When a Contractor “Helping With the Insurance Claim” Crosses the Line in Alabama and Commits the Unauthorized Practice of Law
- Inge Johnstone
- 1 day ago
- 4 min read
Contractors must be careful not to commit the unauthorized practice of law in Alabama. After a loss, contractors are often the first professionals on site—and insureds naturally want them to help “deal with the insurance company.” That instinct is understandable. But in Alabama, there is a clear legal boundary between providing construction expertise and negotiating insurance claims on behalf of an insured. When that boundary is crossed, a contractor may be engaging in the unauthorized practice of law, exposing both the contractor and the insured to unnecessary risk.
Understanding where that line is drawn—and how to stay on the right side of it—is essential for contractors and policyholders alike.
Alabama’s Unauthorized Practice of Law Statute
Alabama defines the “practice of law” broadly. Under Ala. Code § 34-3-6, a person is practicing law if, for compensation (direct or indirect), they:
Act in a representative capacity on behalf of another, and
Enforce, secure, settle, adjust, or compromise a disputed claim, or
Advise another regarding legal rights or policy interpretation.
This statute is not limited to court appearances. It expressly applies to out-of-court claim handling and negotiations, particularly once a claim becomes disputed. People or companies who violate the statute may be liable to criminal penalties.
Wilkey v. State: Negotiating Claims for an Insured Is Practicing Law
The Alabama Supreme Court addressed this issue directly in Wilkey v. State, a case involving insurance adjusters who were not licensed attorneys. The Court drew a sharp distinction between permissible fact-gathering and impermissible claim negotiation.
The Court held that:
Non-lawyers may investigate damage, collect facts, take photographs, and report findings, but
Once a claim reaches the point of default, dispute, or controversy,
Negotiating the claim, recommending settlement positions, or advocating for payment amounts on behalf of another person constitutes the practice of law and must be performed by a licensed attorney .
The Court was explicit: acting as an insured’s representative in claim negotiations—even outside of court—is the unauthorized practice of law.
Although Wilkey involved adjusters, its reasoning applies with equal or greater force to contractors, who likewise lack legal licensure and are not in privity with the insurer.
A Recent Texas Roofing Case Provides a Good Example of the Potential Danger
A recent Texas Supreme Court decision provides a useful illustration of how contractors can cross this line. In Texas Department of Insurance v. Stonewater Roofing, Ltd. Co., the court examined conduct by a roofing contractor that the state deemed unlawful public adjusting.
The contractor made statements such as:
Advertising itself as an “Insurance Specialist” and “The Leader in Insurance Claim Approval”
Claiming it had “developed a system to help customers settle their insurance claims as quickly, painlessly and comprehensively as possible”
Including contract language that authorized the roofer to negotiate with the insurance company on the customer’s behalf
Holding itself out as able to secure claim approval and settlement, not merely perform repairs .
The Texas Supreme Court held that these activities constituted acting as a public insurance adjuster without a license, even though the contractor argued it was merely communicating and assisting.
Texas allows only licensed public adjusters and attorneys to negotiate insurance claims on behalf of insureds. Alabama, by contrast, does not allow public adjusting at all. As a result the following types of activities discussed by the Texas Supreme Court in Stonewater Roofing likely would constitute the unauthorized practice of law in Alabama:
Negotiating with an insurer on behalf of an insured,
Seeking to secure approval, settlement, or payment, or
Presenting oneself as an insured’s representative in claim discussions
Why Involving a Policyholder Coverage Attorney Makes Sense
There are practical reasons that contractors and insureds should consult with a policyholder attorney when claims become disputed:
Law-trained analysis and advocacy
Policyholder attorneys—such as those at Johnstone Trial Law—are trained to interpret policy language, evaluate coverage positions, and advocate based on legal authority, not just construction scope.
Greater weight with insurers
Insurance companies accord significantly more weight to coverage positions presented by licensed attorneys, particularly when disputes involve exclusions, conditions, or policy interpretation.
Ensuring all coverages are utilized
Attorneys look beyond repair costs to identify all available coverages, including ordinance or law, loss of use, business interruption, personal property, debris removal, and other policy benefits that contractors are not positioned to evaluate.
What Contractors Can—and Should—Do
Contractors do serve a vital role in the insurance claims process, including:
Carefully and accurately scoping the loss to reflect what is actually required to restore the property to its pre-loss condition;
Identifying where the insurer’s estimate fails to capture the true scope of work;
Communicating the real-world cost of labor and materials;
Explaining why general contractor overhead and profit may be necessary on a particular job;
Walking through the estimate and explaining why the work it includes is necessary
These activities involve construction expertise—not legal advocacy—and are appropriate.
When It’s Time to Bring in an Attorney
Some common situations where involving a policyholder attorney is advisable include:
The insurer claims part of the work is not “covered” under the policy
There is a dispute over the meaning of policy language
The insurer and insured disagree about the amount owed
There is a dispute over ordinance or law coverage
There is disagreement about the limits or amount of coverage available
Other coverages may be implicated, such as loss of personal property, loss of income, or additional living expenses
This list is not exhaustive—but it illustrates when legal expertise is not just helpful, but necessary. If you need help with your commercial property or homeowners claim and have reached a disagreement with the insurance company, contact us.
