THE TAKEAWAYS
- A contractor is not licensed to negotiate or settle your insurance claim in Texas. Contractors can estimate and explain repairs, but claim negotiation and settlement activity is regulated public adjusting work.
- Texas law is designed to prevent contractors from acting like public adjusters, especially when they want the job. When the same party both “runs the claim” and sells the rebuild, the conflict of interest is built in
- Public adjusters operate under a regulated framework that contractors do not. In Texas, public adjusters are licensed, background-checked through the licensing process, and held to standards tied to fiduciary handling of claim funds.
- Letting a contractor manage the claim often leads to an incorrect budget and scope. If the claim gets under-scoped early, the project becomes change orders, delays, and disputes instead of a controlled rebuild.
- Best practice: get the claim scope and budget verified first, then choose the contractor. Hiring a public adjuster to manage the claim helps get the settlement aligned with the true cost to restore, and then you can select the right contractor once the scope is approved.
CAN A CONTRACTOR MANAGE MY INSURANCE CLAIM?
If you are dealing with a property claim in Texas, especially after a fire or major water loss, you will almost always meet a contractor before you meet anyone who is legally allowed to negotiate your claim. That is where a lot of Texans get pulled into a messy situation: the contractor is great at construction, but starts trying to “run the claim” and steering settlement conversations.
Here’s the clean line in Texas:
A contractor can help document damage, write an estimate, and explain construction details. A contractor should not act on your behalf to negotiate or effectuate your claim settlement. Texas law treats that work as public adjusting, which requires a license.
What “Managing A Claim” Really Means
Most homeowners say “manage my claim” when they mean some combination of:
- communicating with the insurance adjuster
- building the scope of repairs
- pricing the work correctly
- pushing back when the carrier leaves things out
- negotiating the final settlement amount
A contractor is absolutely qualified to do the construction parts of that list (scope, pricing, feasibility, code items, and construction). The legal problems start when a contractor crosses into the representation parts of that list, meaning acting “on behalf of” the insured to negotiate or effect the settlement. That is the heart of the Public Adjuster definition in Texas.
PUBLIC ADJUSTER VS. CONTRACTOR: THREE DIFFERENCES THAT MATTER IN TEXAS
1) Is a contractor licensed to handle claims?
Texas does not issue a “contractor license” that authorizes a contractor to negotiate or settle a property insurance claim for the insured. Texas law defines a public insurance adjuster as someone who, for compensation, acts on behalf of an insured in negotiating for or effecting the settlement of a property claim.
Texas then makes the licensing point explicit: a person may not act as a public insurance adjuster (or hold themselves out that way) unless they hold a license issued under the Insurance Code.
And the contractor-specific restriction is even tighter: Under Texas Insurance Code § 4102.163, a contractor may not act as a public adjuster or advertise to adjust claims on property where the contractor is providing or may provide contracting services, even if the contractor claims authority under a power of attorney or similar agreement. Texas regulators also warn consumers directly that contractors cannot act as public adjusters on claims if they are also doing the work.
Practical takeaway: A contractor can support the claim with construction expertise. A contractor should not be your claim representative.
2) Is a contractor required to have a federal background check?
A public insurance adjuster license in Texas is tied into fingerprint-based background check requirements. Texas Department of Insurance licensing processes use fingerprints to check criminal history records, and Texas rules include a fingerprint requirement tied to Insurance Code Chapter 4102 licensing. Contractors are not going through the Texas Department of Insurance licensing system for claim representation. So, they are not being screened under those public adjuster licensure rules.
Practical takeaway: A Texas public adjuster is operating inside a regulated licensing framework that includes background-check-related requirements.
3) Is a contractor a fiduciary?
Texas law places public adjusters in a fiduciary position in a way that contractors generally are not. Texas Insurance Code § 4102.111 states that claim proceeds received by a licensed public adjuster are received and held in a fiduciary capacity, and the adjuster may not divert or appropriate fiduciary funds.
A contractor has contractual duties to perform work properly and follow the contract, but that is not the same thing as a statutory fiduciary framework around claim proceeds.
Practical takeaway: A public adjuster is positioned by law to act in a fiduciary capacity in specific contexts, and is regulated as a claim representative.
So Can A Contractor Manage My Claim In Texas?
