Texas Roofer Appeals Class Certification in Case Alleging Hail Damage Solicitation

By Denise Johnson | September 22, 2017

A Texas roofer has filed an appeal disputing a class action finding in a case involving allegations of hail solicitation that could impact 3000 of its customers.

The appeals case could have implications for contractors who act as public adjusters illegally leading to class action lawsuits.

The underlying case involves damage to the plaintiffs’ roof due to a May 2011 hailstorm. The plaintiffs, Joe and Stacci Key, notified their insurance carrier and signed a contract with A-1/Lon Smith Roofing and Construction for roof replacement in the amount of $33,769.50. The plaintiffs received $18,926.69 from their homeowners’ insurer and paid that amount to A-1. To collect the balance owed, A-1 filed suit against the plaintiffs, obtaining a default judgment. The plaintiffs challenged the default judgment and obtained a judgment voiding it. A-1 appealed. The plaintiffs then filed a declaratory judgment against the roofer, indicating the contract was null and void since it wasn’t licensed to act as a public adjuster. They also alleged violations under Texas’ Deceptive Trade Practices Act and requested class certification for both claims.

In its appeal, A-1 (also known as Lon Smith Roofing and Construction) claims the Court of Appeals erred in siding with the trial court’s decision affirming the class action, citing that the trial court didn’t perform a vigorous enough analysis and didn’t resolve dispositive issues. A-1 also noted class members signed several versions of the contract and some include an arbitration provision. They point out the Key’s contract contained an arbitration provision that wasn’t referenced in the trial plan.

A-1 also disputes the Court of Appeals findings that LSRC acted as a public adjuster. It denies it advocated for the plaintiffs or discussed insurance coverage or exclusions applicable to the roof replacement.

Lastly, the roofer disputes the Keys are owed any reimbursement, since they were made whole with the replacement of the roof.

Steve Badger, a partner with Zelle LLP’s Dallas office, said previously that the primary reason for the dramatic increase in the number of hail claims in Texas are contractors that inject themselves into the claims process. He explained how they solicit homeowners using door hangers, call centers and other means to aggressively market to homeowners with the promises of a free roof. Badger said the homeowner then signs an agreement giving the contractor the right to negotiate the insurance claim and install the roof for the amount of the insurance proceeds.

“It is not surprising that Lon Smith has filed a further appeal,” said Badger. “This is a bet the company case for them. If this class action is upheld, they will be forced to refund millions of dollars in roofing project payments. That would likely force them into bankruptcy.”

Despite two statutes enacted in 2005 and 2013 to curtail the unauthorized practice of public adjusting (UPPA) among contractors, the problem is still rampant, according to Badger, a vocal advocate against hail fraud abuse.

“An important aspect of this case is that it has brought awareness to the widespread problem involving the unauthorized practice of public adjusting. Texas law clearly prohibits contractors from negotiating insurance claims on behalf of building owners,” Badger said. “This case has been a wakeup call for contractors engaged in this improper conduct. They know now that they are at great risk if they attempt to negotiate insurance claims.”

The Court of Appeals case is Lon Smith & Associates, Inc. and A-1 Systems, Inc., DBA Lon Smith Roofing and Construction v. Joe Key and Stacci Key.

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