On Behalf of | Oct 27, 2022 | Insurance Law

Recently, the Iowa Supreme Court held that a repair contractor who was acting as an unlicensed public adjuster was barred from obtaining compensation from the homeowner’s property insurer.

In 33 Carpenters Construction, Inc. v. State Farm Life and Casualty, 939 N.W.2d 95 (Iowa 2020), an employee of 33 Carpenters Construction Company approached the insureds several months after a hail storm to advise them of potential hail storm damage.  The insureds agreed to allow the contractor’s employee to inspect the roof.  After the inspection, which found hail damage, a contract was presented to the insureds labeled “Agreement” and “Insurance Contingency,” which was signed by the homeowners.  Under the contract, 33 Carpenters agreed to repair the storm damage in exchange for the insured’s insurance proceeds.  The contract authorized 33 Carpenters to act on behalf of the insureds in submitting and obtaining payment of insurance for the hail damage.  Initial documents did not, however, formally assign the insured’s rights against the insurance company to 33 Carpenters.  Eight months after the insureds did sign an “Assignment of Claims and Benefits,” well after the work had commenced on the roof.  The insureds submitted a property damage claim to their homeowners insurer on the same day that 33 Carpenters started work on the roof.  The insureds inspected the roof and estimated the RCV at $30,607 and the ACV at $22,198.  The insurance company then paid the ACV value.  The insureds transferred the payment to 33 Carpenters, which continued with the repair of the roof.

After the initial ACV payment, 33 Carpenters prepared a “supplement,” representing an 81.3% increase in the total repair cost of the roof.  Shortly after submitting the supplement is when 33 Carpenters obtained the assignment and then sued the insurance company.

Litigation ensued and the insurance company filed a motion for summary judgment.  The MSJ was granted by the Court, ruling that the insured’s assignment of their claim to 33 Carpenters was invalid under Iowa law because 33 Carpenters was acting as an unlicensed public adjuster, as defined by Iowa Code Chapter 522C.  The Iowa Supreme Court affirmed.  In doing so, the Supreme Court rejected 33 Carpenters’ argument that only the Iowa Insurance Commissioner had exclusive enforcement authority under the insurance code, and that courts lacked authority to invalidate the contract.  Next, the Court found that under Iowa’s statutes governing residential contractors, residential contractors are prohibited from performing the same conduct that public adjusters are licensed to perform.

The case facts established that 33 Carpenters had approached the insureds, uninvited, and offered to inspect their property, thereby directly soliciting business from the insureds.  A 33 Carpenters employee directed the insureds to file an insurance claim with their insurance company.  The same employee attended the inspection of the insureds’ property with the insurer’s representative, instead of the insureds attending the inspection.  The Court found that 33 Carpenters’ representations which indicated that its employees would “meet personally with your insurance adjuster, as an ADVOCATE on YOUR behalf,” aligned with the actual conduct of 33 Carpenters.  The Court found that 33 Carpenters’ conduct showed that 33 Carpenters had acted for and aided the insureds in effecting the settlement of the claims, in violation of the public adjuster statute.