Mar 162015 David Stewart Article

What the Hail is Going on in Texas?

The Arrogance of Goliath.

By David Stewart, J.D.

Public Adjuster


What the Hail….is Really Going on in Texas – Part 1

What the Hail….is Really Going on in Texas – Part 2


Arrogant – having or showing the insulting attitude of people who believe that they are better, smarter, or more important than other people.[1]


Has the property insurance industry suddenly stopped paying these claims? Or are more sinister forces involved, causing both the increase in number of claims being submitted and number of claims resulting in litigation. There is no question it is the latter[2]


Have Texas insurance companies all of a sudden stopped paying hail damage claims? Of course not. The real cause of the Texas hail claims crisis is obvious[3]


Or perhaps it isn’t so… obvious. To some.


As a public adjuster I am in the trenches helping home and business owners with their property damage claims. I am not a Texas public adjuster, but I have friends who are. What the hail is going on in Texas goes on in every state. In any debate there are always two sets of facts. In order to make an informed analysis of the situation it is prudent to have both sets of facts.


A few days ago as I was getting ready to leave my hotel room I received a call from a State Farm Team 92 claims adjuster (I’ll call him Bob, not his real name). He, like myself, deals with many claims for many different people. It’s our job. However, the topic of our conversation was not about us. It was about a homeowner’s hail claim.


One has to realize that these home and business owners are everyday people. When they have a catastrophe (and to them even having a small water leak might qualify as a catastrophe) they believe that their insurance company is going to take care of them. After all, isn’t that what insurance companies promise to do when they sell a policy?


Have property insurance companies stopped paying their claims? Of course not. They pay them every day of the week. It’s not a question of do they pay their claims, it’s a question of how they pay their claims. The average policyholder knows little about their policy and even less about how to restore their property after a loss. They know they need a professional to help them. Their professional is the contractor they hire to fix their property.


I can’t deny there are contractors and public adjusters that operate in less than ethical ways. All industries have their problem element. One has to be careful when dealing with the problem that they aren’t also affecting the rest of the element, or those who need the element. Blaze on Black



The typical claim evolves in this matter. A policyholder suffers a loss. The first thing they do is contact their insurance carrier. This is actually one of their duties after loss as written in their policy. The carrier sends out an adjuster who inspects and adjusts the loss. The adjuster writes his “estimate,” cuts the policyholder a check and is on his way. Now the contractor becomes involved.


There are two types of contractors. Contractors who are just interested in cash flow and contractors who actually try to operate a stable business model. The contractor who is just interested in cash flow is more than happy to take what the insurance company offers to pay. Many will even offer to pay the deductible. Neither this type of contractor nor the policyholder know anything about the estimating platform or the policy language. The contractor does the work, the policyholder gets their property fixed and everyone is happy, at least momentarily.


If the policyholder happens to contact a contractor who actually operates a stable business model, things may not go as smoothly. The contractor inspects the damage, looks at the insurance adjuster’s scope and tells the policyholder there isn’t enough to properly do the work. The policyholder then contacts their adjuster and tells him the contractor said there isn’t enough to do the work. Now one of two things will happen.


First, the adjuster will contact the contractor and try to work out the differences with the contractor. This is the proper way to handle it and the way it should be done every time. The more common approach is for the adjuster to tell the policyholder their contractor is too high and they need to get more bids. Really? Where in the policy does it say that?


The policyholder, now thinking their contractor is too high, contacts other contractors for more bids. The policyholder quite likely would prefer to work with their original contractor, but are now under the false assumption that their contractor is “too high.” They get bids until they finally come up with a bid that the insurance adjuster feels is low enough to pay. Again I ask, where in the policy does it say that? Oklahoma City Hail From Norman Weather Office




Getting back to my conversation with “Bob,” I was discussing my scope and my documentation with him. I asked him if he had read it and he said he had. The main part of the argument concerned the roof scope. State Farm uses Xactimate so it is prudent when dealing with a State Farm claim to scope a loss with Xactimate. Anyone who has ever seen a State Farm roof scope knows that it is very basic. By very basic I mean they just use a few line items and then claim all the detail work is included. My conversation with Bob revolved around the use of the asphalt starter strip and the ridge cap line items.


I have done extensive research and analysis which included delving into the software, studying building codes and manufacturer’s installation instructions. I produced a “white paper” outlining precisely why each of these line items needed to be included in a properly composed Xactimate roof scope.