A contractor can help with the claim. A contractor should not “manage” the claim in the sense of negotiating or effecting the settlement. This is not just theory. The Texas Supreme Court has described public adjusting as representation of the insured in the claim-settlement process, and it references the licensing requirement and the prohibition against acting as both contractor and adjuster on the same claim. Texas also created these laws specifically to close regulatory gaps and address concerns about contractors preying on consumers after catastrophic events.
WHAT CONTRACTORS CAN DO WITHOUT CROSSING THE LINE
Most good contractors stay in their lane, and you still want their input. Here are examples of appropriate contractor involvement:
- preparing a detailed construction estimate, and identifying code-required items
- meeting the carrier’s adjuster to walk damage and explain repair methodology
- providing photos, measurements, and engineering reports, if required
The key is the “who is the representative” question. If the contractor is speaking as the contractor, explaining construction facts, that is normal. If they are speaking “on behalf of the insured” to drive settlement amount and terms, that is where Texas public adjusting rules get triggered.
The Legal Pitfalls When A Contractor Runs The Claim
Pitfall 1: Unauthorized public adjusting (unlicensed practice)
Once a contractor steps into negotiating or effecting the settlement, Texas law can treat that as public adjusting, which requires licensure. If the contractor is also doing (or trying to do) the repair work, Texas Insurance Code § 4102.163 squarely targets that conflict and prohibits it, even if the contractor claims they are simply providing construction consulting… it’s not a matter of what a contractor calls it, it’s a matter of what actions are taking place.
Pitfall 2: The settlement gets “shaped” to fit the contractor’s agenda
Even when the contractor is honest, their incentives are different:
- They want to win the job.
- They want a scope that fits their crew, their subs, and their preferred approach.
- They may push the claim in a direction that increases profits margins, even if it means long-term fights that exhaust coverages like Additional Living Expenses (ALE).
That incentive mismatch is exactly why Texas prohibits the dual role. The law assumes the conflict is real, because it is.
Pitfall 3: The insured loses leverage on the front end
The most expensive claim mistakes usually happen early:
- agreeing to a scope before hidden damages are documented
- letting the carrier set a low baseline estimate that never gets fully corrected
- approving an incomplete or inappropriate repair scope
When the insured starts with an underbuilt budget, everything downstream gets harder: change orders, delays, quality compromises, and disputes.
CAN A PUBLIC ADJUSTER MANAGE THE INSURANCE CLAIM FOR THE INSURED?
Yes. That is literally what a public insurance adjuster is licensed to do in Texas: act on behalf of the insured in negotiating for or effecting the settlement of a property insurance claim.
But there are guardrails:
- A public adjuster must be licensed to perform that role.
- A public adjuster cannot take on conflicts of interest, and Texas prohibits the contractor-adjuster dual capacity on the same property/claim situation.
This structure is designed so the insured has a regulated advocate whose job is claim accuracy and settlement fairness, not selling reconstruction.
Why The Better Option Is Hiring A Public Adjuster First
In Texas claims, the best outcomes tend to come from the right order of operations:
Step 1: Get the scope and budget correct
Before you “pick the builder,” you need the claim to reflect the real damage and the real cost to restore. That means:
- thorough documentation
- a defensible scope
- pricing that matches market reality
- addressing code and method items upfront
A public adjuster is built for this part, because the role is to represent the insured in the settlement process.
Step 2: Get carrier alignment and approval on the verified scope
When the scope is validated, you reduce surprises and disputes. This is also where public adjusting protects you from being steered into a settlement that is “good enough to start” but not sufficient to finish.
Step 3: Choose the contractor once the scope is verified
Then you hire the right contractor for the job, bid apples-to-apples, and hold the project to a clear standard. This sequence also protects good contractors. When the scope is correct and approved, the contractor can focus on building, instead of acting like a claims negotiator in a regulatory gray zone.
The short answer... No, a contractor cannot manage your insurance claim for you.
A contractor can support your insurance claim with construction expertise. In Texas, a contractor should not act as your claim representative to negotiate or effect your settlement, especially when they are also trying to perform the repairs. Texas Insurance Code Chapter 4102 regulates that work, requires licensure for public adjusting, and prohibits the contractor dual role.
If you are in the Dallas-Fort Worth Metroplex or anywhere in Texas and you are being told “don’t worry, we’ll run the claim for you,” the safest next step is to separate roles: let a licensed public adjuster manage settlement, and let a contractor build the project once the scope is verified.
*True View Commercial is not a law firm and does not offer legal advice
