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

Mary Fortson and I were recently reviewing some matters raised by the leadership of the National Association of Public Insurance Adjusters and Florida Association of Public Insurance Adjusters, when I asked her to provide me the Florida regulations pertaining to these ethical rules. Mary is the General Counsel to the Florida Association of Public Insurance Adjusters, and we were certain that many of the conduct issues being raised by the leadership of these organizations were covered in these rules. The violation of which subjects an adjuster to severe penalties, including the possible loss of license. These rules were made to protect the public and consumers of insurance as stated in the first part of the ethical code:

Code of Ethics. The work of adjusting insurance claims engages the public trust. An adjuster shall put the duty for fair and honest treatment of the claimant above the adjuster's own interests in every instance.

Claims managers need to make certain that they are also adhering to this law. Public adjusters who find company and independent adjusters breaking these rules but do not promptly report the violations to the Department of Financial Services also violate the rules. I recently heard a claims manager suggest that his adjusters had a right to immediate access to the damaged property. Certainly, most policyholders welcome prompt investigation and evaluation, but because of some abuses, access into a policyholder’s home or business is covered in these ethical provisions:

(s) A company adjuster, independent adjuster, attorney, investigator, or other person acting on behalf of an insurer that needs access to an insured or claimant or to the insured property that is the subject of a claim shall provide at least 48 hours notice to the insured or claimant prior to scheduling a meeting with the claimant or an on-site inspection of the insured property. The insured or claimant may deny access to the property if this notice has not been provided.

The Florida Association of Public Insurance Adjusters has a Code of Ethics as well. It also has a committee that reviews every complaint regarding its members. I suggest that when company or independent adjusters report ethical violations to the Department of Financial Services that they also copy the violation to FAPIA. Here is the FAPIA Code of Ethics:

All members of FAPIA are required to abide by the following Rules of Professional Conduct and Ethics. This better enables us to ensure that our clients, members of the public, are able to receive proper and ethical treatment at all times.

1. The members shall conduct themselves in a spirit of fairness and justice to their clients, the Insurance Companies, and the public.

2. Members shall refrain from improper solicitation.

3. No misrepresentation of any kind shall be made to an insured or to the Insurance Companies.

4. Commission rates shall be fair and equitable, and strictly in accordance with the prevailing laws or regulations of the Florida Insurance Department.

5. Members shall conduct themselves so as to command respect and confidence. They shall work in harmony with one another, with their clients, and the Insurance Companies' representatives, so as to foster a cordial and harmonious relationship with all branches of the insurance business, and with the general public.

6. Members must be fitted, by the knowledge and experience, for the work they undertake. They must not endanger the interests of the public adjusting profession, or risk injustice to insureds or to the Insurance Companies, by attempting to handle losses or claims for which they are not qualified, and for which they cannot find competent technical assistance.

7. Members shall not engage in the unauthorized practice of law.

8. Members shall not acquire any interest in salvaged property or participate in any way, directly or indirectly, in the reconstruction, repair, or restoration of damaged property, except with the knowledge, consent and permission of the insured.

9. Members shall be cooperative and assist one another in every possible way.

10. Members shall not disseminate or use any form of agreement, advertising, or any printed matter that is harmful to the profession of public adjusting, or which does not comply with the rules and regulations of the Florida Insurance Department, or which might subject public adjusting and public adjusters to criticism or disrespect.

The enforcement of ethical rules by adjusters leads to a recurrent theme that has to be addressed by Alex Sink and the people operating the Department of Financial Services. Alex Sink is a wonderful public servant. Many in the insurance industry are wholeheartedly supporting her quest to become Florida’s next governor. And, when I hear adjusters and their managers say that when they follow the law, report serious violations of ethical laws to the Department of Financial Services, but the Department essentially says that they are “too busy” to do anything about it, I know she will make a change or change the people who are not doing their job. The California Insurance Commissioner was once sued for not fulfilling the statutory duties of that job.

Somebody needs to find out if our paid regulators are either too lazy or too overworked to do the important job of enforcing the laws. This is a serious matter, but many have been complaining about the lack of action by the Department of Financial Services for far too long. Something has to change soon.

Good, honest, and “playing by the rules” adjusters need to know that their profession and the state will hold wrongdoers accountable for breaking rules. Otherwise, why have any rules?

Here are the ethical requirements of adjusters in Florida:

69B-220.201. Ethical Requirements.

