Roofing Supplement O&P and Xactimate: How to Get Overhead and Profit Approved Every Time

Overhead and profit (O&P) is the single most disputed line item in roofing insurance claims. Adjusters routinely exclude it from Xactimate estimates, and when contractors push back, they often receive a form denial citing "no general contractor involvement" or "simple repair." Both of those denials are wrong in most cases, and both can be overcome with the right documentation and supplement letter language. This guide covers exactly how to do it.

What O&P Is — and Why It Belongs on Roofing Claims

Overhead and profit is a markup applied to the total cost of a repair to compensate the general contractor (or contractor acting in that capacity) for the cost of managing the project. In Xactimate, it is calculated as a percentage of the total labor and materials — typically 10% overhead and 10% profit, though the actual percentages vary by market and are set in the Xactimate price list.

O&P is not a bonus or a negotiating position. It is a standard industry cost that reflects the real expenses of running a contracting business: insurance, licensing, bonding, estimating time, project management, warranty obligations, and the cost of capital. Every roofing contractor incurs these costs on every job, regardless of whether the adjuster acknowledges them.

The standard for when O&P is owed on a roofing claim is well-established: whenever the scope of work requires the coordination of multiple trades or subcontractors, or when the complexity of the project requires general contractor oversight. Most significant roofing claims meet this standard — a full roof replacement involving tear-off, decking repair, flashing, gutters, and interior damage coordination is a multi-trade project by any reasonable definition.

Why Adjusters Deny O&P on Roofing Claims

Adjusters deny O&P for several reasons, most of which are addressable with documentation:

"No general contractor is involved." This is the most common denial. The adjuster assumes that because the roofing contractor is performing the work directly, there is no general contractor to pay O&P to. This is incorrect — a roofing contractor acting as the general contractor on a project (coordinating multiple trades, managing the project timeline, carrying the warranty) is entitled to O&P just as a traditional GC would be.

"The repair is simple and does not require coordination." This denial is used on smaller claims. The response is to document every trade involved in the repair — roofing, gutters, flashing, interior repairs, HVAC penetrations — and demonstrate that coordination was required.

"O&P is included in the labor rate." This is factually incorrect. Xactimate labor rates are set based on the cost of performing the labor operation, not the overhead and profit of the contractor managing the project. O&P is a separate line item in Xactimate for this reason.

"We only pay O&P on total losses." There is no industry standard or policy language that limits O&P to total losses. This is an adjuster-specific position that can be challenged with the policy language and Xactimate documentation.

The Xactimate Line Items for O&P

In Xactimate, O&P is added as a markup at the estimate level, not as an individual line item. The markup is applied to the total of all labor and materials in the estimate. The standard Xactimate O&P percentages are:

Markup Type	Xactimate Code	Typical Percentage	Applied To
General Contractor Overhead	O&P — Overhead	10%	Total labor + materials
General Contractor Profit	O&P — Profit	10%	Total labor + materials
Subcontractor Overhead	Sub O&P — Overhead	10%	Subcontracted labor + materials
Subcontractor Profit	Sub O&P — Profit	10%	Subcontracted labor + materials

The actual percentages in your market may differ from the 10/10 standard. Xactimate publishes regional price lists that include the O&P percentages for each market. If the adjuster is using a price list with lower O&P percentages than your market supports, you can supplement for the difference with documentation of your actual overhead costs.

The Documentation Standard for O&P Approval

The documentation standard for O&P approval has three components: a scope of work that demonstrates multi-trade coordination, a contractor statement of overhead costs, and a policy language citation.

Scope of work documentation. List every trade involved in the repair, even if you are performing some of them with your own crews. Typical roofing claim trades include: roofing (tear-off, installation), decking (repair or replacement), flashing (chimney, valleys, pipe boots), gutters and downspouts, interior repairs (drywall, paint, insulation), HVAC penetration resealing, and any structural repairs. The more trades you document, the stronger the O&P argument.

Contractor overhead statement. A brief written statement documenting your actual overhead costs strengthens the supplement significantly. Include: business insurance premiums, licensing and bonding costs, estimating and project management time, warranty obligations, and vehicle and equipment costs. You do not need to provide tax returns or financial statements — a signed contractor statement is sufficient in most cases.