I will briefly explain what my analysis revealed. The argument is that starter strip and ridge cap are included in the hypothetical “waste factor” of the field shingles. Anyone who knows anything about roofing knows that the field shingles go on rather quickly. They are placed in position and nailed on and any good roofer can install field shingles at a fairly rapid pace. More material can be installed in a lesser amount of time.


The same is not true for the accessories, such as ridge cap and starter strip. Starter strip is done a couple of different ways. First, one can buy pre-manufactured starter strip and use it. This is how it is mainly done with architectural shingles. The other method requires using 3-tab shingles with the tabs removed. Common sense dictates that if one has to remove a portion of the shingle they are installing then it takes more time to perform that task. It is much quicker to place a shingle on the roof and pop 4 nails into it than it is to have to cut 3 tabs off that same shingle, lay it in place and then pop 4 nails into it. Yet, insurance adjusters would have you believe this is “included” in their “waste factor.”


In my analysis I compared the components of the field shingles with the component of the starter strip line item in Xactimate. The cost analysis in comparing an amount of starter strip to an equal amount of field shingle material revealed a cost difference of $147.67 per 234 LF of starter material installed.  This equates to .60/ LF.


This may not seem like much but it does add up. Let’s say on an average hip roof you have 300 LF of eave. Multiplying 300 times .60 comes to $180. Again, that may not seem like much. However, suppose a contractor does 100 of those roofs. That $180 is now $18,000.


This is now $18,000 that a contractor has left on the table and $18,000 of unjust enrichment to the insurer. Yes, it is unjust enrichment. The policy holder paid the premium for that benefit and the carrier improperly denied it. And that is just on 100 roofs. How many roofs are scoped in a year due to storm related claims? Thousands? Ten-thousands?  Hundred-thousand? Do the math.


When analyzing the ridge cap line item we find an even larger discrepancy. For every 100 LF of ridge cap bundled into the hypothetical “waste factor,” a claim is shorted over $161 per 100 LF of ridge cap on a loss. Once again, do the math. How much unjust enrichment does this add to an insurance company’s bottom line that should have gone to their policyholders?


If one needs further proof one simply needs to look at the labor components of these two items as compared to the labor component of the same amount of field shingles. The starter strip labor component shows a labor cost factor 3 times greater than the labor cost to install the same amount of field shingles. The same analysis for the ridge cap line item shows a labor cost factor nearly 4 times greater than the labor cost to install the same amount of field shingles. These facts are in the software program and are there for anyone who wishes to find them. When these facts are revealed we have one line item that shows a labor cost 3 times the comparable amount of field shingles and a line item that shows a labor cost nearly 4 times the comparable amount of field shingles. Yet, we are told “that’s included in our waste.” I’ll ask again. Where in the policy does it say that?


As previously mentioned, Bob said he had read my papers. This means Bob was aware of the facts that I have just explained. Bob told me it was company procedure to pay those items in the waste factor. I told Bob I didn’t care about company procedure. Company procedure is not part of the policy and the policyholder never agreed to “company procedure.” I also told Bob that the policy says the insurer will pay the “actual and necessary amount” spent to repair or replace the property. My papers establish that both of those items are “actual and necessary” costs of a roof replacement.


He agreed with me, but at this point he made an interesting statement to me. He said “You know you’re fighting Goliath, don’t you?” After questioning what he said, he told me again. “You know you’re fighting Goliath, don’t you?” In essence, he just admitted to me that State Farm was a philistine.


In modern usage a philistine is “a person who is hostile or indifferent to culture and the arts, or who has no understanding of them.” I have said many times that estimating insurance losses is an art so I really could not disagree with his admission. State Farm is indeed hostile or indifferent to the art of estimating and have shown on many occasions, the present one included, they have no understanding of it. Even after being presented with the evidence.


As it was I told him that I was aware that I was fighting Goliath. I also told him my name is David and I know how that story ended. Golf Ball Dents @ Fountain Gate Church in Abilene



“A new generation of public adjusters also appeared. In the past two years alone, membership in the Texas Association of Public Insurance Adjusters has more than doubled.”[4]


According to the Texas Department of Insurance, how many licensed public adjusters are there?