(1) Definitions. The following definitions shall apply for purposes of this rule:

(a) “Adjuster,“ when used without further specification, includes all types and classes of insurance adjusters, (company, independent, and public), subject to Chapter 626, Florida Statutes, regardless of whether resident or nonresident, and whether permanent, temporary, or emergency licensees.

(b) “Client“ includes both clients and potential clients; and means any person who consults with or hires an adjuster to provide adjusting services.

(c) “Department“ means the Florida Department of Financial Services.

(d) “Person“ includes natural persons and legal entities.

(2) Violation.

(a) Violation of any provision of this rule shall constitute grounds for administrative action against the licensee.

(b) A breach of any provision of this rule constitutes an unfair claims settlement practice.

(3) Code of Ethics. The work of adjusting insurance claims engages the public trust. An adjuster shall put the duty for fair and honest treatment of the claimant above the adjuster's own interests in every instance. The following are standards of conduct that define ethical behavior, and shall constitute a code of ethics that shall be binding on all adjusters:

(a) An adjuster shall: not directly or indirectly refer or steer any claimant needing repairs or other services in connection with a loss to any person with whom the adjuster has an undisclosed financial interest, or who will or is reasonably anticipated to provide the adjuster any direct or indirect compensation for the referral or for any resulting business.

(b) An adjuster shall treat all claimants equally.

1. An adjuster shall not provide favored treatment to any claimant.

2. An adjuster shall adjust all claims strictly in accordance with the insurance contract.

(c) An adjuster shall not approach investigations, adjustments, and settlements in a manner prejudicial to the in-sured.

(d) An adjuster shall make truthful and unbiased reports of the facts after making a complete investigation.

(e) An adjuster shall handle every adjustment and settlement with honesty and integrity, and allow a fair adjustment or settlement to all parties without any remuneration to himself except that to which he is legally entitled.

(f) An adjuster, upon undertaking the handling of a claim, shall act with dispatch and due diligence in achieving a proper disposition of the claim.

(g) An adjuster shall promptly report to the Department any conduct by any licensed insurance representative of this state which violates any provision of the Insurance Code or Department rule or order.

(h) An adjuster shall exercise extraordinary care when dealing with elderly clients to assure that they are not disadvantaged in their claims transactions by failing memory or impaired cognitive processes.

(i) An adjuster shall not negotiate or effect settlement directly or indirectly with any third-party claimant repre-sented by an attorney, if the adjuster has knowledge of such representation, except with the consent of the attorney. For purposes of this subsection, the term “third-party claimant“ does not include the insured or the insured's resident relatives.

(j) An adjuster is permitted to interview any witness, or prospective witness, without the consent of opposing counsel or party. In doing so, however, the adjuster shall scrupulously avoid any suggestion calculated to induce a witness to suppress or deviate from the truth, or in any degree affect the witness's appearance or testimony during deposition or at the trial. If any witness making or giving a signed or recorded statement so requests, the witness shall be given a copy of the statement.

(k) An adjuster shall not advise a claimant to refrain from seeking legal advice, nor advise against the retention of counsel to protect the claimant's interest.

(l) An adjuster shall not attempt to negotiate with or obtain any statement from a claimant or witness at a time that the claimant or witness is, or would reasonably be expected to be, in shock or serious mental or emotional distress as a result of physical, mental, or emotional trauma associated with a loss. The adjuster shall not conclude a set-tlement when the settlement would be disadvantageous to, or to the detriment of, a claimant who is in the traumatic or distressed state described above.

(m) An adjuster shall not knowingly fail to advise a claimant of the claimant's claim rights in accordance with the terms and conditions of the contract and of the applicable laws of this state. An adjuster shall exercise care not to engage in the unlicensed practice of law as prescribed by the Florida Bar.

(n) A company or independent adjuster shall not draft special releases called for by the unusual circumstances of any settlement or otherwise draft any form of release, unless advance written approval by the insurer can be demonstrated to the Department. Except as provided above, a company or independent adjuster is permitted only to fill in the blanks in a release form approved by the insurer they represent.

(o) An adjuster shall not undertake the adjustment of any claim concerning which the adjuster is not currently competent and knowledgeable as to the terms and conditions of the insurance coverage, or which otherwise exceeds the adjuster's current expertise.

(p) No person shall, as a public adjuster, represent any person or entity whose claim the adjuster has previously adjusted while acting as an adjuster representing any insurer or independent adjusting firm. No person shall, as a company or independent adjuster, represent him or herself or any insurer or independent adjusting firm against any person or entity that the adjuster previously represented as a public adjuster.

