Are Insurance Contingency Roofing Contracts Legal in Texas?

Thu, 17 Sep 2026 00:21:30 +0000

Insurance contingency contracts are common in Texas roofing and restoration work. A contractor inspects storm damage, the homeowner has not yet received a full insurance estimate, and the contractor asks the homeowner to sign an agreement stating that the contractor will perform the work if the insurance claim is approved.

The question is simple: are these contracts legal? The answer is yes, but only if the contract is drafted and performed correctly.

Texas law does not prohibit a construction contract merely because the final scope or price depends on a future insurance estimate. But Texas law does prohibit a contractor from using that contract as a vehicle to act as a public insurance adjuster, to waive or absorb the homeowner's deductible, or to blur the contractor's role in the claim.

The Contract Can Be Enforceable Even If the Insurance Proceeds Are Unknown

The starting point is basic Texas contract law. A contract must be sufficiently definite in its essential terms that a court can understand what the parties promised and determine their legal obligations. Fischer v. CTMI, L.L.C., 479 S.W.3d 231, 237 (Tex. 2016). But Texas law does not require every number to be known on the date of signing. An agreement can be enforceable if it supplies a workable way to determine an essential term later.

That principle matters in insurance restoration because the full scope and price often cannot be known before the insurer completes its adjustment. The Texas Property Code recognizes this reality in residential construction. The statutory disclosure statement for residential construction contracts tells owners that the written agreement should include "the cost of the work or how the cost will be determined." Tex. Prop. Code § 53.255. That language does not require a fixed dollar amount. It allows the parties to agree on a method for determining the cost.

Cohen v. P&C Restoration Services

That is exactly what the Houston Fourteenth Court of Appeals addressed in Cohen v. P&C Restoration Services, LLC, No. 14-22-00907-CV (Tex. App.—Houston [14th Dist.] Apr. 30, 2024) (mem. op.). The homeowner argued the contingency contract was unenforceable because it was merely an agreement to agree and did not contain a price. The court rejected that argument.

In that agreement, the owner chose the contractor "to be the general contractor to perform the work upon the property that the insurance company deems necessary, in the event that any insurance company approves any claim for repairs." The agreement tied the price and the scope of work to the insurer's detailed claim summary, which would list the approved repairs and approved prices.

The court held that this was enough. The contract was not merely an agreement for a future agreement; its language showed a present agreement that became enforceable once the insurer approved the claim. The missing dollar figure did not defeat the contract because the agreement supplied a mechanism for determining both scope and price: the scope of repairs and prices approved by the insurer.

So the better rule is this: a Texas construction contingency contract is not invalid merely because insurance proceeds have not yet been determined. If the contract shows a present intent to be bound and provides a reasonably certain mechanism for determining the scope and price, Cohen supports enforcement. Keep in mind that Cohen is a memorandum opinion from one court of appeals, so it is persuasive rather than binding statewide.

But the Condition Must Be Clear

A separate issue is whether insurance approval is a condition precedent to performance. A condition precedent is an event that must happen before a right to enforce an obligation accrues. Because conditions can cause forfeiture, when no conditional language is used and another reasonable reading is possible, Texas courts construe the term as a promise (a covenant) rather than a condition. Solar Applications Eng'g, Inc. v. T.A. Operating Corp., 327 S.W.3d 104, 108–09 (Tex. 2010). To make performance conditional, a term such as "if," "provided that," "on condition that," or similar conditional language is normally used. Hohenberg Bros. Co. v. George E. Gibbons & Co., 537 S.W.2d 1, 3 (Tex. 1976).

That means contractors and homeowners should be precise. If the parties intend the contractor's duty to perform a roof replacement to arise only if the insurer approves full roof replacement, the contract should say that directly. A general reference to "insurance approval" may not be enough. Approval of a small repair is not the same thing as approval of a full roof replacement.

The contract should identify the exact triggering event. For example, the condition may be approval of any covered repair, approval of full roof replacement, payment exceeding the deductible, approval of a particular estimate, an appraisal award, or some other defined event. Texas law does not supply the condition. The contract does.

The Deductible Still Must Be Paid

Even if the contract is enforceable, Texas law does not allow the contractor to waive or absorb the homeowner's deductible. A person insured under a property insurance policy must pay any deductible that applies to a first-party claim. Tex. Ins. Code § 707.002.