Public Insurance Adjuster – Number of Licenses as of 8/31/14 – 747.[5]


Are we supposed to believe that a mere 747 public adjusters in the state of Texas are helping create what Mr. Badger and others are calling a crisis?


Adjuster – Property and Casualty – Number of Licenses as of 8/31/14 – 48,770[6]


If one compares the number of license public adjusters to the number of licensed property and casualty adjusters, the public adjusters are outnumbered 65 to 1.


Going back to the article:


“Further, to assist these individuals in pursuing their claims, a new generation of ‘roofing experts’ emerged, many with absolutely no previous experience with roofing systems but prepared to issue reports.”[7]


This is an interesting statement. What exactly are the requirements to become a property and casualty adjuster?


I went to the United States Department of Labor website and found the following:


“A high school diploma or equivalent is typically required by employers who hire workers as entry-level claims adjusters, examiners, or investigators. Higher positions may require a bachelor’s degree or some insurance-related work experience. Auto damage appraisers typically have a postsecondary non-degree award or work experience in identifying and estimating the cost of automotive repair.”[8]


Work experience in related occupation – None.[9]


Have you ever heard of the pot calling the kettle black, Mr. Badger? I could imagine the great confidence homeowners would have if they knew the only qualifications necessary to handle their property damage claim is a high school diploma or equivalent. I’m sure there are property adjusters who have experience in construction related fields and do actually know what is necessary to repair damaged property. It has been my experience that they are few and far between.


However, your typical high school graduate will have no idea how to install field shingles, let alone the other detail work that is required to properly install a roof. All they know is what they are told. Sketch the roof in Xactimate and then insert the pre-made, insurance company macro[10]. Boom! 5 minutes and you’re done!


This is not scoping a claim. This is simply regurgitating company procedure in number form. It has nothing to do with the “actual and necessary” cost of repairing property. And just think, there are over 48,000 of these running around the state of Texas adjusting homeowner claims.


Going back to my conversation with Bob, the philistine, Bob admitted that he understood my position and even agreed with me. However, I was fighting “Goliath” and “Goliath’s” position is “that’s included in the waste.”


What exactly do you call it when you are shown, with documented proof, that your position is in error yet you keep on doing what you were doing regardless of the proof? What happens when more and more public adjusters and policyholders learn that the position of the philistine is in error and they have the proof to back it up? The philistine runs and cries to the legislature that the rules need to be changed so they can continue doing what they have always been doing.




Would insurance companies actually send adjusters out to a loss that have no knowledge of the subject matter they are sent to adjust? Well, you would like to believe if you are a policyholder with a claim you would get an adjuster who knew what the hail they were doing. Unfortunately, that is not the case.

An Actual Sign to Hire Adjusters for Insurance Companies After ONLY 4 DAYS of Training. This is the person you will see when you call in a loss....with four days of training......

One of my recent commercial hail claims involved hail damage to a modified bitumen roof on a downtown commercial building. Pretty simple really. However, upon reviewing the scope the adjuster had it adjusted as an EPDM roof. Anyone who has any actual roofing experience would know the difference between a modified bitumen roof and an EPDM roof. Anyone with any roofing experience would also know to check for additional layers under the top layer. This roof had additional layers of built up roofing under the modified bitumen roof. The adjuster sent to this loss did not include this in his scope. It is painfully obvious that the adjuster sent to this loss was in no way qualified to be adjusting this loss.


This adjuster scoped this loss at just over $50k. When I got done assessing the damages it was over $200k. When I first started working on this claim I honestly thought I would be able to get this one settled. The carrier on the claim has historically been pretty good about paying their claims. I sent my scope to the desk adjuster with my demand. I received a letter from the desk adjuster only objecting to a few of my line items. In other words we have a further undisputed amount. I sent a demand for the undisputed amount nearly 3 months ago. Illinois insurance regulations require undisputed amounts to be paid within 30 days. This adjuster has still not sent this undisputed amount, which is in excess of $100k. A claim that I fully expected to be able to settle is going to litigation because this carrier has decided not to pay a legitimate claim.


Four years ago I had never heard of a public adjuster. I was a sales rep for a roofing contractor. Before I knew about the insurance “game,” I would sell roofs. The enlightenment started when people would call with a storm claim and want an estimate for their roof. I would present them with our going rate. However, I was not able to get any of these jobs. Depending on the size of the roof, the insurance adjusters “estimates” were anywhere from several hundred to several thousand dollars below what it actually took to do the job. Did they get their roofs done? Of course. There are low-ball contractors in every market.


