ADJUSTERSINTERNATIONAL.COM • (800) 382-2468 • INFO@ADJUSTERSINTERNATIONAL.COM 5 4 ADJUSTINGTODAY.COM were unconstitutionally vague under the Fourteenth Amendment. The Texas Supreme Court rejected both arguments. The Court held that the challenged statutes regulate professional conduct and representative capacity, not protected speech. The licensing requirement prescribes what a person must do - obtain a license before acting as a public adjuster. The dual-capacity prohibition restricts a contractor from undertaking a business engagement that creates a conflict of interest. According to the Court, neither provision is triggered merely by what a person says about property damage. They are triggered by the role the person assumes in the claim-settlement transaction. The Court also made an important practical distinction. Contractors are not forbidden from discussing repairs, damage, pricing, scope of work, supplements, or clarifications. What they may not do, without proper licensing, is act on behalf of the insured in negotiating for or effecting settlement of the insurance claim. Stonewater’s own contract language, insured how to present the claim, represents that it will obtain claim approval, demands payment beyond the contractor’s own factual estimate, or holds itself out as able to handle the insurance claim. The 2024 Stonewater ruling The Texas Supreme Court’s decision in Texas Department of Insurance v. Stonewater Roofing, Ltd. is now one of the most important authorities on the distinction between contractor speech and public-adjuster conduct. Stonewater Roofing was not licensed as a public insurance adjuster. Its website described the company as an “Insurance Specialist” and “The Leader In Insurance Claim Approval,” and its customer contract authorized Stonewater to negotiate with the insurance company on the customer’s behalf and then perform the resulting repair work. Stonewater challenged Texas’s public-adjuster licensing requirement and its dual-capacity prohibition, arguing that the statutes violated the First Amendment because claim negotiation involves speech. It also argued that the statutes which authorized it to negotiate with the insurer on the customer’s behalf, “practically recite[d]” the statutory definition of public adjusting. Its marketing reinforced the same message by holding the contractor out as an insurance-claim specialist. For public adjusters, insurers, contractors, and policyholders, Stonewater is significant because it answers a common defense to UPPA enforcement: the claim that regulating unlicensed adjusting is really regulating speech. The Court’s answer was no. Licensing laws may incidentally involve communications, but they regulate the professional role and commercial relationship through which claim settlement is undertaken. A warning about unenforceable assignments Stonewater is not the only modern warning. In 2020, the Iowa Supreme Court decided a trio of cases involving 33 Carpenters Construction, Inc., a residential contractor that obtained post-loss assignments of insurance benefits and then sued insurers for additional payment. The court held that a residential contractor acting as an unlicensed public adjuster could not enforce its post-loss assignment against the homeowner’s insurer.4 The Iowa decisions are important because they demonstrate that UPPA can have consequences beyond regulatory penalties. If the underlying contract or assignment is void or unenforceable because the contractor performed public-adjuster services without a license, the contractor may lose the very payment rights it sought to obtain. The policyholder may also face confusion, delay, or litigation over a claim that should have been handled by properly licensed professionals from the start. Legal jeopardy for policyholders and insurers Property owners should not assume that allowing a contractor to “handle the claim” is harmless. Depending on the state, knowingly authorizing an unlicensed person to negotiate or settle a claim may create regulatory problems, contractual disputes, or coverage complications. At minimum, it can place the insured’s claim in the hands of someone who is not trained or regulated for that role. Insurers also have obligations. Several states instruct insurers not to engage with unlicensed adjusters in the settlement of claims. Rhode Island’s Insurance Division, for example, has warned that contractors, estimators, and other unlicensed individuals may not negotiate or effect settlement of an insurance claim, provide claim advice, advocate for the customer in the adjustment of a claim, or prepare the insurance claim for the customer. Insurers are expected to verify that they are dealing with properly licensed representatives when claim settlement is involved.5 This does not mean an insurer should refuse to consider legitimate repair information from a contractor. The better practice is to separate the source of factual construction information from the person authorized to represent the insured in claim settlement. A contractor may help document the cost and nature of repair work. A licensed public adjuster or attorney, where permitted, may advocate for the insured’s claim rights. Protecting consumers Some ask why a contractor should not simply become licensed as a public adjuster and perform both functions. The answer is conflict of interest. A Generally appropriate contractor activity Activity reserved for licensed public adjusters or attorneys Inspect damage and identify repair needs. Negotiate the amount of the insurance settlement on behalf of the insured. Prepare and explain a repair estimate. Interpret policy coverage, exclusions, or claim rights for the insured. Discuss construction methods, materials, code issues, and pricing. Advocate for coverage or claim payment as the insured's representative. Meet an insurer's adjuster to answer factual construction questions. Prepare, present, or settle the insurance claim for the insured. Submit factual supplements or clarifications concerning the contractor's own estimate when requested. Advertise that the contractor will “handle,” “negotiate,” “settle,” or “get approved” the insurance claim.
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