In a recent ruling, the Supreme Court of Texas addressed important issues in Texas Department of Insurance v. Stonewater Roofing, a case examining the legality of roofing contractors acting as public adjusters on insurance claims. Stonewater Roofing, a professional contractor, had been assisting customers with their insurance claims, effectively taking on roles traditionally reserved for licensed public adjusters. Here’s what this case means for contractors, public adjusters, and insured homeowners.
1. The Role of Public Adjusters vs. Contractors
The Texas Insurance Code differentiates between contractors and public adjusters. Public adjusters represent insured individuals in the negotiation and settlement of insurance claims, while contractors focus solely on repairs and restorations. This distinction is crucial; Texas law requires that public adjusters be licensed, and a contractor cannot act as a public adjuster for properties they’re contracted to repair. The court upheld these regulations to prevent conflicts of interest and maintain transparency in the insurance claims process.
2. Stonewater’s Argument: Free Speech and Due Process Concerns
Stonewater Roofing challenged the law on two main constitutional grounds:
• Free Speech: Stonewater argued that discussing insurance claims with clients involved protected speech, which they claimed should not require a license.
• Due Process: They argued the licensing and dual-role prohibitions were too vague, making it unclear for contractors to know what they could and couldn’t do.
However, the court found that these laws regulate professional conduct, not free speech, and concluded the regulations were clear enough to provide fair guidance.
3. Implications for Contractors
The Stonewater decision clarifies that contractors should avoid language in advertising or contracts suggesting they can negotiate with insurance companies on behalf of their clients. For example, phrases like “we help with your insurance claim process” could cross a legal line. Texas law does permit contractors to provide factual information to insurers about repairs, but they must avoid roles that could be seen as negotiating or advocating on behalf of the insured.
4. Guidance for Homeowners
For homeowners navigating property damage claims, it’s essential to understand that only licensed public adjusters can legally negotiate with insurers. While contractors can and should provide information about the scope of repairs, they cannot act as intermediaries between homeowners and insurers. Hiring a licensed public adjuster ensures compliance with Texas law and helps avoid conflicts of interest.
5. Future Considerations for the Industry
This case underscores the importance of adhering to Texas’s regulatory framework governing public adjusters. Contractors and public adjusters should be clear about their roles in the insurance claim process, focusing on either repairs or claim negotiations—not both. The Stonewater ruling strengthens these boundaries, reinforcing ethical standards and regulatory compliance in the insurance industry.
For Texas public adjusters and contractors, the Stonewater case is a reminder to stay informed about licensing requirements and restrictions to avoid legal complications and ensure professional integrity in the insurance claim process.