(q) A public adjuster shall not represent or imply to any client or potential client that insurers, company adjusters, or independent adjusters routinely attempt to, or do in fact, deprive claimants of their full rights under an insurance policy. No insurer, independent adjuster, or company adjuster shall represent or imply to any claimant that public adjusters are unscrupulous, or that engaging a public adjuster will delay or have other adverse effect upon the settlement of a claim.

(r) No public adjuster, while so licensed in the Department's records, may represent or act as a company adjuster, independent adjuster, or general lines agent.

(s) A company adjuster, independent adjuster, attorney, investigator, or other person acting on behalf of an insurer that needs access to an insured or claimant or to the insured property that is the subject of a claim shall provide at least 48 hours notice to the insured or claimant prior to scheduling a meeting with the claimant or an on-site inspection of the insured property. The insured or claimant may deny access to the property if this notice has not been provided.

In Public Adjuster Lawsuit Challenging State's Cap on Fees and Solicitation Ban Survives Venue Change, I noted that the trial court in Dade County ruled that the matter could proceed there. Unfortunately for those public adjusters, Alex Sink appealed that ruling. By the time those appellate issues are finally resolved, the second lawsuit may be over.

These are important cases raising important constitutional questions. We will keep abreast of the developments in both.
 

Sean Shaw went to Tallahassee Leon High School. He then went to Princeton, where many of our best and brightest get a chance. Is there any parent that would not be happy to have their child accepted to and educated at Princeton? He then came back home to Florida and went to law school in Gainesville. Alex Sink, a banker who became Florida's Chief Financial officer, appointed Sean Shaw as the Florida Insurance Consumer Advocate. We are lucky to have such a very smart, passionate and open minded person giving up private gain to step into this role.

I am always for the policyholders. These are my clients. It would come as no surprise that my candid response to any Florida leader supporting the aforementioned deregulation law would be, Do Florida Legislators Think We Are Stupid? It is so clear why this law hurts consumers, and I invite anybody to challenge this statement I made in that post:

Now, our legislators have claimed that rates will stay the same and not go up if there are no regulations limiting what insurance companies can charge. Gimme a break.

Insurance companies want the regulation to cease so they can, as a group, raise the rates as much as they can---especially after hurricanes, when insurers leave the market or use the hurricane losses as reasons to raise prices knowing customers have no choice. This is what happened in the 1990s following Hurricane Andrew and after the 2004 and 2005 hurricanes.

Then, we had leaders that stood up to the insurance industry. Now, many legislators in leadership receive significant support and constant lobbying from insurance companies. The result is this anti-consumer legislation.

The legislators supporting this bill say that there will be more competition. I say that the insurance rates are going to rise with greater competition because the insurers are exempt from anti-trust laws, and there is no open market in insurance.

Our legislators are simply deceitful when they suggest this bill will lower rates or keep them the same. For example, State Farm would be charging significantly more had the Office of Insurance Regulation not stopped the requested increase. Under this bill, State Farm and all the insurers as a group could charge as much as they want.

It makes no sense, and it is very disingenuous to suggest that rates will remain the same because of more competition. There will be more competition at significantly higher cost if this bill passes.

I am no rocket scientist, but I can figure out when the sales pitch is a bunch of bunk. This is what many of Florida's political leaders are trying to sell, hoping their supporters and constituents will not catch on that they have become closer and obligated to a more lucrative base---the insurance industry. I have made a promise to cite each politician supporting this bill so all Floridians can keep track. But, we need some "smarter" analysis from the man in the street common sense I subscribe to. And this is where Sean Shaw comes into the picture.

Sean Shaw and another consumer advocate, Bill Newton, of the Florida Consumer Action Network, recently wrote an opinion letter, Don't Deregulate Insurance: Consumers Only 'Choice' Would be Bad, to the Palm Beach Post which stated in part:

While these provisions are similar to the "consumer choice" bill introduced in 2009, this legislation would allow all authorized property insurers, not just a select few, to charge any rate.

Imagine walking into your insurance agent's office. Your agent places three policies in front of you. Two are with private insurers, and one is a Citizens policy. The private insurers' policies are close in price, but the Citizens' policy is significantly cheaper, for essentially the same coverage. Which would most consumers choose? The answer is obvious, especially in these tough economic times.

Sen. Bennett has stated that he filed this bill in response to the perception that Citizens' legislatively set rates are driving private property insurers from Florida. Unfortunately, this bill does nothing to address Citizens' rates. This legislation would only exacerbate the growth of Citizens by increasing the divide between Citizens' rates and what other companies can charge. Because Citizens is backed by all Florida taxpayers, many legislators have tried to limit the state's exposure by reducing Citizens. If private insurers can charge whatever they wish, Citizens is likely to see an increase in policyholders.

