IMPORTANT TEXAS UPPA UPDATE FROM TAPIA
by Don Wood, TAPIA President
November 10, 2015


In 2013 a company that calls itself “the largest residential roofing company in Texas," lost a legal battle over its contracts and the services it offers its customers. Lon Smith Roofing & Construction was ordered by a federal magistrate judge to pay $275,000 in damages and attorney fees to a Fort Worth couple who claimed the company failed to keep its contractual promise to arrange with the couple’s insurance company to pay for a new roof.


For those that don’t already know, the facts of the case go something like this: Lon Smith’s contract with Mr. and Mrs. Reyelts promised to make all arrangements with the Reyelts’ insurance company to cover the cost and replacement of a new roof. Lon Smith installed the new roof, but never made contact with the Reyelts’ insurance company. When the insurance company received a $15,000 bill for the new roof, it refused to pay, saying they had not seen the old roof before it was torn off nor been contacted by Lon Smith. Lon Smith went on to bill the Reyelts for the entire amount of the roof and, when they failed to pay, sent three demand payment letters threatening a lawsuit unless they paid. The Reyelts hired an attorney and sued Lon Smith claiming that Lon Smith failed to perform under the contract and alleging it was illegal for Lon Smith to negotiate on behalf of the Reyelts with their carrier. The court agreed and ordered Lon Smith to pay $275,000 in damages and attorney fees based on several different factors affecting the case. Lon Smith’s contract, read, in part: Lon Smith agrees “to pursue homeowners’ best interest for all repairs, at a price agreeable to the insurance company” and to work out “the final price agreed between the insurance company” and Lon Smith.


This is a clear violation of Texas UPPA laws.


In coordination with the Texas Association of Public Insurance Adjusters, the National Association of Public Insurance Adjusters filed an amicus curiae brief in the Fifth Circuit Court of Appeals supporting the trial court decision. The Fifth Circuit considered the party’s arguments and affirmed the trial court’s decision. The result: a contractor contingency agreement giving the contractor the right to negotiate a claim on behalf of a policyholder is illegal and, if held to account by the policyholder, the roofing contractor must return all amounts paid under the contract.


Following the outcome of the Reyelts case, another important development occurred when Lon Smith filed suit against a homeowner, Joe Key, in Tarrant County under similar circumstances. The Court in that case struck down Lon Smith's contract as void, illegal and unenforceable. As a result of the Key case, a recent and very important development occurred when the 236th District Court certified a class action against Lon Smith Roofing comprised of all customers since 2003. Should the class action plaintiffs prevail, all Lon Smith customers over the past decade will be entitled to the return of all amounts paid for their roofs. The action taken by these two Court’s has sent a powerful message to contractors throughout Texas - attempting to offer the services of a public insurance adjuster without being licensed is against the law and you will be held accountable!


TAPIA applauds the hard work of the attorneys and other aligned advocates who’ve worked tirelessly in order to help bring awareness to this important issue. TAPIA will never stop working to protect the integrity of public insurance adjuster licenses and to ensure that Texas policymakers understand the dangers of unauthorized public adjusting.


TDI Update - License Renewals and Contract Approvals


During the last several years TAPIA has worked closely with the Texas Department of Insurance to help alleviate some of the common issues plaguing public adjusters in Texas. At times those issues are substantive and at other times they’re procedural. In the case of license renewals and contract approvals the case is very much the latter. Texas PA’s have been frustrated with the length of time it's taken to receive license renewals and contract approvals. Making the matter worse, contracts are seemingly approved with ease for one entity then lengthy delays and/or denials occur with near identical contracts submitted by another. To be sure, it’s an issue we have brought to the department’s attention on more than one occasion.


TAPIA’s meetings with the Department have yielded the following actions:


* TDI has requested that TAPIA draft a standard “form” contract that can be used for quick approval by any Texas licensed public adjuster. The department is looking to TAPIA for guidance and support on this issue in order to help provide a standard solution to improve upon Form 535.


* Following meetings with TAPIA representatives, TDI has committed to updating its web portal by dedicating more space and information to educate consumers on Texas public insurance adjusters. The department has asked that TAPIA assist in the content and subject matter of that enhanced web portal.


* Pursuant to TAPIA’s request, TDI has confirmed that if a license renewal payment and request are received by TDI, the PIA’s license won’t expire due to a failure of TDI to address it by the expiration date. The license will show active in TDI’s system (and through its public interface) despite any expiration date, until the approval catches up.


TAPIA representatives are scheduled to meet with TDI staff again this week to look at other ways of reducing the backlog of approvals and to improve the content requirements for public adjuster contracts. The department is currently working on a 5-8 day delay, from the date of submission, in reviewing a contract or processing a license renewal. This delay is based largely on workforce reductions and the manual nature of PIA renewals. That lag should be taken into consideration by PIA’s submitting contracts or seeking license renewals. Any issues arising during the process will potentially add to that delay.

You can be confident that TAPIA is working hard, along with the good folks at the TDI, to improve the process of PIA license renewal and contract reviews so that PIA’s spend less time working on the "procedural" and more time working on the "substantive" pieces of their business!