ADJUSTERSINTERNATIONAL.COM • (800) 382-2468 • INFO@ADJUSTERSINTERNATIONAL.COM 3 2 ADJUSTINGTODAY.COM But the arrangement is not merely a matter of convenience. In most states, settling an insurance claim on behalf of an insured is the work of a licensed public adjuster or, in appropriate circumstances, a licensed attorney. A contractor may inspect damage, estimate repair costs, explain construction methods, and answer factual questions about the work. What the contractor may not do is step into the insured’s shoes and negotiate or effect the settlement of the insurance claim without the license and duties that come with that role. The problem is commonly known as the unauthorized practice of public adjusting, or UPPA. It is not a technicality. It is a consumer protection issue, a claims-handling issue, and an integrity issue for the property insurance system. Recent court decisions and statutory reforms, including the Texas Supreme Court’s 2024 decision in Texas Department of Insurance v. Stonewater Roofing, Ltd., have made the dividing line clearer than ever.1 The line is not between silence and speech. It is between providing construction information and assuming the legal role of the insured’s claim representative. Why the line matters Public adjusters represent policyholders in the adjustment, negotiation, and settlement of first-party property insurance claims. Their work is regulated because they handle matters involving contract rights, insurance coverage, claim valuation, settlement strategy, and sometimes claim proceeds. They are expected to understand property damage, policy language, documentation requirements, duties after loss, and the ethical obligations that attach to representing an insured. Repair contractors perform a different and also essential role. They evaluate physical damage, propose a scope of repair, provide pricing, perform construction work, and stand behind the completed job. Their expertise is indispensable to claim resolution because insurers and policyholders often need contractor input to understand what work is necessary and what it will cost. The difficulty arises when one party attempts to occupy both roles. A contractor who will profit from the repair work has a direct financial stake in the amount of the claim payment allocated to that work. This is not an integrity issue. Most contractors are honest, but their focus may unknowingly differ from the policyholder’s broader interests. A property claim may involve building damage, code upgrades, business interruption, personal property, additional living expenses, debris removal, ordinance or law coverage, sublimits, deductibles, and exclusions. A contractor focused on its own work is not positioned to evaluate the claim as a whole. Instead of merely receiving payment for completed work, a contractor with an assignment might attempt to control communications with the insurer, submit supplements, dispute coverage or pricing, demand appraisal, or file suit in its own name. In that setting, the assignment becomes more than a payment mechanism. It becomes a vehicle for claim representation by someone who may not be licensed to represent the insured. Florida became the best-known example. For years, AOB litigation and related claim-cost inflation were a central part of Florida’s property insurance crisis. The Legislature responded with a series of reforms, culminating in a prohibition on assigning post-loss benefits under residential property policies and certain commercial property policies issued on or after January 1, 2023.2 The result is that the Florida example is now both a warning and a case study: widespread use of AOBs in property claims can distort the claims process so severely that legislatures may remove the mechanism altogether. The broader principle applies outside Florida. A policyholder may have a right to assign certain proceeds after a loss, depending on the policy and governing law. But assigning the right to collect money is not the same thing as assigning the regulated role of adjusting, negotiating, or settling the claim. Public-adjuster licensing laws continue to govern who may act for an insured in the claim process. Contractor boundaries Regulators generally recognize that contractors must be able to communicate about repairs. A contractor may describe the damage observed, explain the cause of damage from a construction standpoint, provide a repair estimate, discuss material choices, answer questions about labor and pricing, and meet an insurer’s adjuster at the property to explain the proposed work. Those communications are often necessary for a fair and efficient claim. The crossing point comes when the contractor moves from explaining its work to advocating as the insured’s representative in the settlement of the claim.3 A contractor crosses that line when it negotiates claim value on behalf of the insured, interprets coverage for the insured, advises the “The line is not between silence and speech. It is between providing construction information and assuming the legal role of the insured’s claim representative.” giving the contractor the right to collect the insurance proceeds. In this issue of Adjusting Today, Joseph S. Harrington and Jim Beneke identify the problems that arise when a restoration contractor’s actions cross the line into public adjusting. It also sets forth clear guidelines on what the restoration contractor should and should not do, particularly considering the landmark Texas Supreme Court case, Texas Department of Insurance v. Stonewater Roofing, Ltd. (2024). It is our hope that this article clarifies any confusion over the roles and benefits provided by restoration contractors and public adjusters. With a full understanding of these distinct roles, insureds will be better understanding of the importance of having a public adjuster managing and negotiating their entire claim while at the same time, utilizing the restoration contractor’s expertise in the areas where it is most suited. Ethan A. Gross, JD Editor AOB vs. licensing laws Much of the modern UPPA problem grew alongside assignment of benefits, commonly called AOB. In its simplest form, an assignment of benefits allows a policyholder to assign the right to collect insurance proceeds to a third party, often a contractor or remediation company. The practice is familiar in health insurance and auto physical damage claims, where providers may bill insurers directly while the policyholder remains responsible for applicable deductibles and other obligations. Property insurance AOB arrangements became more controversial because they were sometimes used to bypass public-adjuster licensing laws.
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