Policy language citation. Most homeowner's insurance policies require the insurer to pay the "reasonable cost to repair or replace" the damaged property. O&P is a reasonable and standard cost of repair. Cite the specific policy language in your supplement letter to anchor the argument in the contract rather than in industry custom.

How O&P Interacts with Xactimate Line Items

One of the most common errors in roofing supplements is submitting an O&P request without first ensuring the underlying Xactimate estimate is complete. O&P is calculated as a percentage of the total estimate — which means every excluded line item reduces the O&P amount as well. Before supplementing for O&P, run through the complete list of commonly excluded Xactimate roofing line items (see our Xactimate Roofing Line Items guide) and add any missing items first. A complete estimate with full O&P will recover significantly more than a partial estimate with O&P.

The interaction works in both directions. If the adjuster approves additional line items but denies O&P, you are leaving money on the table. If the adjuster approves O&P but the underlying estimate is incomplete, the O&P amount is lower than it should be. The correct approach is to submit a complete supplement with all missing line items and O&P at the same time.

Supplement Letter Language for O&P Approval

The following supplement letter language is designed to address the most common O&P denials. Adapt it to your specific claim and policy language.

For the "no general contractor" denial:

"[Shop Name] is acting as the general contractor on this claim. Our scope of work includes coordination of the following trades: [list all trades]. As the general contractor, we are responsible for project management, scheduling, subcontractor coordination, warranty obligations, and all associated overhead costs. Overhead and profit is a standard and reasonable cost of this repair and is required by [Policy Number] Section [X], which requires payment of the reasonable cost to repair the covered damage. We are requesting O&P at the Xactimate market rate of [X]% overhead and [X]% profit on the total estimate of $[AMOUNT], for a total O&P amount of $[AMOUNT]."

For the "simple repair" denial:

"The scope of this repair requires coordination of [X] trades: [list trades]. This is not a simple single-trade repair. Per the Xactimate pricing methodology, O&P is owed whenever the scope of work requires general contractor coordination. The coordination required on this claim includes: [list specific coordination tasks — scheduling, subcontractor management, material procurement, permit management, etc.]. We are requesting O&P at the Xactimate market rate."

For the "O&P included in labor rate" denial:

"Xactimate labor rates represent the cost of performing the labor operation and do not include general contractor overhead and profit. O&P is a separate markup in the Xactimate pricing methodology, applied at the estimate level to compensate the general contractor for project management costs that are not captured in individual labor rates. This is documented in the Xactimate pricing methodology guide. We are requesting O&P as a separate line item at the market rate."

O&P on Xactimate Supplements: The Numbers

To illustrate the financial impact of O&P on a typical roofing claim, consider a $25,000 roof replacement estimate. At the standard 10/10 O&P rate, the O&P amount is $5,000 — 20% of the total claim value. On a $50,000 claim with interior damage, the O&P amount is $10,000. These are not marginal amounts; they represent the difference between a profitable job and a break-even one for most roofing contractors.

The O&P denial rate on roofing claims varies by carrier and adjuster, but industry data consistently shows that O&P is denied or reduced on a significant percentage of claims where it is legitimately owed. The supplement approval rate for well-documented O&P requests is high — most carriers will approve O&P when presented with a complete scope of work and a clear contractor statement. The key is to document the coordination requirement before the adjuster closes the claim.

Common O&P Supplement Mistakes to Avoid

The most common mistake is submitting an O&P supplement without supporting documentation. An O&P request that says only "requesting O&P" without a scope of work, contractor statement, or policy citation will be denied in most cases. The second most common mistake is submitting the O&P supplement after the adjuster has already closed the claim — at that point, reopening requires additional documentation and negotiation that could have been avoided.

A less obvious mistake is accepting a partial O&P approval. Some adjusters will approve O&P on some line items but not others, or will approve a lower percentage than the Xactimate market rate. Both of these partial approvals should be supplemented — the documentation standard is the same, and the approval rate for a well-documented partial O&P supplement is high.

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