Overhead and Profit (O&P) Xactimate Rules in Texas (2026)

If you are a roofing contractor operating in the state of Texas, you know that battling insurance adjusters is a daily, exhausting reality. In the aftermath of massive hail and wind storms, the most fiercely contested battleground is Overhead and Profit (O&P)—commonly referred to in the industry as "10&10" (10% overhead, 10% profit). Insurance carriers will do absolutely everything in their power to strip O&P from your Xactimate estimates.

They will claim that simply replacing a roof does not require a General Contractor. They will throw arbitrary rules at you. But understanding the specific overhead and profit Xactimate rules in Texas is critical to your survival. If you leave 20% on the table for every single claim, you are actively losing hundreds of thousands of dollars a year in pure gross margin. Here is how you fight back and win.

Instead, pivot the conversation to a retail upsell. While you aggressively fight the adjuster for O&P behind the scenes, use CurbClose to show the homeowner the retail upgrades they can buy with their deductible.

Take a photo of their house and render a premium architectural shingle, or even a standing seam metal roof. Generate a branded visual PDF proposal that highlights the massive curb appeal upgrade. If you can upsell them a $4,000 premium package out-of-pocket on the first visit, you have instantly recovered the O&P margin the insurance company is trying to withhold. You win the margin upfront, and any O&P you win later from the carrier becomes pure bonus profit.

The Battle for Margins

First, you must understand what O&P actually represents. The line items in Xactimate (for shingles, tear-off, drip edge, etc.) only cover the direct cost of materials and the direct cost of the subcontractor labor performing the task. They do not cover your office staff, your project managers, your insurance, or your profit. That is what O&P is for.

When an adjuster strips O&P, they are essentially telling you that you should act as a General Contractor for free. You must refuse to accept this.

The 3-Trade Rule Myth

The most common and frustrating excuse a desk adjuster will use to deny O&P is the "3-Trade Rule." They will boldly tell you over the phone that unless the claim involves three distinct trades (for example, Roofing, Seamless Gutters, and Interior Drywall repair), O&P is not warranted on the claim.

You must understand that this is an industry myth perpetuated by carriers to suppress payouts. There is absolutely no legal statute or binding case law in Texas that explicitly states three trades are required. The true, legal test for O&P is "Complexity and Coordination," not an arbitrary trade count.

Proving Coordination of Trades (Complexity)

To successfully win O&P, you must prove to the desk adjuster that the job is complex enough to require a General Contractor to coordinate scheduling, materials, safety, and sequencing. You must paint a picture of logistical complexity.

• HVAC Detach & Reset: If you have to hire an HVAC technician to safely disconnect, lift, and reset a heavy AC unit to replace the flat roof membrane beneath it, that requires intense scheduling coordination.
• Solar Panel Removal: Coordinating a specialized, certified solar crew to safely power down, remove, store, and reinstall panels is highly complex and carries massive liability.
• Permitting & Engineering: If the municipality requires structural engineering sign-offs for the decking, or specialized mid-roof inspections, you are acting as a GC.
• Steep & Tall Logistics: A 12/12 pitch roof on a 3-story house requires scaffolding, specialized boom lifts, and extreme safety protocols. That level of risk management requires a GC.

Documenting the F9 Notes

You cannot just ask for O&P; you must document the necessity in your Xactimate F9 notes. Adjusters live and die by the file. If it isn't documented, it didn't happen. Detail the exact timeline required to coordinate the solar crew, the dumpster delivery, the roofing crew, and the gutter crew. Provide photos of the steep drops and access issues.

Texas Department of Insurance (TDI) Bulletins

When an adjuster stubbornly denies O&P despite your documentation, you must arm yourself with the TDI bulletins. Historically, the Texas Department of Insurance has issued bulletins (such as the famous Bulletin #B-0045-98) indicating that if it is reasonably anticipated that a homeowner will need a General Contractor to coordinate the repairs, O&P should be paid on the *entire* claim, not just the non-roofing items.

""The deduction of prospective contractors’ overhead and profit and sales tax in determining the actual cash value of a loss is improper, is not a reasonable interpretation of the policy language, and is an unfair claim settlement practice." - TDI Bulletin"

Quote the bulletin directly in your email to the adjuster. Force them to put their denial of state guidelines in writing.

The Retail Upsell Strategy

While you are fighting the adjuster in the background for your O&P, you must protect your cash flow on the front end. Do not let the homeowner get bogged down in the insurance fight, as it creates anxiety and delays the build.