Tag: Roof Damage

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.

Roof Damage

The Role of Roofing Contractors in Damage Repair

Any number of natural disasters can cause roof damage. Damage is usually very easy to spot with missing or damaged shingles or leaks in your roof or ceiling. Whether it was just a storm or a devastating tornado, there are necessary steps to take to get your roof repaired. Once you report the damage to your insurance carrier, they will send an insurance adjuster to investigate the extent of the damage and provide an estimate for repairs. Once you know how much your insurance company will pay to repair your roof, you can begin looking for a roofing contractor.

How To Pick A Contractor

Not doing your research on your contractor could leave you hung out to dry. A contractor should be licensed and insured to work in your area. When looking for a contractor, it’s essential to verify the contractor’s name, address, phone number, and any references provided. Additionally, make sure that your roofer has experience working under any applicable building codes required in your area, like the Texas Windstorm Building Code (TWBC). Your contractor should have familiarity with insurance claims and can help you work with your insurance company. You should be wary of any contractor who is not insured, only accepts cash, or who only has out of state references.

Obtain Several Repair Estimates

In order to get a fair price for your damage, it’s wise to get several estimates from different contractors. This ensures that you get the best price to repair your roof. The estimates you obtain should be put in writing, and you should retain copies of any warranty terms and/or signed agreements. Once you have selected a contractor, the work can begin to repair your roof. Final payment to the contractor should not be made until the work is completely finished.

Raizner Slania Has Handled Hundreds of Roof Damage Claim Denials

If you feel like your insurance claim was underpaid, delayed, or it was in fact denied, the attorneys at Raizner Slania can help. We have years of experience examining insurance policies to determine the intricacies of various forms of coverage to find out what our clients may be owed. If you are facing an insurance company that is not giving you the full compensation you are owed under your policy, contact Raizner Slania today.

Sources:

http://www.tdi.texas.gov/wind/documents/RepairingRoofAfterStorm.pdf

https://stormdamagecenter.org/identify-storm-damage.php