Contractor vs Public Adjuster: What's Legal and What's Not

The line between contractors and public adjusters is one of the most commonly crossed legal boundaries in the insurance industry. Understanding who can legally do what protects you from fraud and illegal activity — and helps you avoid unknowingly participating in a scheme that could void your claim.

Contractors and public adjusters serve entirely different functions. Confusing them — or allowing one to act as the other — can expose both you and the professional to serious legal consequences.

Contractor Boundaries

What Contractors CAN Do (Legal)

  • Prepare estimates and scope of work for repairs
  • Be present during insurance adjuster inspections
  • Answer questions about their estimates when asked by the insurer
  • Recommend that a homeowner file an insurance claim
  • Provide documentation of damage discovered during the course of their work

What Contractors CANNOT Do Without a PA License (Illegal)

  • Negotiate or settle insurance claims on a homeowner's behalf
  • File insurance claim forms for the homeowner
  • Advertise as adjusters, "claim specialists," "insurance experts," or similar titles that imply adjusting authority
  • Accept direct payment from the insurance company via assignment of benefits (AOB) in states that restrict this practice
  • Charge a percentage of the insurance settlement as their fee
  • Interpret insurance policy language for homeowners

Public Adjuster Boundaries

What Public Adjusters CAN Do (Authorized)

  • Review contractor estimates to support insurance claims documentation
  • Negotiate directly with insurance companies on the homeowner's behalf
  • File and manage insurance claims through the entire adjustment process
  • Interpret policy language and advise on coverage questions
  • Refer homeowners to contractors — provided there are no financial kickback arrangements

What Public Adjusters CANNOT Do (Prohibited)

  • Perform or contract repair work on properties they have adjusted

    Florida's dual-role prohibition (Fla. Stat. 626.8795) explicitly bars a PA from having a financial interest in repairs on any claim they adjust.

  • Receive kickbacks or referral fees from contractors

    Prohibited in Texas under Insurance Code § 4102.158 and in most other states under general anti-kickback provisions.

  • Have a financial interest in repair businesses connected to claims they are adjusting
  • Practice law or provide legal advice — that requires a licensed attorney

Real Enforcement Examples

These violations are prosecuted. State insurance departments actively investigate complaints and refer cases for criminal prosecution.

Florida — Third-Degree Felony

Unlicensed public adjusting in Florida is a third-degree felony under Fla. Stat. §§ 626.854 and 626.8738. Penalties include up to 5 years in prison and a $5,000 fine per violation. Contractors who negotiate claims without a PA license are regularly prosecuted under these statutes. Florida also prohibits dual-role arrangements under § 626.8795 — a licensed PA who also profits from repairs on the same claim violates the law.

Texas — Civil and Criminal Penalties

Texas Insurance Code Chapter 4102 governs public adjusters and establishes both civil and criminal penalties for unlicensed adjusting. Separate violations arise under § 4102.158 for kickback arrangements between PAs and contractors. The Texas Department of Insurance has pursued enforcement actions against roofing companies that solicited homeowners by promising to "handle their claim."

Iowa — June 2024 Cease-and-Desist Orders

In June 2024, the Iowa Insurance Division issued cease-and-desist orders against four roofing firms for unauthorized public adjusting activities: Recon Roofing, Exterior + Home, American Dream, and Darren Reeves Roofing. Each was found to have engaged in activities constituting public adjusting — including claim negotiation and acting as an intermediary between homeowners and insurers — without holding the required public adjuster license.

How to Protect Yourself

1

Verify any public adjuster's license before signing anything

Use the PA license lookup tool to confirm active licensure in your state. A legitimate PA will give you their license number without hesitation.

2

Never let a contractor manage or negotiate your insurance claim

A contractor who asks you to sign a document giving them authority to "work with your insurance company" may be acting as an unlicensed public adjuster. Verify your contractor is actually licensed as a contractor before any work begins.

3

Understand what you're signing

Read any authorization or direction-to-pay documents carefully. If a contractor is asking to be paid directly from your insurance proceeds based on a percentage of the settlement, that arrangement may be illegal in your state.

4

Report violations to your state insurance department

If you believe a contractor or unlicensed person is illegally adjusting claims, file a complaint with your state Department of Insurance. You can also report it here and we will help direct you to the right authority.

Need to verify a license or report a problem?

Use our tools to check that anyone handling your claim is properly licensed — and report violations to help protect other homeowners.

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