Supervisor Hours vs. Overhead & Profit: Clearing the Confusion in Insurance Estimates
When reviewing an insurance estimate, one of the most common points of contention is the inclusion of Supervisor Hours and Overhead & Profit (O&P). Carriers often push back, arguing these items are “duplications” or “unnecessary.” In reality, they are two distinct, legitimate costs — each serving a different purpose in returning a property to pre-loss condition.
Let’s break down the difference.
🔹 What Are Supervisor Hours?
Supervisor Hours represent the direct labor cost of onsite project management. These hours are billed when a supervisor is physically present to:
Oversee crews on complex projects (e.g., steep-slope roofing, multiple trades, safety-sensitive work).
Ensure OSHA compliance, setup of fall protection, and jobsite safety.
Coordinate subcontractors (roofers, gutter installers, fence crews, carpenters, etc.).
Handle inspections and quality assurance with local building departments.
In Xactimate, Supervisor Hours are applied as a line item — just like shingles, drywall, or paint. They are a direct expense necessary to complete the scope of work.
🔹 What Is Overhead & Profit (O&P)?
Overhead & Profit is not tied to a single task — it represents the business cost of coordinating and running the project as a whole.
Overhead = expenses a contractor incurs to stay in business (office, insurance, licensing, admin staff, vehicles).
Profit = the reasonable margin a contractor is entitled to for performing the work
Industry standards and carriers’ own guidelines recognize that when three or more trades are involved, or when a project requires complex coordination, O&P is customary and owed
🔹 Why They’re Not Duplicates
Supervisor Hours = direct onsite labor cost tied to a specific project.
O&P = indirect business expense + margin tied to running a construction company
Think of it this way:
Supervisor Hours pay for the person wearing a hard hat, standing on-site, directing crews.
O&P pays for the office, scheduling, business risk, and profit margin that allows the contractor to stay in business.
They are separate categories of cost, both necessary and non-overlapping.
🔹 Why This Matters in Appraisal & Claims
When estimates are reduced by removing Supervisor Hours or O&P, the result is underpayment:
Projects become unsafe if no supervisor is budgeted.
Contractors are forced to absorb business expenses the carrier should have accounted for.
Homeowners may not receive the full, fair repair scope they’re entitled to
For appraisers, public adjusters, and contractors, it’s critical to defend both Supervisor Hours and O&P in estimates — with clear documentation of complexity, multiple trades, and safety requirements.
✅ Bottom Line
Supervisor Hours = direct labor cost.
O&P = business expense + margin.
Both are valid, both are needed, and neither is a duplication
When explained clearly and supported with industry standards, these charges are much harder for a carrier or opposing appraiser to dismiss.
