Public Adjusters Sued in Class Action for Wrongful Conduct--Are Unauthorized Practice of Law Class Action Suits Next?
At our recent seminar on insurance adjustment techniques and practices, Texas Hold 'Em" #2: Merlin Law Group's Seminar for Texas Public Insurance Adjusters, I warned public adjusters that wrongful practices, especially the unauthorized practice of law by giving legal advice, would probably result in lawsuits against them. Yesterday, I found an article, Class Action Lawsuit Targets Fees Charged by Public Adjuster, that addresses some of my concerns.
The article suggests that a public adjusting firm violated specific fee rules which are mandated by the Florida Office of Insurance Regulation:
"The complaint in the lawsuit seeks class action status and alleges Ameriloss
overcharged some clients. Specifically, the suit alleges Ameriloss sought fees of 33.5 percent for adjusting a claim by Clyde Lightbourn related to Hurricane Katrina in 2005, when state law limited fees to 10 percent.Lightbourn attorney Lance Harke, of Harke & Clasby in Miami, said his client
argued with Ameriloss about the fee, but the company insisted a third was the “standard” amount, and Lightbourn was desperate to get additional money for needed repairs.“It got us pretty angry to think someone in that situation could be taken
advantage of in this way. It’s price-gouging,” said Adam Moskowitz, an
attorney with Kozyak Tropin & Throckmorton in Coral Gables, who is handling
the lawsuit with Harke.Lightbourn received a favorable declaratory statement from the Florida
Department of Financial Services dated Jan. 13 that said “the public
adjusting firm [Ameriloss] could not properly charge a fee in excess of 10
percent under the specific facts of this case.”
Most public adjusters charge fees no more than ten percent. In the vast majority of the claims I review, public adjuster services result in a recovery far greater than the ten percent fee and everybody is very happy, except the insurance company.
My primary concern is a longstanding one addressed repeatedly by most leaders in the public adjuster field--public adjusters must not practice law. Doing so is illegal and will subject public adjusters to fines, loss of their licenses and jail. It will certainly lead to calls by insurers to prohibit public adjusting. The public adjusting industry must remain vigilant to prevent errant public adjusters from committing acts that endanger the profession and service for all: providing legal advice, giving legal opinions, and arguing law.
It is very easy to overstep the bounds of public adjusting and engage in the practice of law. For example, when a public adjuster advises a client to not file a lawsuit and go to appraisal or administrative appeal, that is practicing law. Whenever a person tells another what type of legal procedure should be taken to resolve a dispute where competing legal benefits and rights are at issue and need analysis, that is the practice of law. People who are not lawyers do this everyday.
This example, and hundreds of others like it, were a primary concern of the late Paul Cordish, the General Counsel for the National Association of Public Insurance Adjusters. Virtually every annual address Cordish presented to public adjusters had remarks and warnings about not practicing law. In my discussions with him, it was obvious he was concerned that some in the audience listened, but failed to behave accordingly. We both recognized how legal analysis aids adjustment disputes and why public adjusters so often fall into the trap of acting like lawyers and practicing law. The problem is that it is illegal--criminal in most states.
Public adjusters help policyholders in a number of different ways. There are many bright and dedicated people who spend their life helping policyholders obtain the full benefits owed following a disaster. I am humbled to be acknowledged as a past National Association of Public Insurance Adjusters Co-Person of the Year. I suggest that all public adjusters realize the significance of Paul Cordish’s warnings. If a class action over a fee amount has been filed, how many public insurance firms could be sued for routinely practicing law?
In this case, my instruction to public adjusters is simple: Just Don't Do It!
Could you please explain in more detail the 10% fee cap?
The following quote in the article is disturbing-- "Lightbourn received a favorable declaratory statement from the Florida Department of Financial Services dated Jan. 13 that said “the public adjusting firm [Ameriloss] could not properly charge a fee in excess of 10 percent under the specific facts of this case.”
Now, I don't know the specific facts of this case, BUT I do know that even the Department of Financial Services website states "There is no fee cap on re-opened or supplemental hurricane claims;...".