Texas Business and Commerce Code § 27.02 requires a contract for goods or services that is reasonably expected to be paid wholly or partly from property insurance proceeds, with a contract price of $1,000 or more, to include a deductible notice in at least 12-point boldfaced type. The notice states that Texas law requires the insured to pay any applicable deductible and that it is a violation of Texas law for a seller who expects to be paid from insurance proceeds to knowingly allow the insured to fail to pay, or assist the insured's failure to pay, the deductible. Tex. Bus. & Com. Code § 27.02(b).

The same statute makes it a Class B misdemeanor for a seller, without the insurer's consent, to advertise or promise to pay, waive, absorb, or decline to collect the deductible, to provide a rebate or credit that offsets it, or to otherwise help the insured avoid paying it. Tex. Bus. & Com. Code § 27.02(c)–(d).

This matters when the contract says the "price" equals the insurance proceeds. That language can be misleading if it suggests the homeowner owes nothing beyond the insurance payment. The legally safer formulation is that the contract price consists of the insurer-approved amount, including the applicable deductible, plus any approved supplements or separately agreed upgrades.

Insurance Code Chapter 707 reinforces this rule. An insurer that provides replacement-cost coverage may refuse to pay withheld recoverable depreciation or a replacement-cost holdback until it receives reasonable proof that the policyholder paid the deductible. Tex. Ins. Code § 707.004. In short, insurance proceeds may be used as a pricing mechanism, but they do not erase the deductible.

The Contractor Cannot Become the Public Adjuster

The biggest legal danger is not the contingency clause itself. The danger is when the contractor uses the contract to take over the insurance claim. Texas Insurance Code Chapter 4102 regulates public insurance adjusting. A person may not act as, or hold themselves out as, a public insurance adjuster in Texas without a license. Tex. Ins. Code § 4102.051(a). A public insurance adjuster includes a person who, for compensation, acts on behalf of an insured in negotiating for or effecting the settlement of a property insurance claim. Tex. Ins. Code § 4102.001(3).

Texas goes further for contractors. A contractor may not act as a public adjuster, or advertise to adjust claims, for any property on which the contractor is providing or may provide contracting services, even if the contractor holds a public adjuster license or has a power of attorney or other agreement from the insured. Tex. Ins. Code § 4102.163(a).

This distinction is critical. A contractor may prepare a construction estimate, explain the scope of repairs, and discuss technical construction issues. But a contractor may not act on behalf of the insured to negotiate, adjust, or settle the insurance claim. The Texas cases draw that line sharply.

Wolfe's Carpet v. Bourelle

In Wolfe's Carpet, Tile & Remodeling, LLC v. Bourelle, No. 14-22-00579-CV (Tex. App.—Houston [14th Dist.] July 27, 2023), the contractor sued homeowners for payment after hurricane repairs. The homeowners argued the contract was void because the contractor acted as an unlicensed public adjuster in violation of Texas Insurance Code § 4102.051. The contract authorized the contractor "to negotiate to said Insurance Company ... on [the owners'] behalf a quick and fair settlement" and said the work and money due would be the scope and price "agreed upon with the adjuster and insurance company." The Fourteenth Court of Appeals held that this language fell squarely within what § 4102.051 prohibits and affirmed the judgment voiding the contract and dismissing the contractor's claims.

Texas Department of Insurance v. Stonewater Roofing

The Texas Supreme Court reinforced this regulatory boundary in Texas Department of Insurance v. Stonewater Roofing, Ltd. Co., 696 S.W.3d 646 (Tex. 2024). The roofing company challenged Texas's public-adjuster licensing requirement and the contractor/adjuster prohibition on free-speech and due-process grounds. The Court rejected those challenges, holding that the statute regulates the role a person plays in a commercial transaction rather than speech, and that the statute gave fair notice of what it prohibits.

Pricing language versus claim advocacy

So there is a major difference between these two kinds of clauses:

Pricing mechanism: "The contract price shall be determined by the insurer's approved estimate, including the insured's deductible, together with any approved supplements or written change orders."
Public-adjusting language to avoid: "Contractor will work on behalf of the insured, negotiate with the insurance company, secure approval, or settle the claim."

The first clause concerns construction pricing. The second concerns claim advocacy.

