Just last week, the Iowa Court of Appeals in 33 Carpenters Construction, Inc. v. The Cincinnati Insurance Company,1 held that 33 Carpenters, a contractor who was the assignee of a hail and wind storm claim, acted as an unlicensed public adjuster.

33 Carpenters, a home-repair contractor, entered into an agreement for the repair of an insured’s claim for hail and wind damage. In exchange for repairing the home, 33 Carpenters would receive any proceeds paid by Cincinnati, the insurer. A formal Assignment of Claim and Benefits (“AOB”) was entered into between the insured and 33 Carpenters. The AOB allowed 33 Carpenters to prosecute, collect, settle, and compromise the claim in its own name.

Cincinnati assigned an adjuster who reviewed the claim, prepared an estimate of the repair costs, and issued payment. 33 Carpenters contacted Cincinnati requesting a further estimate to address additional damages. Cincinnati refused to communicate with 33 Carpenters and would only address its communication to the insured. Ultimately, 33 Carpenters sued Cincinnati for breach of contract, alleging Cincinnati failed to pay it for all benefits due and owing under the insurance policy. Cincinnati denied it breached the policy and filed affirmative defenses which included that in obtaining the assignment from the insured, 33 Carpenters acted as a public adjuster without a license, in violation of Iowa Code chapter 522C (2017), which rendered the assignment unenforceable.

While noting that law favors the assignability of causes of action, the district court ruled that the assignment was invalid as 33 Carpenters was not a licensed public adjuster. The district court found that the website for 33 Carpenters included advertisements to advocate on behalf of an insured with their insurance adjuster and would work directly with the insurance company to ensure all damaged areas of the house are included in the claim. In that regard, the district court found that 33 Carpenters attempted to aid the insured in negotiations with its insurer and was involved in determining how Cincinnati would make its insured whole. The district court found 33 Carpenters was acting as public adjuster without the required license.

On appeal, 33 Carpenters asserted once it had obtained the AOB it was no longer acting on behalf of the insured, but rather on its own claim. In determining whether 33 Carpenters was “acting for or aiding [the insured] in negotiating for or effecting the settlement [with Cincinnati] of a first-party claim for loss or damage to real or personal property,” the appellate court rejected 33 Carpenters’ argument that it was pursuing its own claim, noting that it was a “form-over-substance” argument. That while the assignment was intended by 33 Carpenters to benefit it by allowing it to make a profit, it was fundamentally and primarily a vehicle by which the insured intended to benefit when 33 Carpenters successfully negotiated and effected a settlement with Cincinnati so 33 Carpenters could repair the home. The appellate court found there was no dispute that 33 Carpenters was “acting for and aiding the insured in negotiating for and attempting to effect a settlement of the insured’s first-party claim.” In so doing, 33 Carpenters acted without a license and was in violation of the Iowa Code. As such, the appellate court upheld the assignment as unenforceable and granted summary judgment in favor of Cincinnati.
1 33 Carpenters Construction, Inc. v. The Cincinnati Ins. Co., No. 17-1979 (Iowa App. Feb. 6, 2019).

  • ND

    it’s about time

  • Chris Pce

    Ok so takeaways here??? Make sure you’re a licensed PA if you’re a contractor doing AoB-based work on insured’s homes?? How can a contractor argue for what they feel they’re owed to perform repairs if they will be accused of UPPA?

    • Anthony

      The insuring agreement is not between the contractor and the insurance company. The agreement is between the home owner and the insurance company. Therefore only a licensed public adjuster or attorney has the ability to ‘represent’ the insured and argue a proper settlement based on what the policy affords, not necessarily what the contractor ‘feels’ they are owed.

      Also..never use AOB. If the home owner doesn’t control their settlement money they have no leverage to get you to fix things if you underperform or they are unhappy with your work. 33% to start, 33% in the middle and the balance when they are satisfied.

      • Jeff Brinkman

        Anthony is right on !

    • Bryce McLarney

      You can hire a public adjuster if you are not one if you have an AOB.

  • Kyle Larson

    If this is how courts are going to see this issue, we all better start looking for a different path to get the repairs done correctly. I can imagine a world where there is a PA on a majority of the claims no matter the size. I am sure insurers would just love that! At a min a contractor has to be able to discuss the scope, & price, of the repairs with the insurer. Does that also benefit the insured? of course it does. But is is UPPA? Maybe, by the strict definition of effecting the claim.

    The reality is though, we all work in a world where the vast majority of consumers want to have a contractor who can, and will, act on their behalf in regards to the scope of the repairs. I think one solution may be to create a licensed, regulated position. Cal it “Insurance Restoration Contractor”, and only contractors licensed under this sort of thing would be allowed to talk to insurers. Obviously to obtain this sort of license one would have to pass some sort of testing demonstrating that they understood what insurance fraud was and that they would not engage in it. A homeowner could hire whoever they want but an insurer would not have any obligation to discuss anything with an unlicensed contractor. On the flip side it would also create a path for insurers and regulators to punish bad actors who engage in unethical, fraudulent dealings.

    I get PA’s will cry foul, but unless PA’s want to start taking on thousands of 10k claims who is supposed to help consumers get their repairs done correctly?

  • I do not think that is a very good takeaway. A PIA is normally limited to the amount they can charge, meaning the contractor, by becoming the PIA, would be limited by the fee cap. Normally, that cap is much lower than what the profit should be on the project, so I do not think it is a win, and if asserted by opposing counsel, could open up the contractor to some much stiffer penalties. (Which, in part, is what occured here. Contractor went on offense, then was countered, debunked, and ultimately ended up in prosecution on their part.) Not sure on the one above, but if was opposing counsel… I would be asking to see the numbers.