33 Carpenters Constr., Inc. v. State Farm Life & Cas. Co.

• Decision Date: 14 February 2020
• Docket Number: No. 18-1354,18-1354
• Citation: 939 N.W.2d 69
• Parties: 33 CARPENTERS CONSTRUCTION, INC., Appellant, v. STATE FARM LIFE AND CASUALTY COMPANY, Appellee.
• Court: Iowa Supreme Court

939 N.W.2d 69

33 CARPENTERS CONSTRUCTION, INC., Appellant,

v.STATE FARM LIFE AND CASUALTY COMPANY, Appellee.

No. 18-1354

Supreme Court of Iowa.

Filed February 14, 2020

Edward F. Noethe, Kyle J. McGinn, and Emily A. Weiss (until withdrawal) of McGinn, Springer & Noethe PLC, Council Bluffs, for appellant.

Brenda K. Wallrichs and Mark J. Parmenter of Lederer Weston Craig PLC, Cedar Rapids, for appellee.

WATERMAN, Justice.

This appeal is one of three¹ we decide today concerning whether a residential contractor acting as an unlicensed public adjuster can enforce its postloss contractual assignment of insurance benefits against the homeowners’ insurer. A controlling statute, Iowa Code section 103A.71(5) (2016), declares "void" contracts entered into by residential contractors who perform public adjuster services without the license required under section 522C.4. Those laws were enacted to protect homeowners and insurers against exploitation by unlicensed contractors after hailstorms, tornadoes, and other natural disasters.

The plaintiff-contractor in this case represented the homeowners as an assignee of their insurance claim for hail damage. The defendant-insurer paid what it determined was owed, and the plaintiff-contractor sued for much more. The district court granted the defendant-insurer’s motion for summary judgment on grounds that the plaintiff-contractor’s contractual assignment was unenforceable. We retained the plaintiff-contractor’s appeal.

On our review, we apply section 103A.71(5) to hold the assignment contract void. We reject the plaintiff’s argument that courts must honor these "void" contracts unless specifically directed otherwise by the Iowa Insurance Commissioner. For the reasons explained below, we affirm the summary judgment.

I. Background Facts and Proceedings.

On March 15, 2016, a hailstorm struck Bettendorf and damaged the roof and siding of a home owned by Brant and Sarah Clausen. The Clausens initially were unaware of any storm damage to their property. Their home was insured through State Farm Fire and Casualty Company (State Farm). On June 29, Matt Shepherd, an employee of 33 Carpenters Construction, Inc. (33 Carpenters), approached the Clausens at their home and asked if he could inspect their roof for hail damage. The Clausens agreed to permit his inspection. Shepherd found hail damage to the roof and siding, which was news to the Clausens.

Shepherd presented, and the parties signed, two documents, labeled "Agreement" and "Insurance Contingency," whereby 33 Carpenters agreed to repair the storm damage in exchange for the Clausens’ insurance proceeds. The documents also purportedly authorized 33 Carpenters to act on behalf of the Clausens regarding the submission, adjustment, and payment of an insurance claim for the hail damage to their roof.

Insurance/Mortgage Company Authorization: I authorize and direct my insurers and mortgagees to communicate directly with 33 Carpenters Construction to include discussions regarding scope of work and payment. I also authorize and direct my insurers and Mortgagees to include 33 Carpenters Construction as a joint payee on all checks.

The Insurance Contingency authorized 33 Carpenters to "meet with and discuss hail and wind damage" of the Clausen property with their insurance company, State Farm, and it required the Clausens to acknowledge that "33 Carpenters Construction will act as their General Contractor to obtain appropriate property damage adjustments."

That same day, the Clausens made a property damage claim to State Farm. About two weeks later, State Farm representatives visited the Clausen home to inspect the storm damage. Shepherd attended the inspection without the Clausens. After this meeting, State Farm formulated an initial estimate calculating the replacement cost value, or total repair costs, of $30,607. After subtracting depreciation and the Clausens’ deductible, State Farm paid the Clausens $22,198. The Clausens transferred this payment to 33 Carpenters, and it began repairing the roof and siding.

Subsequently, 33 Carpenters prepared an undated² "Supplement" to the insurance claim, claiming $15,087 in additional repair costs, $645 in tax, and $9137 in overhead and profit for a new claim of $24,869 above State Farm’s initial determination of the total repair cost, amounting to an increase of 81.3%. State Farm’s adjuster returned to the Clausen home to assess the new claims.

