New Decision on UPPA Has Major Implications for Roofing Contracts
Unauthorized practice of public adjusting (“UPPA”) refers to instances where someone other than a licensed claims adjuster or attorney works with a policyholder to settle a property insurance claim. Over the last several years, there has been an increase in UPPA activity by contractors and roofers who choose to act as and perform adjusting tasks that they are not licensed or trained to perform. Put simply, Texas contractors cannot “negotiate” insurance claims on behalf of their building owner clients. Since the UPPA Act was passed, there have been a handful of court opinions finding that contracts giving the contractor the right to “negotiate” an insurance claim are illegal, void, and unenforceable.
A recent decision from the Houston Court of Appeals held that language in a general contractor's contract violated the unauthorized practice of public adjusting (“UPPA”), was void, and entitled the Contractor to nothing, including payment for services that had already been performed (notably, repairs were performed to the satisfaction of the insured). The case involved a contract that contained the following language:
“ASSIGNMENT AGREEMENT: We furthermore authorize [Wolfe] to negotiate to said Insurance Company and Mortgage Institution if necessary, on our behalf a quick and fair settlement with our insurance carrier (With Owners Approval). All checks are to be made payable to both Owner(s) and [Wolfe].”
The court determined “this contractual language violates section 4102.051. Section 4102.051 prohibits a company from advertising, soliciting business, or holding itself out as a “public insurance adjuster,” which includes acting on behalf of an insured “in negotiating for or effecting the settlement” of an insurance claim covering real property.”
“The courts in Lon Smith and Hill emphasized two components of the contracts at issue to support their conclusions that the contracts violated section 4102.051: that the contracts authorized the appellants to (1) pursue the homeowners’ “best interest” for all repairs, and (2) reach a settlement price with the insurance companies. . . . Although the contract here does not use the phrase “best interest,” it does state that Wolfe is permitted to work on the [insureds’] behalf to secure “a quick and fair settlement.” The agreement also authorizes Wolfe to reach a “settlement.” These similarities to the analyses in Lon Smith and Hill provide further support to the conclusion that the parties’ contract violates section 4102.051. Likewise, the parties’ contract permitted Wolfe more liberties than the one analyzed in Stellar Restoration and did not contain a disclaimer stating that Wolfe was not acting as a public insurance adjuster.”
In my experience, the vast majority of reputable roofers and contractors do not engage in UPPA in Texas, and recommend the insured retain licensed attorneys or adjusters the moment a carrier raises coverage issues during the insurer’s investigation of the claim. That said, even if it is undisputed the roofer had no involvement in the negotiation of the claim, if the contract between the insured and its contractor is determined to violate the UPPA, the contract will still be void. Contractors and roofers would be well-advised to avoid language similar to the language in the Wolfe's Carpet, Tile & Remodeling, LLC decision. Wolfe's Carpet, Tile & Remodeling, LLC v. Bourelle, NO. 14-22-00579-CV (July 27, 2023).