Lon Smith Roofing & Construction was ordered earlier this year 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.
As readers of the Dave Lieber Watchdog column in The Dallas Morning News first learned, a lawyer for Lon Smith, which has offices in Fort Worth, Garland and Austin, says he is appealing that ruling. The lawyer says there’s no contract problem.
The gist of the case is that Lon Smith’s signed contract with Gerald and Beatriz Reyelts promised to make all arrangements with the Reyelts’ insurance company to pay for a new roof. Lon Smith installed the new roof, but Lon Smith never made contact with the couple’s insurance company.
When the insurance company received a $15,000 bill for the new roof, it refused to pay, saying no one had showed its adjusters the old roof for inspection before it was torn down.
(Dallas Morning News photo)
Lon Smith was supposed to do that but didn’t. When Lon Smith billed the couple for the entire amount and sent three demand payment letters, the Reyelts hired a lawyer and sued. They claimed that Lon Smith didn’t keep its promise to make arrangements with the insurance company. The judge agreed and issued a default judgment in the couple’s favor after representatives of Lon Smith failed to show up for a scheduled hearing.
Lon Smith’s standard printed contract, which the Reyelts signed, is clear in its promise: Lon Smith agreed “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. The homeowner is responsible for paying the deductible and for any upgrades. “The final price agreed to between the insurance company and LSRC shall be the final contract.”
Under Texas law, someone other than a homeowner who negotiates a price with an insurance company is considered a public insurance adjuster.
The problem here is that under state law, only a licensed public adjuster can do that. Lon Smith is not a licensed public adjuster. A public adjuster is someone who, for a fee, negotiates with insurance companies on behalf of homeowners or business owners who don’t like an insurance company’s initial settlement offer. There are about 600 active ones in Texas.
Lon Smith violated state law, says the Reyelts’ lawyer, Charles W. Fillmore. In court papers, Lon Smith admitted it lacked the required state license but stated that because it did not charge the family for its services, there was no violation. State law does not mention that providing insurance-adjusting services by an unlicensed adjuster is permitted if the service provided is free.
The case appears to have wide-ranging ramifications for other Lon Smith customers since the basic language of its contract has been called into question.
Rick Disney, lawyer for Lon Smith, responded to The Watchdog in a written statement: “Lon Smith Roofing provided the Reyelts a high quality roof, and they have never complained, even once, about the workmanship or quality. The trial court ruling is the first step in a long legal process, and Lon Smith is confident it will prevail.”
The lawyer adds, “One more fact: except for, I think, $1,176, neither the Reyelts nor the insurance company paid anything to Lon Smith Roofing for their roof.”
Lon Smith is lucky in one respect. Last month, a new state law went into effect that specifically states that roofing contractors cannot serve as both contractors and public adjusters on the same roof deal. The idea is to avoid a conflict of interest.
But that law wasn’t in effect when the Reyelts’ roof was replaced. The law that pertained to them at that time stated that public adjusters must obtain a state license, which Lon Smith didn’t have.
Lon Smith’s lawyer says that because the company failed to keep its promise to contact the insurance company on the couple’s behalf, it can’t be accused of acting as an unlicensed public adjuster.
However, in court papers, Lon Smith President David Cox stated that, “Lon Smith does, if appropriate, assist the homeowner with his negotiations with his insurance company.” He added, “Lon Smith has been using this form of an agreement for years.”
Under the original law passed a decade ago, unlicensed work is a misdemeanor crime.
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The Reyelts’ lawyer says that alone is enough to void a contract, which the federal magistrate did in this case.
Under the revised 2013 law, the language is even clearer, specifically citing that roofers cannot negotiate with insurance companies on behalf of a homeowner. That specific point was added to enforce that the roofing industry is included.
Cox also states in the court papers that he didn’t learn about the default judgment against his company until after the ruling. “I was and am very upset that our attorney did not keep us apprised.” He added that he hired a new lawyer “to try to repair the damage that has been done.” Cox did not return a call from The Watchdog.
Bottom line here for all future roofing customers: Roofing companies are not allowed to negotiate with insurance companies on behalf of their homeowner clients. Lon Smith, as have many roofing companies, participated in this process for years. Now, most definitively, it’s no longer allowed.
Follow Dave Lieber on Twitter at @DaveLieber.
[This originally appeared in the Dave Lieber Watchdog column in The Dallas Morning News.]
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