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).