Property Insurance Coverage Law Blog : Florida Insurance Lawyer & Attorney : Merlin Law Group Law Firm : Tampa, Houston, Coral Gables, Gulfport

I have also made this point as a warning to company and independent adjusters:

Insurance company adjusters that negotiate an insurance claim with contractors are knowingly engaging with others in illegal activity and committing unfair insurance claims violations.

People who act as contractors for policyholders can negotiate insurance claims only if they are licensed attorneys or licensed public insurance adjusters. If properly licensed, they can negotiate only if they are retained by the policyholders. In jurisdictions that allow a contractor to work on and act as a public insurance adjuster on a single claim, I imagine some contractors are retained as both. A conflict of interest seems inherent in the dual roles, and virtually every Bar Association in America would prohibit an attorney from representing a client as a contractor and legal counsel at the same time.

Contractors can and should discuss the damage they find and costs of repairs with insurance adjusters. The Arizona Department of Insurance clearly indicated this was acceptable:

It is not unusual for a property owner’s contractor to discuss the details of building damage with the insurance company’s adjuster, particularly when there is extensive or complex damage. Often the contractor’s expertise is essential to identify precisely what was damaged, the extent of the damage, and the cost to repair it...

Over the past fifteen years, there has been a growing trend where out-of-state and specialty restoration contractors come to catastrophe areas. Some have one or two page contracts that essentially give them the right to act as the contractor and adjust losses for policyholders, as the contracts require payment based upon the insurance recovery. The Arizona Department of Insurance noted this trend, that it is illegal and the possibility of exploitation:

The Arizona Department of Insurance (ADOI) ordered an Arizona building contractor, True-Built Construction, LLC (Weston Farnes), to stop acting as an insurance adjuster without a license. Arizona insurance law requires any person who “adjusts, investigates or negotiates settlement of claims” to have a license from the ADOI.

...In this case, Farnes had his homeowner client sign an “Authorization” form which stated that he was representing the homeowner in negotiations with the insurance company “to obtain full reimbursement under the terms of [her] policy for a property damage claim.”

The massive hail storm that hit the Phoenix valley last October generated over 100,000 homeowner’s insurance claims in a single day. The storm created so much repair work, property owners sometimes had to wait weeks to get estimates from their insurance company’s adjuster and to schedule contractors for the repair work. It is likely that the increased demand for building contractors, especially roofers, prompted an influx of contractors from out of state. Non-resident contractors may not be aware of the ADOI adjuster license requirements for representing someone in an insurance claim settlement.

If someone contacts you and offers to represent you in the settlement of your homeowners insurance claim, you should verify the adjuster's references and credentials, including whether they have a license....

Long ago, the National Association of Public Insurance Adjusters determined there is an inherent financial conflict of interest for a public adjuster that also acts as a contractor on the same loss. Its Code of Ethics specifically prohibits this arrangement. It is about time that Departments of Insurance recognize the potential conflict and prohibit the practice. It should be part of the Model Insurance Code.