Finally, this proposal would allow all insurers to "cherry pick" customers, leaving many Floridians with nowhere else to turn but Citizens. South Floridians near the coast would see the largest increases in premiums, while Floridians who live more inland and in northern counties would see more favorable rates. When a hurricane hits, not only would Citizens have the majority of the losses, but its policyholders would have to pay that 15 percent assessment before any private insurance money was due.

Proponents of deregulation claim that it would bring new insurers to the market. However, no insurer has said publicly that it would enter Florida if the property market were deregulated. Deregulation also would strip out a huge layer of consumer protection for all Floridians. The average consumer does not have the resources to determine when a rate is excessive. The state has the resources to judge the fairness of insurance rates, and can provide a warranty of fairness to consumers. Deregulation would end this protection.

Another argument for deregulation is that it would end the subsidization of coastal properties by inland property owners. But significant state revenues are generated from coastal areas and flow inland. Any current subsidization of the coastal market helps the overall housing market in Florida. The issue of coastal property insurance rate subsidies has been successfully addressed in other states, such as Mississippi, and the answer has never been deregulation.

History has shown the problems deregulation can bring to Florida's insurance marketplace. In 1968, Florida politicians attempted to deregulate the auto insurance market, based on many of the arguments being submitted by Sen. Bennett and Rep. Proctor. After rate increases as high as 23 percent, the legislation was repealed. The auto insurance market has remained regulated since 1971.

As consumer advocates, we are always encouraged when any legislator or industry group proposes an idea that seeks to improve the insurance industry in Florida. However, this bill would not lead to any sort of improvement; instead it would significantly hurt Florida's consumers. If this legislation should pass, we urge Gov. Crist, as he did last year, to veto it.

Sean Shaw and Bill Newton have only the consumer interests in mind while making these public statements regarding how much you have to pay for rates and why this law is wrong. Guess what interests Senator Bennet and Representative Proctor are supporting when sponsoring laws to allow insurers to charge you whatever amount they want? Most of us are not that stupid that we cannot figure that out. I pointed this out in A Balanced Perspective Regarding the Politics of Insurance Legislation, where I made this observation of what we common types may find:

This Florida legislative session still leaves me troubled. I have difficulty understanding what so many of these hardworking, well-meaning representatives were thinking when voting for unregulated rates. Unregulated rates will result in rates higher than what the regulators would permit-even though the regulated rates give insurers a fair profit on their investment.

It sounds so stupid. Can you imagine this scenario:

“Edna, I am really excited about this new law. The old fair rate approved by the Office of Insurance Regulation has been wiped off the books by our genius Florida legislators. Next year, we will get the same insurance, and it will cost as much as our carrier wants to charge us. This is because our insurance carrier no longer has to worry about applying for a fair rate."

I should also emphasize that another person dedicated to the study of insurance rates and consumer issues opposes this measure, Kevin McCarty, as I posted in Kevin McCarty Battles for Consumers and Against Higher Rates. Yet, I do not understand why some of our politicians are so motivated to help raise rates for businesses and consumers just to help the property insurance industry. Maybe the property insurance industry has their ear and pocket? Otherwise, Florida seems to be the only state in the Union to accede to the insurance industry's goal of complete deregulation, collusion, and sky-high rates granted by ignorant state leadership. Nobody can be that dumb. Somebody has been bought off in one political way or another.

We need more of the Sean Shaw type of people's advocate and less of the insurance industry advocate in Tallahassee. We need to keep track of and hold those politicians in the insurance industry’s pocket accountable.

Fundraising receptions are an excellent opportunity to meet candidates. What people see on television and often read in newspapers does not accurately portray what a politician is about. Frankly, most politicians I meet seem to be genuinely interested in doing "good" for the people they represent. Often, they are overwhelmed by the number of issues facing them and have difficulty sorting out truth from propaganda.

Alex Sink is bright and probably more at ease studying and making decisions than having to campaign. My impression is that she sees the subtle aspects of issues and is not dogmatic nor bullying in her leadership and decision making. She is concerned for the consumer, but understands that we have to balance that need with a favorable business climate. The bottom line is that these attributes make her the best candidate for Florida's next governor, and I am supporting her.

