Month: September 2017

Lon Smith Roofing

The Lon Smith Roofing Decision: Texas Law On Contractors Improperly Acting As Public Adjusters

Construction contractors acting as public adjusters, even if not deliberately, face class action lawsuit exposure according to an August 3, 2017 decision out of the Court of Appeals in Fort Worth. The big takeaway is that responsible contractors must utilize fully licensed public adjusters if the insured is in need of policy negotiation, coverage evaluation, and advocacy in support of the claim. While roofers and construction contractors can still provide valuable services both in identifying physical damage and building failures and in completing construction projects, when it comes to insurance claim negotiation and coverage evaluation, Texas law is clear, leave it to the licensed professionals.

This decision signifies not only a clarification of existing law and of contract interpretation and voiding, but also a policy focus to root out unethical contractors, seen as largely responsible for perceived increases in claims from recent hailstorms. Ethical and talented contractors remain fully viable in all areas of Texas, but they need to follow the proper processes and avoid blanket contracts. The impact of Lon Smith style contracts is potentially disastrous, including being held responsible to refund all insurance proceeds paid to the contractor and full recovery of attorney’s fees under the declaratory judgment act and the Texas Insurance Code.

The Violating Contract Language

In Lon Smith and Associates (dba Lon Smith Roofing and Contracting) v. Key, the Texas Court of Appeals certified class action status for consumers who had signed contracts with Lon Smith Roofing that 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 homeowners [‘] 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.

After analyzing existing Texas statutes and case law, the trial court and Court of Appeals confirmed the agreement and conduct of Lon Smith amounted to unauthorized public adjusting, thus making the contracts void and unenforceable, and subjected Lon Smith to the damages and relief sought by the insured.

Applicable Law For Contractors and Public Adjusters 

Chapter 4102 of the Texas Insurance Code prohibits a “person” from acting as a public insurance adjuster in Texas without a license. See Tex. Ins. Code 4102. The Court further clarified that the definition of a “person” includes a corporation. Id. § 4102.001(2). And a “public insurance adjuster” is “a person who, for direct, indirect, or any other compensation acts on behalf of an insured in negotiating for or effecting the settlement of a claim or claims” while acting as a public insurance adjuster and “also includes advertising, soliciting business, and holding oneself out to the public as an adjuster of claims.” Id. § 4102.001(3)(A)(i), (ii). A licensed public insurance adjuster is expressly prohibited from participating directly or indirectly in the reconstruction, repair, or restoration of damaged property that is the subject of a claim adjusted by the license holder; acting as a public insurance adjuster and a contractor on the same claim is a statutorily-defined conflict of interest. Id. § 4102.158(a)(1). Any contract for services regulated by chapter 4102 that is entered into by an insured with a person in violation of the chapter’s licensing requirements “may be voided at the option of the insured.” Id. § 4102.207(a). If a contract is so voided, “the insured is not liable for the payment of any past services rendered, or future services to be rendered, by the violating person under that contract or otherwise.” Id.

Important Language From The Decision 

Because Lon Smith contractually promised that it would pursue the Keys’ best interest in negotiating an agreement with the Keys’ insurance company and that LSRC’s negotiated contract price would be agreed to by the Keys’ insurance company—acts that under chapter 4102 of the insurance code LSRC could perform only if it were a licensed insurance adjuster—LSRC’s contract misrepresenting that it could and would perform these acts in connection with the Keys’ homeowners’ insurance claim violates chapter 4102 of the insurance code and constitutes an unfair or deceptive act or practice in the business of insurance under chapter 541 of the insurance code. See, e.g., Tex. Ins. Code Ann. §§ 541.001–.454 (West 2009 & Supp. 2016); Reyelts, 968 F. Supp. 2d at 844 (“The Lon Smith Defendants’ use and employment of an agreement that was and is illegal and violative of Chapter 4102 of the Texas Insurance Code constituted an act or practice in violation of Chapter 541 of the Texas Insurance Code and, thus, a violation of section 17.50(a)(4) of the DTPA.”).

