On February 14, 2020, the Iowa Supreme Court issued decisions in three companion cases involving a residential contractor, 33 Carpenters Construction, affirming the Court of Appeals’ decisions against the contractor.
In light of these recent appellate decisions, contractors who interact with their clients’ property insurers, including storm response contractors and other remodeling companies, need to take a close look at their practices and seek legal advice as necessary regarding changes that need to be made to their job practices, contracts, website, and other marketing materials to comply with Iowa law.
In the 33 Carpenters case, the Iowa Supreme Court, agreeing with the Iowa Court of Appeals, concluded that the storm response contractor acted as an unlicensed public adjuster in its dealings with a homeowner’s property insurer by advocating for and assisting its client-homeowner in the handling and settlement of the insurance claim. The Court also found problems in the contractor’s website in which the contractor marketed itself as working directly with its clients’ insurers and advocating on its clients’ behalf regarding their insurance claims.
Because the Court held that the contractor acted as an unlicensed public adjuster, it consequently ruled that the contractor’s Assignment of Claim and Benefits--which would have otherwise entitled the contractor to payment for its work--was void and unenforceable.
This is an area of law that is not always fully understood by the construction industry. Since 2007, Iowa law has provided that a person acts as an unlicensed public adjuster if they, for compensation or value, act on behalf of an insured (aka the client or customer), by:
- Acting for, assisting, or aiding an insured in negotiating for or effecting the settlement of the homeowner’s claim with its property insurer;
- Advertising or soliciting business or representing to the public that the person is a public adjuster of claims; or
- Directly or indirectly soliciting business investigating or advising an insured about the homeowner’s claim with its property insurer.
Thus, whenever a contractor assists its client in negotiating or handling the client’s insurance claim, or otherwise advocates for its client with the property insurer, that contractor is running the risk of the Insurance Commissioner or a court holding that it is an unlicensed public adjuster.
Frankly, it can be difficult for a contractor to strictly abide by the law, but there are numerous steps--some smaller and some larger-- contractors can and should take to substantially lessen the risk of being deemed to be an unlicensed public adjuster.
Finally, in 2019, the Iowa legislature passed a new law mandating further restrictions on potential assignment of claims and benefits involving residential contractors.
If your company works with your client’s property insurers
and you have any questions about this area of law, contact legal counsel.
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