There are moments when a court opinion stops me cold. Not because it is wrong or that it is something that has never been raised. But because it quietly exposes and allows a trap that many have been walking into for years. A recent federal court decision out of Texas does exactly that. 1 It should be required reading for restoration contractors, roofers, and property insurance adjusters.
The case involved a fairly common fact pattern. A homeowner suffers a fire loss. A mitigation contractor performs the work. The insurer pays part of the invoice, but not all. The contractor finishes the job anyway. Litigation follows. So far, nothing unusual.
What changed everything was the contractor’s testimony. The restoration company owner testified that he believed roughly $50,000 remained unpaid. But he also testified that he had not billed the insured for that amount and would not seek payment unless the insured recovered additional funds from the insurer. That testimony ended the case.
The court ruled that because the insured might never be asked to pay the contractor, the alleged damages were contingent, speculative, and not ripe. No actual damages meant no breach of contract, no prompt payment violation, and no bad faith claim. Case over.
This is where the opinion becomes unsettling. Many insurance restoration contracts contain some version of what contractors believe is consumer-friendly language: “We will not charge more than the amount paid by the insurance company.” Contractors think this reassures policyholders. Many insurers and my clever opposing insurance defense colleagues will think this contract language is a gift.
The court, whether intentionally or not, treated that kind of arrangement as evidence that no debt existed at all. If the contractor will not pursue the insured unless insurance pays, then the insured has suffered no out-of-pocket loss and faces no legal obligation. Under basic damages law, that equals no recoverable damages.
The court did not say the work was unnecessary. It did not say the charges were unreasonable. It did not say the insurer paid enough. It said if no one is owed anything, then no one has been harmed.
That conclusion rests on legal principles. Courts do not award damages for losses that may never occur. They compensate for actual loss, not hypothetical exposure. By testifying that payment depended entirely on the outcome of the lawsuit, the contractor unintentionally converted a real invoice into a legal mirage.
This should concern restoration contractors and roofers well beyond Texas. The court relied on federal ripeness doctrine and long-standing state law principles that exist in some form everywhere. The reasoning is portable. Defense lawyers will read this opinion with interest, and it will be publicized to claims executives at the next PLRB conference.
The problem is not that contractors are trying to protect homeowners. The problem is that contract language and testimony have blurred the line between deferring collection and eliminating the debt. Those are not the same thing, but courts will treat them as the same if the distinction is not clear.
From an insurer’s perspective, this is a perfect storm. Pay what you want. Let the contractor finish the job. Let the contractor promise not to bill the insured. Then, argue that the insured has no damages beyond actual cash value. With one motion, breach of contract, prompt payment, and bad faith claims disappear.
This case should force a hard conversation in the insurance restoration industry. If a contractor performs work, issues an invoice, and believes money is owed, there must be a legally enforceable obligation somewhere, or the insurer will argue there is no replacement cost loss at all. Collection can be deferred. Hardship accommodations can be made. But extinguishing the obligation entirely hands the insurer a powerful defense.
My colleagues should ask the uncomfortable questions before defense counsel does. Is the client legally obligated to pay the contractor? Has an invoice been issued? Is the obligation contingent or real? Has an oral promise been made never to charge more than the insurer will pay? If the answers are fuzzy, the damages case is already in trouble.
Thought For The Day
“The most dangerous mistakes are the ones made with good intentions.”
— Peter Drucker
1 Elim v. Allstate Vehicle & Prop. Ins. Co., no. 4:25-CV-00147 (N.D. Tex. Dec. 30, 2025).