Landscape After Lon Smith Roofing Decision

It should be noted that insurance industry experts from all over weighed in on the briefing including contractors, the National Association of Public Insurance Adjusters (NAPIA), insurance carriers, insurance contract drafters, and legislators. The trial and appellate courts agreed that the trend in almost every state is to regulate the business of public adjusting. The activities constituting what could be considered public adjusting will be construed very broadly, and most states, including Texas, have provided significant penalties for persons found in violation. There should be a place for the proper functioning of both public adjusters and for contractors, but all parties need to stay in their own lanes and comply with the law.

Storm Service Providers

What Policyholders Should Expect from Storm Service Providers

Natural disasters like Hurricane Harvey bring out both the best and the worst. It can be a real puzzle sorting out the good guys from the bad, the helpful from the opportunists, and the experienced from, well, more opportunists. The best thing you can do as a business owner or homeowner is to be informed, do your research, and most importantly, ask questions.

Texas property owners impacted by Hurricane Harvey are going to become familiar with service providers and professionals they never needed or even knew existed before. Here are some of the types of professionals Texans will see in the coming months, and what you need to know.

Independent Adjusters

When you contact your insurance company, they will send out an adjuster to evaluate your damage. It doesn’t matter if your insurance company is State Farm – the largest one out there – or some fly by night offshore file drawer of a company. None of them have enough adjusters to handle all of the claims that will arise out of Hurricane Harvey. So in the coming days, insurance companies will be scrambling to find as many “independent adjusters” as they can. This title – “independent adjuster” – suggests that the adjuster assigned to your claim is independent of the insurance company. But, that isn’t what it means at all – it just means these adjusters are outsourced contractors. That said, some of them are dedicated, conscientious professionals who want to get it right. But others may have had no experience at all as an adjuster before they were thrown into a crash course on adjusting and sent out into the field. We’ve seen all kinds of independent adjusters over the years, ranging from guys with 30 years of catastrophe property damage experience down to 20-year-old kids fresh from working at a Walmart cash register. Too often, the sheer mass of claims after a natural disaster results in unqualified or inexperienced adjusters being given the unfair task of handling claims they aren’t equipped to handle. So here’s the key if you get an incompetent first adjuster: ask for a re-inspection. Most of the time, your insurer will send a second adjuster out, and the further you get from the storm date, the better the adjuster quality seems to get as the incompetent ones melt away.

Public Adjusters

A public adjuster is a professional adjuster licensed under Texas insurance laws, and their role is to represent the insured on an insurance claim. Public adjusters are legally authorized to act as the policyholder’s advocate in recovering benefits due under the insurance contract. Qualified public adjusters have extensive experience inspecting storm damages, preparing estimates of the damage, and working with independent adjusters paid by insurance companies. Public adjusters work on the policyholder’s behalf to ensure your property is completely inspected and all damage is presented to the insurance company.

But beware, in the wake of a natural disaster, many unqualified public adjusters will flock to the area to take advantage of people in a vulnerable time. Texas has a strict licensing program for public adjusters with which all license holders must comply. Do not hesitate to ask for a copy of someone’s Texas license if they offer assistance with your claim – and note that licenses from other states do not make an adjuster licensed in Texas. While it is not a guarantee of competence, you can increase the changes of identifying a qualified public adjuster by working with those who are members of the Texas Association of Public Adjusters (TAPIA) or the National Association of Public Adjusters (NAPIA). There are plenty of good public adjusters who aren’t members of these organizations, but membership in TAPIA or NAPIA is a clear indication the public adjuster is licensed, competent, and experienced. Ask your public adjuster if he or she maintains a membership with one or both of these organizations; if they do not, then ask particularly detailed questions about their training and experience. Additionally, since Texas has strict requirements that govern the terms of a public adjuster’s contract, a licensed member of a legitimate organization is more likely to use a legally compliant contract.

