Roofers and contractors must be extremely careful not to step over the line and act as public insurance adjusters. I have given three speeches to insurance restoration contractors and roofers over the past year warning that there are serious legal ramifications for doing so and that it is illegal. I even brought the topic to a public discussion earlier this year in Unauthorized Practice of Public Adjusting and the Lon Smith Roofing Case Should Scare Contractors and Roofers with Contingent Contracts.
The National Association of Public Insurance Adjusters and The Texas Association of Public Insurance Adjusters jointly filed an amicus brief supporting class action certification against a roofer accused of public adjusting. Here is a summary of their argument:
Strong public policy concerns support class-wide relief to enforce Section 4102.051(a) against Lon Smith. The contract gave Lon Smith a full obligation and full authority to negotiate directly with the Keys’ insurance company with respect to the “final contract price” that the insurance company would pay for the storm damage to the Keys’ roof. Allowing unlicensed intermediaries between the homeowner and an insurance company would wreak havoc on the licensed and regulated public insurance adjuster profession and would allow contractors to take advantage of homeowners –particularly in the face of a catastrophic natural disaster, when they are the most vulnerable – in situations where the contractors’ financial interests obviously conflict with those of the homeowner.
A class action is a superior means of bringing relief to thousands of Texans whom Lon Smith duped into signing illegal contracts. Roofing contractors are particularly problematic, and the judicial findings of fact in Reyelts show that Lon Smith is representative of the typical contractor engaged in this illegal conduct.
Class relief is necessary to bring an end Lon Smith’s illegal conduct and properly compensate its victims.
I strongly suggest that all insurance restoration contractors and roofers involved with wind or hail claims read this amicus brief. The fine line of discussing price and proposed method of repair can easily be stepped over into adjusting a loss for the policyholder. There is not a state in the Union where a person is permitted to do so without a public adjuster or law license.
Insurance company claims managers should also warn their field claims adjusters not to assist or support insurance restoration contractors and roofers who illegally act as public insurance adjusters, either.
One of the most interesting aspects of this case is that the public adjuster associations hired insurance defense attorney Steve Badger to write this brief and argue on their behalf. This is the same Steve Badger some public adjusters were upset and gave me grief for publicly debating about hail claims handling in Texas at a TAPIA seminar.
My suspicion is that Badger and the insurance industry also do not like open ended construction contracts where they feel they are being "gamed" into paying unfair amounts. The repair contract at issue was open ended and arguably provided for the roofer to negotiate the policyholder’s claim. Making intentionally inflated estimates and claims and allowing insurance restoration contractors to negotiate for policyholders is simply not right—does anybody disagree?
On the other hand, it is also not right for insurance company claims handlers to underpay claims and force legitimate contractors into accepting amounts for repair that foster improper and often illegal construction practices—does anybody disagree?
The policyholder, who is often ignorant about the methodology and price to properly repair a structure, is often caught in the middle of this fight between sometimes legitimate and sometimes illegitimate competing differences of opinion–does anybody disagree?
Positive Thought For The Day
"Here’s to the crazy ones — the misfits, the rebels, the troublemakers, the round pegs in the square holes. The ones who see things differently — they’re not fond of rules. You can quote them, disagree with them, glorify or vilify them, but the only thing you can’t do is ignore them because they change things. They push the human race forward, and while some may see them as the crazy ones, we see genius, because the ones who are crazy enough to think that they can change the world, are the ones who do."