Contractors Must Proceed Cautiously

Contractors who interact with their homeowner-clients’ insurers must proceed cautiously after a recent Iowa court decision.

Earlier this year, the Iowa Court of Appeals rendered a significant decision in the case of 33 Carpenters Construction v. Cincinnati Insurance. All 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 Court of Appeals, agreeing with the District Court, concluded that the storm response contractor acted as an unlicensed public adjuster in its dealings with the homeowner’s property insurer by advocating for and assisting its homeowner-client in the handling and settlement of the insurance claim.

The Court also found problems in the contractor’s statements on its 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, the Court 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.

Further details on the specific facts of this case can be found by reading the Court of Appeals Decision, District Court Opinion, as well as the Statement of Facts submitted by the insurance company to the District Court.

This is an area of law not always fully understood by contractors. Since 2007, the Iowa Code has provided that a person acts as an unlicensed public adjuster if a person, for compensation or value, acts on behalf of an insured, 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—that a contractor can and should take to substantially lessen the risk of being deemed to be an unlicensed public adjuster.

If your company works with the property insurers of your clients and you have any questions about this area of law, please contact me or your attorney to discuss your questions.

Jodie McDougal, Davis Brown Law Firm, 515-288-2500,

Jodie is a Construction Law and Real Estate Attorney and serves as the Chair of the Construction Law Department. In her construction law and real estate law work, Jodie represents commercial and residential general contractors and builders, architects and engineers, remodelers, subcontractors, suppliers, and owners. Her work includes contract preparation and negotiation, project administration, mechanic’s liens and public/Chapter 573 claims; warranty claims; loss prevention work; purchase agreement disputes; landlord matters; and various other construction project dispute and litigation matters.