On February 22, 2017, the Clausens signed another document that purportedly assigned their insurance claim with State Farm to 33 Carpenters. This "Assignment of Claim and Benefits" stated,

FOR VALUE RECEIVED, the Assignor [Brant Clausen] hereby sells and transfers to the Assignee [33 Carpenters] and its successors, assigns and personal representatives, any and all claims, payment drafts, demands, and cause or causes of action of any kind whatsoever which the Assignee [33 Carpenters] has or may have against State Farm (insurance company), arising from the following claim [for hail and wind damage.]

This document further stated that "all future payments or settlements for the above referenced claim" should be made directly to 33 Carpenters.

On March 10, 33 Carpenters filed this civil action against State Farm. 33 Carpenters alleged that it is the assignee of the Clausens’ rights and that State Farm had breached its insurance policy by failing to pay 33 Carpenters "all benefits due and owing under the policy." State Farm filed an answer denying those allegations.

Later that month, State Farm prepared a substituted estimate in response to the 33 Carpenters Supplement. The substituted estimate increased the replacement cost value to $40,953 to reflect the need to replace all of the siding on the Clausen home since the original siding became unavailable during the interim between the initial estimate and the repair work. In recognition of this increase, State Farm paid an additional $15,681 directly to 33 Carpenters and the Clausens’ mortgage company, and 33 Carpenters deposited the payment.

Next, on August 21, after State Farm had made the second payment and after 33 Carpenters had completed the repairs, 33 Carpenters submitted yet another cost estimate, claiming $64,973 for the cost of repairs and $12,994 in overhead and profit, increasing the total claim to $77,968, a 90.4% increase from State Farm’s substituted estimate of the total replacement cost value. State Farm refused to pay the additional sums. Two months later, 33 Carpenters filed a motion to compel appraisal of the loss. The district court denied the motion.

State Farm filed a motion for summary judgment on May 15, 2018, claiming that the contract between 33 Carpenters and the Clausens was unenforceable because 33 Carpenters was not a licensed public adjuster, as required under Iowa Code chapter 522C. State Farm supported its motion with the contractual documents and other evidence showing that 33 Carpenters acted as a public adjuster for the Clausens. The summary judgment record included a printout of 33 Carpenters’ public webpage that outlined its six-step process for a common insurance claim:

STEP 1

Contact 33 Carpenters Construction (http://33carpentersconstruction.com/contact) for a free comprehensive storm damage evaluation and assessment.

[phone numbers of the various 33 Carpenters locations]

STEP 2

Contact your insurance company to file a claim.

Inform your insurance company that your home was impacted by recent severe storms and your home was inspected by a licensed general contractor and areas of your home are damaged.

STEP 3

Inform us when the insurance adjuster will be coming out to assess the damage on your home or property.

We will meet personally with your insurance adjuster, as an ADVOCATE on YOUR behalf, and discuss the work that needs to be completed to repair your home to its original beauty and value. Your insurance adjuster will submit a report that will list the work that needs to be completed and a copy will be sent to you.

STEP 4

Send us a copy of the summary report put together by your insurance company.

Included in the summary report will be the itemized costs of the work that needs to be performed. We will work directly with your insurance company to ensure that all damaged areas of your home will be included on the report.

STEP 5

We will meet with you to make product selections.

Our entire team has a vast and comprehensive knowledge about all home exterior products and we are happy to help you in the decision making process regarding product selection and color options. We will work with your schedule to determine the best day to start the necessary repairs to your home.

STEP 6

Payment.

We will provide you and your insurance company with a copy of the invoice when the work is completed. You may be required to get your mortgage company to endorse the check from the insurance company before payment can be submitted to us for the work completed to your home. You are only responsible for your insurance deductible and any agreed upon upgrades.

33 Carpenters resisted summary judgment by arguing that the Iowa Insurance Commissioner has the sole authority to enforce the provisions of Iowa Code chapter 522C such that State Farm cannot use the statute to invalidate the assignment agreement. Alternatively, 33 Carpenters argued its conduct did not violate Iowa Code chapter 522C or 507A. 33 Carpenters asserted that the only relevant event before the February 22 assignment was the evaluation of the claim attended by State Farm representatives and Shepherd, and it stated this was not improper because Shepherd did not negotiate or advocate for the Clausens during that meeting. The other events, 33 Carpenters claimed, occurred after the Clausens assigned the claim to 33 Carpenters, which it stated it wholly owned and could negotiate without a public adjuster license.

The district court granted the motion for summary judgment, ruling that the Clausens’ assignment of their claim to 33 Carpenters was invalid under Iowa law because...