Everything is bigger in Texas, including the hail storms. In Fact, Texas continually makes the top 10 list each year for the amount of insurance claims made to repair hail damage. It’s no surprise that many roofing contractors consider themselves insurance claim specialists. But can roofing contractors legally use that term? No, and while many contractors in Texas are already aware of the limitations of Texas Insurance Code Section 4102 that prevents the unauthorized practice of public adjusting, an ongoing lawsuit could mean widespread changes for or all Texas contractors who attempt to negotiate insurance claims.
Texas became the first state to prosecute a roofing company, Lon Smith Roofing, through a class action lawsuit for the unauthorized practice of public adjusting. How was the state able to prove their case? By reviewing contracts Lon Smith policy holders sign before hail damage restoration work began – all of which included a very specific clause. The residential homeowner contracts in question specifically stated:
The 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, and at NO ADDITIONAL COST TO HOMEOWNER EXCEPT THE INSURANCE DEDUCTIBLE AND UPGRADES. The final price agreed to between the insurance company and LSRC shall be the final contract price.
The federal court ruled that the written agreement between the homeowners and Lon Smith Roofing was “illegal, void and unenforceable” because it violated provisions of Texas Insurance Code Section 4102 in that a company or individual cannot both negotiate an insurance claim on behalf of an insured and make the repairs.
Why should other Texas roofing contractors be paying attention to this case? The Supreme Court of Texas has ruled the contracts Lon Smith used to be illegal and void. This means Lon Smith must refund of all money received from homeowners that signed these contracts. Every single dollar must be returned to homeowners with claims dating back to 2003 – about 3,000 claims total. The total repayment amount is over one million dollars.
Lon Smith Roofing appealed the decision of the Fort Worth Court of Appeals to the Texas Supreme Court in January of this year. Lon Smith Roofing, and many other Texas roofing contractors, will now have to wait and see what the Texas Supreme Court does with the matter.
Interested in learning how you can keep your roofing company insurance claim compliant? Contact us to learn more.
