Roofing Contractor Challenges Iowa’s Public Adjusting Laws on Constitutional Grounds

In a case that could have far-reaching implications for contractors and public adjusting laws, Shamrock Hills LLC, dba Shamrock Roofing and Construction, has filed a federal lawsuit against Iowa insurance regulators. The suit, filed on September 25, 2024, in Iowa federal court, challenges the constitutionality of Iowa’s laws regulating public adjusting and contractor conduct. As I read the complaint, 1 it is eerily like the Stonewater Roofing case noted in Stonewater Case Decided for Texas Department of Insurance and Against the Free Speech Arguments Which Would Have Gutted Public Adjusting Licensing Laws and Can Texas Roofing and Restoration Companies Advertise That They Are Insurance Specialists and Can Negotiate on the Policyholder’s Behalf?

Shamrock is a Kansas-based roofing contractor operating in multiple states, including Iowa. It received a Warning Notice from the Iowa Insurance Division (IID) on July 2, 2024. The notice alleged that Shamrock was potentially engaged in “unlicensed public insurance adjusting” in violation of Iowa Code §§ 103A.71(3) and 522C.2(7). These laws prohibit residential contractors from representing or negotiating on behalf of property owners in insurance claims and define various activities that constitute public adjusting. Shamrock’s complaint argues that the Iowa laws in question violate both the First and Fourteenth Amendments of the U.S. Constitution. The company contends that the regulations infringe on protected speech and are unconstitutionally vague.

In its pleadings, Shamrock asserts that Iowa Code §§ 103A.71(3) and 522C.2(7) are content-based and speaker-based restrictions on free speech. The complaint argues that these laws regulate a broad range of speech, including negotiating, advertising, soliciting, and advising, based on both its content and the speaker’s identity as a contractor.

The company points out that the IID’s enforcement actions targeted statements and posts on Shamrock’s website, which they argue is clearly speech and not conduct. Shamrock contends that the laws prohibit contractors from engaging in certain types of communication while allowing others, making them content-based restrictions subject to strict scrutiny under the First Amendment.

Shamrock also argues that the Iowa laws are unconstitutionally vague, violating the Due Process Clause of the Fourteenth Amendment. The complaint states that the laws fail to provide fair and adequate notice of what conduct is prohibited, making it difficult for contractors to understand what statements might trigger a violation. The company highlights the IID’s inability to provide an exhaustive list of prohibited conduct and the broad language of the statutes, which could potentially encompass routine statements made to insureds. Shamrock argues that this vagueness leaves contractors uncertain about what actions might be considered violations.

Similar to the Texas case, this case raises important questions about the balance between policyholder protection and contractors’ rights to commercial free speech and due process. If successful, Shamrock’s challenge could have significant implications for how states regulate contractor conduct in relation to insurance claims and the interplay between contractor speech and public adjuster activity. While this case specifically challenges Iowa’s laws, a ruling in Shamrock’s favor could set a precedent that impacts similar regulations in other states. Many states have laws restricting contractors from acting as public adjusters, and these public adjuster licensing laws could be vulnerable to similar constitutional challenges.

If the court agrees with Shamrock’s First Amendment arguments, it could lead to a reassessment of what types of communications between contractors and insureds are protected speech. This could potentially open new avenues for contractors to assist property owners in the claims process.

My prediction is that if the vagueness challenge succeeds, it might prompt states to define more clearly what constitutes public adjusting as well as the unauthorized practice of law. This could benefit both contractors and regulators by providing clearer guidelines for permissible conduct. I do not expect the departments of insurance nor bar associations to sit back and allow contractors or others to provide unrestricted advice to policyholders regarding their rights in an insurance claim. Still, a ruling in Shamrock’s favor could blur the lines between contractor services and public adjusting, potentially affecting the public adjusting profession and how it’s regulated.

This case bears many similarities to the Stonewater Roofing v. Texas Department of Insurance case, 2 which was decided in favor of the Texas Department of Insurance. However, there are key differences. Shamrock’s complaint appears to be broader in scope, challenging not just the ability to negotiate claims but also advertising and other forms of communication. The Iowa case includes specific allegations about vague enforcement and overly broad interpretation by regulators, including citing content from personal websites. Shamrock’s arguments extend beyond just First Amendment challenges to include Fourteenth Amendment due process claims.

As this case progresses, I will certainly monitor how the court balances the state’s interest in protecting consumers with contractors’ constitutional rights. The outcome could potentially reshape the landscape of contractor-insured interactions and the regulation of public adjusting across the country. Just because Stonewater ruled one way does not mean that a different state with slightly different public adjusting laws will rule the same. Still, Stonewater has set a precedent for other courts to consider.

In an era where digital communication and online advertising play an increasingly significant role in the contracting business, cases like this will likely shape the future of how contractors can market their services and assist property owners with insurance claims. As always, staying informed will be key for all professionals in the insurance claims and restoration industry. Everybody must follow the law, and this case merely challenges what the law is and how it should be interpreted in Iowa.

Roofers, restoration contractors and public adjusters all play a very important role in helping policyholders recover following a catastrophe. The people involved in these trades and professions are truly “policyholder heroes” when they operate in a highly ethical and professional manner while serving victims in their time of need. There is a need for all, and this lawsuit seems to be about defining the limits of regulation versus commercial speech.

Thought For The Day

The physician and consumer should have the assurance, from an impartial scientific source, that any drug or therapeutic device on the market today is safe and effective for its intended use; that it has the strength and quality represented; and that the accompanying promotional material tells the full story–its bad effects as well as its good….Under our system, consumers have a right to expect that packages will carry reliable and readily useable information about their contents.
—President John F. Kennedy

1 Shamrock Hills, LLC v. The State of Iowa, No. 4:24-cv-00340 (S.D. Iowa Sept. 25, 2024).
2 Texas Dept. of Ins. v. Stonewater Roofing, Ltd., No 22-0427 (Tex. June 7, 2024).