Ruling: Iowa contractors can’t negotiate insurance claims on homes they repair

DES MOINES, Iowa — When storm damage hits a home, the person making money from the repairs cannot also serve as the person negotiating how much the insurance company should pay.

A federal appeals court ruling this week upheld Iowa laws designed to keep those two roles separate.

The U.S. Court of Appeals for the Eighth Circuit rejected most of a constitutional challenge brought by Shamrock Hills, LLC, an Iowa residential contractor that had received warning notices over business practices state officials said amounted to unlicensed public adjusting.

Under Iowa law, residential contractors can inspect damage, provide repair estimates, and perform the work. But they cannot also act as a public adjuster for the homeowner unless they are properly licensed to do so.

Public adjusters represent policyholders in negotiating or settling insurance claims.

The distinction is intended to prevent a potential conflict of interest after hailstorms, tornadoes, and other damaging weather events. A contractor who expects to receive the repair job could have a financial incentive to seek a larger insurance settlement if that same contractor is also negotiating the claim.

Attorney General Brenna Bird said the ruling allows Iowa to continue enforcing laws intended to protect homeowners from those practices.

“Owning a home is a dream for many Iowans, but that dream can turn into a nightmare if they are scammed by people who are supposed to be there to help when their home needs repairs,” Bird said in announcing the decision.

The ruling does not create a new benefit or payment for homeowners. Instead, it preserves protections already in Iowa law and confirms the state can continue requiring contractors and public adjusters to perform separate roles.

For homeowners, that means a contractor can explain what repairs are needed and what the work will cost, but negotiating the homeowner’s insurance settlement must be handled by the homeowner or a properly licensed public adjuster.

Iowa officials say the separation also helps prevent unlicensed insurance practices and gives the state authority to take action against contractors who violate the law. Violations can carry fines of up to $40,000.

The Attorney General’s Office encourages Iowans who believe they have been victims of contractor or insurance-adjuster fraud to contact the office at 515-281-5926 or through the Iowa Attorney General’s website here.

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