Contractors and Roofers

Pickup trucks around the country are fired up and headed to Texas right now. And there are probably hundreds of newly minted contractors landing on our shores each day. If a supposed contractor shows up with Florida license plates, or has a 954 area code on their phone number, make sure you understand who they are and what their experience has been. Chances are, they are journeyman contractors who travel the country looking for storm repair work. Stay away from these types of contractors. Ask questions.

You should also be wary of any contractor or roofer who offers to work directly with your insurance company on your claim. Contractors can’t legally do that, and they are prohibited from acting as public adjusters, being compensated based on a percentage of any amounts paid under your policy, or even acting as both a contractor and a public adjuster on the same claim. They aren’t allowed to rebate your deductible, and as tempting as it is, don’t go there because it’s illegal. One of the largest roofing contractors in Texas was recently hit hard with an unfavorable ruling for committing the unauthorized practice of public adjusting. Illegitimate contractors will try to skirt the rules, assuming you do not know them. To make matters worse, Texas does not maintain any type of licensing requirements for contractors, so you can’t assume workers who approach you are really contractors just because the logo on their truck says they are.

Legitimate contractors will often work with public adjusters to ensure each professional is performing an authorized activity. As a general matter, to be safe, do not agree to assign any proceeds of your insurance claim to a roofer or other type of contractor.

Attorneys

Hiring an attorney may very well become necessary, but it ought to be your last resort. As frustrating as it may be, the adjusting process needs a chance to work, because there are clear rules on how long it should take, and lawyers should be contacted only when it fails. Your insurance company shouldn’t learn about your claim for the first time in a letter from a lawyer. Anyone who hires a lawyer for bad faith insurance practices during the first days after a natural disaster is probably making a mistake. But let’s drill down and cover some specific problems.

One of the biggest problems we’ve seen in the past involves lawyers who do not typically handle property damage claims suddenly becoming first party insurance experts after a storm. This phenomenon includes automobile accident lawyers, divorce lawyers and the like.

But here’s the best antidote: critical thinking and asking questions. Just ask some detailed questions about the lawyer’s experience and you’ll smoke out the inexperienced ones pretty quickly.

Here’s another warning. Lawyers who show up uninvited and solicit your business either directly or through an intermediary, without express authority from the Texas Bar, are breaking the law and committing both criminal and civil misconduct called barratry. This doesn’t mean lawyers can’t market their services legitimately – they can and should – but uninvited direct solicitation crosses the line and lawyers who do this can be prosecuted. In fact, a relatively new Texas state civil barratry law allows you to sue them if they obtained your representation through improper means.

Remember, you owe it to yourself to be your own advocate and to ask questions. Any type of professional or organization – adjusters, public adjusters, contractors, roofers, lawyers – should be more than willing to answer them and to be transparent about their experience and background.

Learn More About THE Addicks Barker Class Action

What is the case about?  

A class action lawsuit was filed on behalf of individuals who had their homes flooded after the U.S. Army Corps of Engineers intentionally conducted a controlled release of water from the Addicks and Barker reservoirs and flooded thousands of homes in Houston, that would not otherwise have flooded during Hurricane Harvey.

While the release of water from Addicks and Barker may have been necessary to protect downtown and other parts of Houston from even greater damage, the case seeks just compensation from the government for the intentional flooding of their properties. The case does not allege that the Corps committed any wrongdoing or negligent act.

Why is this case a class action?

A class action is a lawsuit in which one or more plaintiffs–in this case, Plaintiffs Angela Bouzerand, Wayne Pesek, Amy Pesek, and Fred Paul Frenger–sue on behalf of a group of people who have similar claims. Together, this group is called a “Class” and consists of “Class Members.”

In a class action, the court resolves the issues for all class members, except those who exclude themselves from the class. The case alleges that the U.S. Army Corps of Engineers’ decision to release water from Addicks and Barker impacted thousands of individuals in a similar manner and, therefore, seeks relief for all those affected.

Do you need to join the case? 

