectors—where referral fees are explicitly prohibited to prevent conflicts of interest, no clear statutes restrict such arrangements between plumbers and restoration contractors. As a result, plumbers can legally accept payments for referring clients, provided there is no outright fraud or deception.
However, Arizona does have laws that reflect concern over referral-based inducements, but this wouldn’t apply to this situation. Without targeted regulation, these referral systems remain technically legal, but ethically murky—leaving homeowners to navigate the risks largely on their own.
What To Be On The Look-Out For
Homeowners facing sudden water damage are often under stress and pressured to act quickly. But even in an emergency, taking a few extra steps can help avoid being pulled into costly referral schemes. Start by asking the plumber directly whether they receive any payment or incentive for recommending a particular restoration company. Honest professionals won’t mind the question—and evasive answers can be a red flag.
If restoration is needed, don’t settle for the first company suggested. Get at least two estimates, and if possible, involve your insurance company early. Most insurers maintain lists of vetted contractors or offer guidance to help ensure that the work is necessary and fairly priced. Taking this route also gives you more control over the claims process.
Finally, understand your policy. Know what water damage is covered, how claims affect your premiums, and what your deductible is. Informed homeowners are less likely to be taken advantage of—and better equipped to protect their homes and finances.
What starts as a simple leak can quickly spiral into a costly ordeal driven by hidden incentives and inflated claims. While the system favors profit over transparency, homeowners aren’t powerless. By asking questions, seeking multiple estimates, and involving insurers early, they can avoid unnecessary costs and protect their coverage.