Please explain!
http://www.myfloridacfo.com/Agents/Industry/News/docs/PubAdjNewStat10-08.htm
Thanks,
Bob
Bob,
Here is statute Fla. Stat. §626.854:
"(11) (a) If a public adjuster enters into a contract with an insured or claimant to reopen a claim or to file a supplemental claim that seeks additional payments for a claim that has been previously paid in part or in full or settled by the insurer, the public adjuster may not charge, agree to, or accept any compensation, payment, commission, fee, or other thing of value based on a previous settlement or previous claim payments by the insurer for the same cause of loss. The charge, compensation, payment, commission, fee, or other thing of value may be based only on the claim payments or settlement obtained through the work of the public adjuster after entering into the contract with the insured or claimant. The contracts described in this paragraph are not subject to the limitations in paragraph (b).
(b) A public adjuster may not charge, agree to, or accept any compensation, payment, commission, fee, or other thing of value in excess of:
1. Ten percent of the amount of insurance claim payments by the insurer for claims based on events that are the subject of a declaration of a state of emergency by the Governor. This provision applies to claims made during the period of 1 year after the declaration of emergency.
2. Twenty percent of the amount of all other insurance claim payments."
Mr. Merlin,
Thanks for your reply.
Please note the last sentence in FS626.854(11)(a)
..."The contracts described in this paragraph are not subject to the limitations in paragraph (b)."
Also see DFS website here: http://www.myfloridacfo.com/Agents/Industry/News/docs/PubAdjNewStat10-08.htm
The 3rd bullet under FEES says:
"There is no fee cap on re-opened or supplemental hurricane claims; however, the fee cannot be based on any payments made by the insurer to the insured prior to the time of the public adjuster contract"
Can we assume that Ameriloss must have sought monies from the "insureds work" or under "adjusting" that were in excess of the fee cap, for the DFS to have made such a statement?
Thanks for your help in understanding this issue,
Bob
Chip,
How is it you being an attorney who is an expert in this field could not determine that there is no fee cap for public adjusters on supplemental hurricane claims? It is very clear in the statement above that as of October 2008 that any question about fee-caps on supplemental hurricane claims had been put to rest. The statute clearly states there are none. There is no mention that this statute as stated above was either amended or written to go into effect in October 2008, so is it even pertinent to the Ameriloss case. Sounds like attorneys would like to eliminate public adjusters altogether and be the only ones who can charge excessive fees and be involved with the appraisal process
thanks,
Rick
Bob,
I am citing the current law which FAPIA, NAPIA, and a number of others, including me, helped lobby and pass which has no fee cap on supplemental claims. You correctly note this, but I assume that is not the statute in application.
Instead, I assume that the contract at issue in the Class Lawsuit was based on the Administrative Rule applying to contracts entered into immediatly following Katrina. That had a ten percent limit and no express wording allowing for more for supplemental claims.
I will follow up on this as well as and issue a post with a warning that many legislators, being urged by the insurance lobby, find the charging of a third of a claim as improper because of the limits as to what a public adjuster can and should do. This is from my personal experience at the Citizens Claims Review Task Force.
Most of the very best public ajusters charge far less than a third. Bill Coffman, past President of FAPIA was quoted as saying that he was outraged that some public adjusters were charging fifty percent.
On the other hand, when the claims get so small and have already been reviewed and adjusted a number of times, the time and effort to make it economical for a public adjuster to provide valuable professional help simply cannot be done for the customary ten per cent. A very valid point which lead to the passage of the current statute.
I am sorry for the confusing comment. Doug Gross and I went through this language in a presentation in January at the FAPIA Conference.
And my main point was to watch for the more concerning illegal conduct of practicing law.
Hi Rick.. I'm disturbed by your comment about attorneys being "the only ones who can charge excessive fees".
I'm not in this business to charge excessive fees. I'm here to advocate for people to try to make them whole.. and charge a fair rate for my services.
Granted.. I'm not a proponent of regulated fee caps..never have been. I'd rather see our industry police itself.. a la Florida Bar.. I'm a free market person and I believe that if consumers were informed about our profession.. in the form of an "Policy Holder's Bill of Rights" - where they were made to understand that PA fees can be negotiated, the market would correct itself. That's my dream, anyway.
If Florida PA's would think about it.. they would never charge excessive fees. It only opens Pandora's Box and that, along with the UPL issues brought up by Chip in this post, may eventually be the catalyst for our demise as an industry.
Who will that hurt? people like me who love what they do.. and Florida's insurance consumers.
As a volunteer officer with FAPIA - and knowing how hard so many volunteers have worked to keep our profession alive for so many years before me.. I leave you with this final thought - http://tinyurl.com/owep8m