I encourage any and all to come to my home next Monday, September 21st, from 5 - 6:30 p.m. Food, beverages and lots of funloving people will be there. Alex Sink will meet and greet you. Please call (813) 229-1000 or email Kendra Kenney with questions and to help us keep track of expected guests. 

The Report that McCollum was referring to is the Emerging Florida Homeowners Property Marketplace. The report is full of operational information regarding many insurers. It also suggests that the surplus lines industry is participating much more than anticipated. Possibly, the Surplus Lines Legislation just passed is having a positive impact with new and increased surplus lines capacity coming into Florida.

Gary Fine outlined the nature of the antagonism between the two consumer advocates:

“McCarty made the presentation at the request of Sink, who was following up on complaints from lawmakers who pushed the insurance deregulation or a.k.a the "State Farm" bill. These lawmakers have contended that McCarty misled Crist before he vetoed the legislation and there remains a quiet effort to get the Legislature to pass a new version of the bill if there is a special session later this year. The bill in essence would allow large capitalized carriers to have unregulated rates. (Sink refused to say Tuesday whether Crist should have signed or vetoed this bill - saying that was "the governor's decision" to make.)

"McCarty for his part has refuted the suggestion he misled anyone, saying he and members of his office have been "candid" that a big chunk of new capital in Florida has come from unregulated surplus lines carriers which do not usually cover those in the residential homeowners market.

Sink on Tuesday morning chided McCarty for failing to get her the information she requested earlier, saying "it still stuns me" that his office was unable to get the information to her sooner.”

Hopefully, they will be able to get this behind them. I agree with Alex Sink that everybody has to have their performance reviewed. Contrary to the belief of those in the insurance industry and some in the Florida legislature listening to the industry rather than their constituents, Kevin McCarty has been doing a fantastic job for Florida policyholders.

Insurance companies do not want to be held accountable for wrongful conduct. "Cheat and get away with it"-- is the mantra of many insurers. This is wrong and it has to stop.

Honest insurers should push for consumer protection laws that hold dishonest insurers accountable. Do they? Not that I have seen. Only crooks and cheats oppose laws that punish cheating--where is the property and casualty insurance industry?

I know most independent adjusters would support these laws. Company adjusters publicly would as well if they were not subject to termination. The property and casualty industry needs to clean itself up. Honest insurers and adjusters should support penalties when others break rules. As Alex Sink suggested yesterday, there needs to be accountability for those that do not honor insuring promises. Who is against that? I suggest that the answer is only those that break those rules.

Yesterday, I tried to teach public adjusters how to prevent otherwise innocent policyholders from wrongfully inflating claims because they believe the insurer will always try to reduce what is rightfully owed. Two wrongs never equal a right. However, many policyholders lack faith in insurance company claims practices and believe they can’t be straight forward and get paid a fair amount. This must stop. Nobody benefits.

I first met Alex Sink in Tallahassee shortly after she became CFO. In our initial meeting, she seemed very concerned with the ability of Florida's Catastrophe Fund to raise money quickly if needed. Several months later, she reached a deal with Warren Buffett and bought an option for Florida to receive funds from Buffett's Berkshire Hathaway in the event of a catastrophe. This was long before the financial collapse last year, and I felt she was a genius to have figured out the oncoming credit collapse months before anyone else. Maybe all her years as a banker gave her a much better appreciation for the upcoming financial mess we have been going through.

Sink applauded FAPIA for raising the standards of Florida public insurance adjusters. Indeed, Sink noted that FAPIA has called for higher testing and educational requirements for those obtaining a license, has requested stronger ethics requirements, and made experience a requirement through an apprentice program. She urged the group to promote more professionalism in the trade and to always look for ways to protect insurance policyholders from those that are unscrupulous.

She said that she supported the gradual rate increases for Citizens property insurance because it was not fair that others had to subsidize Citizens so that it could offer rates that are far from actuarially sound. She was happy the Catastrophe Fund exposure was lessened, although she is still concerned about Florida’s financial exposure should a major hurricane strike southeastern Florida.

In the future, she felt Florida's government needs far greater transparency in operations so people know how our government runs and how laws are made. She felt that Shawn Shaw as the Insurance Consumer Advocate was a great appointment because many in Tallahassee forget that the people, not insurance companies, vote them into office. She indicated Shaw was a strong advocate for consumers. Most, including me, agree.

My impression was that she knows insurance consumers need professional help. She clearly suggested that FAPIA continue its longstanding position with an eye towards serving insurance consumers through higher and stronger professional requirements. She is right on that point. Florida deserves highly educated, trained, professional, and ethical public insurance adjusters.