I discussed the Lon Smith Roofing class action case against a contractor accused of practicing public adjusting in, Unauthorized Practice of Public Adjusting and the Lon Smith Roofing Case Should Scare Contractors and Roofers with Contingent Contracts. An appellate court reaffirmed the dangers contractors face when negotiating claims and benefits with insurance companies and contracting to do what many consider either the unauthorized practice of law or the unauthorized practice of public adjusting.

The most significant part of the discussion in Lon Smith & Associates, Inc. v. Key,1 stated the following:

Also under its first issue, LSRC argues that, in fact, it never acted as or held itself out as a public insurance adjuster. LSRC points to an Insurance Commissioner Bulletin authorizing roofing companies to “discuss the amount of damage to the consumer’s home, the appropriate replacement, and reasonable cost of replacement with the insurance company.” The same Bulletin, however, provides that a roofing company may not “advocate on behalf of a consumer” or “discuss insurance policy coverages and exclusions.” See Tex. Dep’t Ins. Comm’r Bulletin B-0017-12.

As set forth above, the LSRC Acceptance and Agreement provision provided:

This Agreement is for FULL SCOPE OF INSURANCE ESTIMATE AND UPGRADES and is subject to insurance company approval. By signing this agreement homeowner authorizes Lon Smith Roofing and Construction (“LSRC”) to pursue homeowner[s’] best interest for all repairs, at a price agreeable to the insurance company and LSRC. The final price agreed to between the insurance company and LSRC shall be the final contract price.

To the extent LSRC asserts that it never acted or held itself out as a public insurance adjuster because LSRC merely agreed to “discuss the amount of damage to the consumer’s home, the appropriate replacement, and reasonable cost of replacement with the insurance company” but did not agree to “advocate on behalf of a consumer” or “discuss insurance policy coverages and exclusions [,]” we cannot agree. By the express terms of the contractual provision set forth above, LSRC agreed to “pursue homeowners[‘] best interest” and to reach an agreement with the insurance company for the final roofing contract price—“[t]he final price agreed to between the insurance company and LSRC shall be the final contract price.” By contracting to “pursue homeowners[‘] best interest” and to reach a settlement with the Keys’ insurance company, LSRC explicitly agreed to “advocate on behalf of a consumer [the Keys]”—which is conduct prohibited by the same Insurance Commission Bulletin that LSRC claims authorized its conduct. See generally Tex. Ins. Code Ann. § 4102.001(3) (defining “public insurance adjuster” as including a “person” who acts on behalf of an insured in negotiating settlement of a claim.)

The bottom line is that the appellate court found that class action cases could be made against the roofing contractor for the Unauthorized Practice of Public Adjusting. Contractors and their attorneys writing these contracts should be ready for similar class action lawsuits which may soon be filed. I have seen many similar remediation contracts and these have even been used as examples to be followed at recent restoration industry seminars.

For our friends, Texas Super Lawyer Rene Sigman and I will discuss this case and other hail damage claims issues found in Texas and Colorado this coming Tuesday. If you are a public adjuster or a friend of the firm interested in helping policyholders and learning how to do so, click here to register.

Quote of The Day

“He should’ve read the contract a little closer before he signed, but being moments from a painful and violent death had provided a necessary sense of urgency.”
—Andrea Laurence, from Sexy as Hell
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1 Lon Smith & Associates, Inc. v. Key, No. 02-15-00328, 2017 WL 3298391 (Tex.App.-Fort Worth, Aug. 3, 2017).

  • I’m doing a session at the national CPCU convention in Orlando next month called “The Additional Insured Illusion…and Other Feats of Contractual Risk Transfer Magic Even David Blaine Couldn’t Pull Off.” I’ll have to “borrow” that quote!

  • shirley heflin

    Dear Chip:

    This conduct you described is a prevalent and popular problem in all “industries.” The Lawyers and Public Adjusters don’t like the Contractors, Roofers, Restorers, etc., “settling” and/or advocating on behalf of the insured to repair or replace a damaged structure for obvious reasons. One being that it’s illegal. Another being that it infringes on their livelihood and another being that they’re not experts. The Insured could be deprived by not getting benefits rightfully and fully due them and signing a Release forever closing their claim. On the flip side, however, I can tell you that I’ve conversed with many Contractors, Restorers, Roofers, etc., who do know the insurance world and are extremely competent – they’re just not licensed as a P.A. or an Attorney. In that regard, yes, they should (and must) be designated as same if they want to adjust claims as a P.A. or handle the legal affairs as an Attorney.

    Respectfully,
    SHIRLEY HEFLIN
    Tampa, FL