The proposed Class in Bouzerand, et al. v. The United States is defined as:

All persons or entities whose private properties were flooded as a direct result of the drainage of the Addicks and Barker reservoirs after U.S. Army Corps of Engineers discharged water from them beginning August 28, 2017.

If you meet the above definition, you are a member of the proposed Class. If the case moves forward and reaches what is called the “Class Certification” stage, you may receive notice from the parties with more details about the case and your rights and obligation if the Court decides to certify the class. Alternatively, if the Parties reach an agreement to settle this case, the Court will have to approve the settlement after allowing class members an opportunity to be heard and to state their positions and/or objections, among other things.

If you’d like your potential claim evaluated before then, feel free to contact our attorneys for a risk-free consultation.

Be careful of scams or high pressure sales tactics disguised as assistance to flood victims.

The Office of the Texas Attorney General has already received thousands of reports of fraud on Hurricane Harvey victims, from criminals impersonating government officials and insurance agents to fraudulent GoFundMe pages.

Ask questions, be vigilant, and take time to make sure you are comfortable before signing up for any services or sharing your personal information with anyone, including lawyers. If you are a member of the proposed class, as we have explained it, you are under no time pressure to retain an attorney.

Importantly right now, be vigilant at so-called “Town Hall” meetings hosted by for-profit companies, lawyers, insurance agents, and other private parties. While these meetings are sometimes well intentioned and provide helpful, informative information, do not share your contact information or sign up for any services (legal or otherwise) unless you are fully informed and comfortable doing so.

For instance, unless you have a prior relationship, lawyers should not solicit you in person at a Town Hall meeting to file or “join” a case. If a lawyer you do not know does this, they may be violating Texas ethical and even criminal rules. Lawyers who break these rules are not just committing a criminal act, but under many circumstances they can also be sued for what is called “barratry” under the law. Texas law has heightened prohibitions on lawyer solicitations that occur within 31 days of a disaster. Lawyers who break these rules, including by engaging in improper solicitations or “signing up” clients at Town Hall meetings, can be sued in court and required to forfeit their fees. If you have concerns about improper solicitations, you can report them to the Texas Bar by calling an attorney grievance helpline at 1-800-932-1900 or reporting this conduct here.

Addicks and Barker dam releases

West Houston Residents File Class Action Complaint for Inverse Condemnation

The attorneys of Raizner Slania LLP, together with Edelson PC, have filed a Class Action Complaint against the United States on behalf of property owners flooded by the Houston Addicks and Barker dam releases after Hurricane Harvey.

Around 2:00 a.m. on August 28, 2017, the United States Army Corps of Engineers (USACE) began releasing large amounts of water from both the Addicks Reservoir and the Barker Reservoir in an effort to prevent a massive failure of both systems. By doing so, the USACE knowingly flooded thousands of homes in the Houston area—homes which remain under water as of the filing of this lawsuit and will remain under water for several weeks to come due to the ongoing releases occurring from the dams.

This inverse condemnation lawsuit is not brought under the Federal Tort Claims Act and does not allege that any government official committed any wrongdoing. Instead, it alleges a violation of the Takings Clause of the Fifth Amendment of the United States Constitution. The Takings Clause specifically states that the government shall not take private property for public use from property owners without providing those property owners with just compensation. The intentional discharge of water from the Addicks and Barker dams has caused permanent damage to a class of property owners who would not have otherwise flooded but for the USACE decision to discharge the water. USACE stated that the reservoir release was done for a public purpose, and the government is obligated to compensate the property owners who were affected by this decision.

The lawsuit seeks a declaration that the actions constitute a taking under the Fifth Amendment of the Constitution, ordering the government to notify the impacted parties of its intention to compensate them for the taking, awarding just compensation, and any other relief as deemed fair by the court.

If you own property that was flooded by the Addicks or Barker dam releases, you may be entitled to compensation. Our lawyers are already taking action to protect the affected property owners’ rights. Contact Raizner Slania LLP today if you believe your home or business is in the affected area. We are available to provide more information for free at your convenience.