My success rate with regular retail bids was pretty good. On a retail bid I was actually selling the benefits of our company and the company had been around a long time and had a good reputation. However, I eventually realized that on “bidding” insurance claims I was not “bidding” against other contractors. I was bidding against an insurance company.


This all happened before I learned about Xactimate. Nearly all the storm claim bids were done with Xactimate. I finally went to a class about storm claims taught by a contractor. It was at this class that I learned about Xactimate. Once I subscribed to Xactimate and started looking at all the line items that were actually included in the software I realized why insurance scopes were so low. They were not using the software as it was designed to be used. I have already previously discussed bundling ridge cap and starter strip into a hypothetical waste factor. Depending on the size of the claim, this might leave anywhere from 300-500 dollars off the claim. When you start finding all the other items that they leave out of their scopes, that 300-500 might easily be 1-2k or several thousand dollars.


Without knowing the estimating software, a homeowner has no idea that their adjuster is intentionally leaving hundreds, if not thousands of dollars, out of their claim. They would never know this unless someone knowledgeable with the software, such as a public adjuster or contractor, told them this was being done.




There most definitely is something the hail going on. Just what the hail is going on? Is it because “Texas insurance companies (have) all of a sudden stopped paying hail damage claims? Of course not.” Now that some more facts have been added perhaps Mr. Badger’s conclusion is not so “obvious.” What the hail is going on in Texas is not just a Texas “crisis.” The crisis exists everywhere there is an insurance claim being adjusted.


I have no reason to believe there is not some questionable activity on the side of some contractors and public adjusters. However, I absolutely know there is questionable activity happening on the insurance side. No, Texas insurance companies have not all of a sudden stopped paying hail damage claims. Those who deal with those claims are becoming more knowledgeable and are exposing the fraudulent activity of the insurance companies.


Insurance companies can no longer get away with the deception they have been using for years. We are learning the software and the tactics used by insurance companies. We know the law and we know how to properly scope a claim. We have more experience than a high school diploma. We know how to properly scope a roof because we have done it for years.


The insurance industry is not under attack. The insurance industry is being exposed. They are being exposed of sending incompetent adjusters out to scope losses they know nothing about. They are being exposed for their bastardization of the estimating software. Even their phony engineer reports are being exposed. There most certainly is a crisis in the insurance industry, Mr. Badger. The crisis is we are onto the scheme. When we expose the scheme, just like the philistine, they ignore the facts and just go right on doing what they are doing. Arrogance! Pure arrogance!


Toto is chewing on the curtain and the wizard is being exposed.


An article by David Stewart,

Licensed Public Adjuster.


[2] Badger, Steven J. “The Emerging Hail Risk: What The Hail Is Going On?” Claims Journal. Wells Media Group, Inc., May 2, 2014. Web. February 2015.

[3] Badger, Steven J. “Juror Witnesses Firsthand What the Hail is Going on in Texas.” Claims Journal Wells Media Group, Inc., December 1, 2014. Web. February 2015.

[4] Badger. “The Emerging Hail Risk, id.



[7] Badger. “The Emerging Hail Risk, id.


[9] Id.

[10] A macro is a pre-set group of line items that are inserted into a Xactimate estimate.


Some good links, with a broad perspective.

Cal Spoon 02/22/15


If you would like to add information to this, feel free to comment below, or contact me through the link at my name.


Here are some good articles and sites where information was obtained. This article is very suspicious, simply because we have no facts, yet I believe they found and culminated a good story to appeal to Hispanic Americans and not filing ANY claims.

See some of the damage for yourself:

Biased reports, only giving partial facts…..

Legislation in Tennessee attempting to eradicate the very laws similar to those proposed in Texas by Senator Larry Taylor and pushed by Steven J. Badger. They have had a very good taste of this Insurer Friendly type legislation and are actively, with bills on the floor, trying to REMOVE IT!

Another Public Adjusters perspective who lives in a state where they currently have this type of proposed legislation in place. They have the bill listed above introduced and well on its way to passing, TO CHANGE THESE LAWS TO THE ONES TEXAS CURRENTLY HAS IN PLACE.

In other words, they are taking their freedoms back while Texans are being stripped of theirs……No.


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