What Happens If the Contractor Violates Chapter 4102?

A contract for services regulated by Chapter 4102 that an insured enters into with a person who is violating the licensing requirement may be voided at the option of the insured. Tex. Ins. Code § 4102.207(a). That distinction matters: the contract is not automatically void in every situation. The statute gives the insured the option to void the agreement.

If the insured does void the contract, the insured is not liable for payment for any past or future services rendered by the violating person "under that contract or otherwise." Tex. Ins. Code § 4102.207(b). In Wolfe's Carpet, that is what happened: the homeowners voided the contract, and the contractor could not recover for roughly $40,000 of work it had performed.

This is why contractors should not draft agreements that make them the homeowner's insurance representative. The contractor can build the roof. The contractor can estimate the roof. The contractor can explain construction issues. But the contractor cannot adjust the claim.

Cohen and Wolfe's Carpet Can Be Harmonized

Some may read Cohen and Wolfe's Carpet as conflicting. They are not. Cohen answers a contract-definiteness question: a contingency contract can be enforceable even though the price and scope are supplied later through the insurer's detailed claim summary. Wolfe's Carpet answers a public-adjusting question: a contractor cannot use a construction contract to negotiate or settle the insurance claim on the insured's behalf.

Together, the cases point to a coherent rule. A Texas contractor may use insurance approval as a condition and may use the insurance estimate as a pricing mechanism. But the contractor may not contract to pursue, negotiate, settle, or adjust the insurance claim for the insured.

Practical Drafting Rules

A compliant Texas insurance-contingency construction contract should separate four concepts:

Intent to be bound. The contract should state whether the parties intend to be bound immediately or only after a specified condition occurs.
The condition. The contract should define any condition precedent with precision. If the parties mean full roof replacement approval, the contract should say full roof replacement approval, not merely claim approval.
The price. The contract should explain how the price will be determined. If the price is based on the insurer's detailed claim summary, the contract should say that. If supplements, upgrades, code items, overhead and profit, or the deductible are included, the contract should say that too, and it must include the § 27.02 deductible notice when that statute applies.
No public adjusting. The contract should disclaim public-adjusting authority. It should state that the contractor does not represent the insured in the insurance claim, does not negotiate settlement of the claim, does not interpret policy coverage, and does not act as a public insurance adjuster. And the contractor's conduct has to match the contract.

Conclusion

Insurance contingency construction contracts can be legal in Texas when properly drafted and lawfully performed. Texas law does not require the contract to state a fixed dollar amount at signing if the agreement provides a definite method for determining the price later. See Fischer, 479 S.W.3d at 237; Cohen, No. 14-22-00907-CV. But enforceability is not the end of the analysis. The contract must clearly define any condition precedent. The homeowner must pay the deductible. The contract must comply with residential construction and homestead requirements when they apply. Most importantly, the contractor must not act as the insured's public adjuster.

The lawful version of the contingency contract is a construction agreement with an insurance-based pricing mechanism. The unlawful version is a construction agreement that turns the contractor into the policyholder's claim advocate. That distinction is where Texas law draws the line.

Key takeaways

A Texas contingency contract is not unenforceable just because the price depends on a future insurance estimate, as long as it supplies a reasonably certain way to fix scope and price (Cohen, 2024).
Define the triggering event precisely; "insurance approval" is not the same as "approval of a full roof replacement."
The homeowner must pay the deductible. Contracts of $1,000 or more paid from insurance proceeds need the 12-point bold deductible notice, and waiving or absorbing the deductible is a crime (Tex. Bus. & Com. Code § 27.02).
A contractor may not act as a public adjuster on a property it is or may be repairing, even with a license or power of attorney (Tex. Ins. Code § 4102.163), and the Texas Supreme Court upheld these rules in Stonewater Roofing (2024).
Contract language authorizing the contractor to negotiate a settlement "on behalf of" the owner can let the homeowner void the contract and avoid paying for work already done (Wolfe's Carpet, 2023; Tex. Ins. Code § 4102.207).

If you are a contractor or public adjuster with questions about how Texas law treats insurance contingency agreements, or a homeowner with questions about a Texas property insurance claim, contact The Claim Attorney. Homeowners can request a free case review, and attorneys interested in co-counsel are welcome to reach out.

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