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Texas Contractor vs. Update unauthorized practice of public adjustment | Property Insurance Law Team Blog



This post is an update of Can Texas roofing and restoration companies advertise that they are insurance specialists and can negotiate on behalf of the policyholder? The Texas Department of Insurance (TDI) has filed a motion that the Texas Supreme Court should take up the case instead of simply returning to the trial level for further proceedings.1 Whether the Texas Supreme Court will do that is anyone’s guess, but the petition has some very interesting arguments.

TDI notes the nature of the case as follows:

Stonewater Roofing, Ltd. Co. (‘Stonewater’) sued the Texas Department of Insurance and its commissioner (collectively ̵

6;TDI’) for annulling two provisions of the Texas Insurance Code because the statutes violate the First and Fourteenth Amendments to the U.S. Constitution … TDI left filed a motion to dismiss under the Texas Rule of Civil Procedure 91a. CR.53-64.

This is an important point. The contractor sued TDI. It really chose a good factual case to do so because the policyholder also hired a public adjuster. The contractor claims that the public adjuster made the public adjustment. In this scenario, it would be difficult to actually understand how the policyholder could be harmed because there was an authorized public adjuster who negotiated the policyholder’s claim.

TDI claims that the case has two primary issues:

Section 4102.051 (a) of the Texas Insurance Code restricts a person from participating in the practice of unlicensed public insurance. Section 4102.163 (a) further restricts a contractor from acting as a public insurance adjuster for all property for which the contractor provides (or may provide) contracting services, whether or not the contractor has a license.

The questions presented are:

(1) Whether Sections 4102.051 (a) and 4102.163 (a) are content-based limitations of numbers that imply the first addition; and

(2) Whether Stonewater can claim that these provisions are not vague, even though they clearly prohibit Stonewater’s own conduct.

I think that the summary of the argument without references to cases provides a framework that everyone can understand the TDI position:

Just because a profession involves speaking to the public … does not mean that the profession is immune to any regulation aimed at professional conduct that may also inadvertently involve speech that occurs as part of that behavior. After all, many professions involve talking to clients, counterparts, patients, co-practitioners, and practitioners of other professions. Such speech is in fact a central part of professions such as law practice, medical practice and public insurance adaptation. When the state regulates these professions, including by regulating who is allowed to practice them or by establishing rules for conflicts of interest that govern practitioners, it regulates behavior – not speech.

It has never been the case that a law prohibiting, for example, an unlicensed person from providing legal advice is subject to review of the first supplement. Such a regulation, as well as the permit and conflict of interest provisions that are relevant in this case, limit the behavior – ie who is allowed to practice the profession and under what conditions they are allowed to do so. The temporary burden of speech that comes from that restriction does not support a challenge in the First Amendment. If, as the Court of Appeal concluded, such laws govern speech as speech, systems requiring licenses for lawyers and punishing unlicensed provision of legal advice would be in jeopardy, as would similar rules for many other professions.

So what will happen? Who knows? The case never developed objectively because the first trial decision was before any evidence was taken.

Various insurance departments clearly agree that contractors and insurance adjusters should talk and discuss the price and method of restoration. In order to fulfill the obligation in good faith to make a complete investigation and evaluation of the damage, the insurance companies’ adjusters must talk to the policyholder’s contractor. I highlighted this obligation in
Failure to communicate with the insured’s contractor is bad faith. Consequently, from the contractor’s point of view, there seems to be a very fine line between what can be said and done legally and what cannot be said by the restoration contractor. I think this is what generates much of the freedom of expression and vagueness of the regulatory debate on this issue.

On the other hand, I made the following comment in Are you hiring a lawyer to fix your roof? Are you going to hire a roofer to argue your roof insurance claim in court?:

Americans hate to hear that we can do nothing. I feel the same way. Yet most states regulate who can fix roofs, who can provide engineering services, who can exercise law, and who can exercise public adaptation to protect our citizens from those who do not have credentials.

TDI and all insurance departments have an obligation to protect policyholders and the general public. The interpretation of insurance terms, benefits available and different legal obligations for policyholders are complex and significant. Many of these problems have nothing to do with the cost of fixing a roof. Having legitimate individuals who are experts in these fields is certainly a matter for regulatory bodies, and it is in the public interest to prevent those without these credentials from potentially harming the public.

Public adaptation and insurance restoration are both very important to the public. The interplay between the two and the role of the regulator is what this case is about. We will keep readers updated with all important developments in this case.

Today’s thoughts

It is through the goodness of God that we in our country have these three unspeakably valuable things: freedom of speech, freedom of conscience, and the wisdom of never exercising any of them.
-Mark Twain
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1 For example. Inst. v. Stonewater Roofing, Ltc. Co.No. 22-0427 (Tex. [Petition for Review] 6 July 2022).


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