Contractors Cannot Be “Insurance Claim Specialists” Under New Louisiana Law

When disaster strikes, some contractors play a double role, acting as both a contractor and an insurance claim specialist.

The Louisiana House just approved a bill requiring contractors to stop that practice.

Under the proposal, contractors in Louisiana would be prevented from advertising themselves as “insurance claim specialists.”

Similarly, public adjusters in Louisiana would be unable to perform construction work related to a claim they’re handling.

The ruling is designed to separate contractors from the insurance claims they’re handling, helping to avoid a conflict of interest.

The overall goal of the bill is to reduce insurance premiums in the state. Louisianans pay some of the highest rates in the nation for property and casualty insurance.

How House Bill 121 Works

As reported by Wesley Muller at the Louisiana Illuminator, House Bill 121 was sponsored by Rep. Roy Daryl Adams, D-Jackson as a way to reduce the cost of property insurance in Louisiana.

Here’s how the bill works:

• House Bill 121 prohibits contractors from acting as public adjusters and vice versa when working on the same claim.
• If a public adjuster is helping a client with an insurance claim, for example, then that public adjuster cannot perform construction, repair, or other contracting services on the property.
• If a contractor is working on a property, then that contractor cannot also act as a public adjuster for that property. The contractor can’t repair the property and negotiate with the insurer on behalf of the homeowner, for example.
• The law also applies to roofers. After a storm, some roofers go door-to-door advertising themselves as insurance claim specialists. They claim to handle the claim and repair process from start to finish, taking stress away from homeowners. Under House Bill 121, this practice would no longer be permitted – although roofers could continue going door-to-door offering their roofing services to homeowners.
• Some contractors currently use terms like “insurance claims specialists” on their websites or advertisements. This would no longer be permitted.

House Bill 121 was Watered Down Since Its Inception

House Bill 121 originally had stricter requirements for how contractors handled insurance claims.

As Muller reports, the original version of the bill prevented roofers from having any dealings with an insurance company.

Roofers pushed back against that version of the bill, arguing it would make it difficult to provide ordinary roofing services.

In fact, roofers argued they would be afraid to even mention the word “insurance” in front of a customer to avoid violating the bill.

The bill was later amended to remove these restrictions. Roofers can communicate with insurance companies and discuss insurance matters, but they cannot advertise themselves as insurance claim specialists.

The watered-down version of the bill also expanded beyond roofers: originally, the bill only targeted roofers, but has since expanded to all residential contractors.

How Roofers & Contractors Help with Insurance Claims

A good roofer or contractor makes an insurance claim go smoothly.

Generally, here’s how roofers and contractors interact with insurers during the repair process:

1. A roofer or contractor visits your property to estimate the cost of repairs. Sometimes, your insurer recommends a specific contractor. However, you are not required to use this contractor. You can receive one or more quotes.
2. You choose a contractor, and the contractor begins to repair your property to pre-loss condition.
3. At this point, your insurer may send payments directly to the contractor. Prior to doing so, you would need to sign a “direction to pay” form. Or, your insurer may write one or more checks to you or your lender, and then you use those funds to pay the contractor.
4. The contractor completes repairs, restoring your property to pre-loss condition.

As Angi explains, it’s rare for homeowners to handle contractor invoices for insurance claims. Instead, insurers typically pay the contractor directly.

Under the new ruling in Louisiana, contractors would continue to operate under this system. However, they would be unable to advertise themselves as insurance claim specialists.

Texas Has a Similar Law for Contractors

Louisiana isn’t the first state to pass a law restricting contractors from advertising themselves as public adjusters.

Louisiana’s House Bill 121 would give the state similar regulatory requirements to neighboring Texas.

In 2003, Texas passed a law preventing contractors from acting as public adjusters on a claim.

That law upheld a recent challenge. In 2020, Stonewater Roofing sued the Texas Department of Insurance (TDI). The Texas, Tyler-based roofer argued the law violated free speech. A high court overturned a Texas appeals court ruling, finding the 2003 state law did not regulate free speech or violate Stonewater’s constitutional rights.

Public Adjusters vs. Contractors

Public adjusters and contractors play different roles in an insurance claim.

Under the proposed Louisiana law, those roles would be even more clearly defined than they already are:

• Public adjusters are insurance claim specialists. They manage your claim from start to finish, working with your insurer to represent your best interests – not your insurer’s bottom line. Public adjusters can speed up a claim, increase payout, or overturn a denied claim, among other benefits.
• Contractors focus on restoring the property to pre-loss condition. They provide different services – from roofing to electrical work to carpentry – to repair a property to the state it was in before a covered loss.
• Both public adjusters and contractors are licensed professionals (in most states). Both must meet specific license requirements.
• Generally, contractors and public adjusters play separate roles and have different areas of expertise. Contractors specialize in repairs and replacements, while public adjusters specialize in dealing with the insurer.

Under current law in Texas and other states (and the proposed law in Louisiana), contractors cannot act as public adjusters for the same claim (and vice versa).

The goal of House Bill 121 is to reduce conflicts of interest and, ultimately, to reduce the cost of property insurance across the state of Louisiana.