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

Debbie Maroy, of ClaimSmentor and Dimechimes, which are excellent educational sites for adjusters, made the following observation:

Chip- I posted a link to this on our claims group at Linkedin as even independent adjusters who work for roofing firms when independent adjusting assignments are low are often faced with this problem when roofing firms ask them to act as negotiators with the insurers. I always point them to this California insurance commissioner case as many of them were approached by the contractor to work for them. I had warned them it sounded like public adjusting and sure enough not many months later the CA insurance department issued a press release about their unlicensed PA work....

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I hope this helps independent adjusters as well make sure they are not participating in unlicensed public adjusting when working for roofing firms or other contractors. Thanks for bringing up this important topic.

The press release she referred to noted:

A Palos Verdes company and its operators will pay $200,000 in fines for posing as insurance claims adjusters after the Angora fire in South Lake Tahoe last summer.

Insurance Commissioner Steve Poizner says Paramount Disaster Recovery also agreed to pay the state $75,000 in litigation costs.

Steve Slepcevic, 39, of Palos Verdes, and Matthew Todd, 48, and Charlie Rose, 43, both of Redondo Beach, were ordered to cease and desist operations in August.

Poizner's office said they acted as certified public insurance adjusters and signed contracts with Tahoe-area fire victims.

The contract language language at issue in this matter was similar to that I have seen in dozens of contracts used by non-public adjusters:

13. On or around March 2000, the Department was informed that PARAMOUNT offered customers or potential customers Contract/Authorization/Designations that included the following language: “If insured elects not to repair property, but instead receives loss settlement from insurance company, Paramount shall receive 20% of THE AGREED UPON ESTIMATE, without deduction for depreciation or Insured’s deductible.”

14. After interviews and discussions between Department personnel and
PARAMOUNT regarding the contract language identified in paragraph number 13 herein, PARAMOUNT represented to the Department, in written correspondence dated January 22, 2003, that at that time the only contract they were using did not include the language contained in paragraph number 13 herein, but instead included the following contract language: “Paramount will be paid for in full for repairing/replacing Client’s damaged property. Paramount will receive the full amount of the total agreed upon estimate (i.e. the estimate Paramount and the Insurance Company agree upon), without deduction for depreciation or Client’s deductible. Paramount shall perform all work according to the agreed upon estimate and will perform all work to meet
current uniform building codes and/or restore property to pre-loss condition.

If you think that you may be in violation of adjusting laws, see an independent attorney and get a legal opinion about what to do. Many private emails suggested that these occurrences are not isolated, but that the enforcement divisions do little about this issue. I would not count on that continuing in the future.

Rumors on the streets or email highway in the independent adjuster world are saying that BP has instructed the ONE adjusting firm assigned to handle the claims not to deploy anyone experienced in handling the Exxon Valdez oil spill claims. Please look into this and assure us that is not true and the thousands upon thousands of independent adjusters sitting at home not deployed to help are not being excluded because they have experience handling claims. That is just unimaginable and I hope proves not to be true. The numbers of people who have applied directly to ESIS and to independent adjusting firms who have heard nothing might prove what you are told when investigating this that it is a fact. Let us know please. Rumors can destroy you. Facts posted on the ever popping up response websites would be helpful. Also, I suggest you not believe one rumor that we have run out of independent adjusters available. A quick check of the number of licensed resident and non resident independent adjusters will prove this is impossible even if 10,000 are already deployed yet we hear less than 1,000 are now in the BP field claim offices.

This blog displays links for search terms adjusters use that leads them to our blog. Since the BP oil crisis, search terms are at least 50% of all search hits on this site where adjusting firms and adjusters are looking for information as to who is handling the BP Oil spill claims.

Thus far the information circulating in our discussions is that ESIS has only appointed ONE adjusting company to assist their personnel. ONE-and that firm fortunately is a reputable adjusting firm- Worley Catastrophe www.worleyco.com. Rumor on the street is that they are inundated with resumes flowing in but many many of us have not even gotten a reply to email and resume submissions.

There was also a response to my post, How to Value an Oil Spill Claim--Not an Easy Task:

Chip Merlin, a consumer attorney wrote a blog this week suggesting BP use CPA’s and accountants on the loss of income claims. While he provides good reasons, we in the claim industry are plenty capable of helping issue the $5,000 advances and there are thousands of adjusters trained in business interruption claims for loss of rents, tourism cancellations, and much more but I do agree CPA firms are often used by insurers for proper determination of amounts due for large commercial business interruption claims. In fact, my brother in law is a retired IRS CPA and has huge resources to other CPA’s who are also interested in deploying. In fact, this week I will post a large number of online business interruption links for some great information on business interruption claim training.

Any money paid to those with lost profits and earnings is better than no money. If full and prompt payment is really its goal, BP needs to hire and send legions of adjusters to DimeChimes business interruption night school, hire accountants and bookkeepers, and retain a significant number of independent economists motivated to determine the full extent of projected lost revenue. Lost income projections and continuing expense recovery have not been something typical claims adjusters have been trained to do. Other than my experience and numerous depositions, additional proof is in the internal insurance company claims manuals that instruct insurance company adjusters how send business income claims to insurance industry forensic loss accountants.

The problem is that BP has never been in the business interruption and lost income business. This is something insurance companies and adjusters do. The truth is that the insurance adjustment community is much quicker to count the sticks and bricks following catastrophic loss and traditionally take months to determine the business interruption loss. I bet that if I put a gun to the current BP liability claims adjusters and asked them how to determine the typical continuing expenses and extra expenses of a retail fish store, shrimp fleet operator, condominium, hotel, restaurant, seafood wholesaler or association of commercial fishermen whose members can no longer pay dues, most would start crying and beg for mercy.

I use this example to show how criminal it is for BP to suggest that it is taking care of claimants by simply spouting statistics of claims adjusters hired, claims offices opened, and partial monies paid. A second financial catastrophe is happening as I write because only a few in the claims industry have ever undertaken complex business loss of income analysis. I routinely have to teach my clients’ regular accountants how to do these types of claims calculations and often suggest specialized consultants help them. How are liability adjusters going to learn accounting and business to competently do this job without a plan? Telling them to read all of Michelle Claverol's Sunday posts on this blog regarding business interruption claims will not help, although it is better than nothing.

To further my point regarding the catastrophe training that Worley offers its adjusters, look at their training schedule. The typical BP Oil Spill claims handler has experience in car and structure claims. Even maritime adjusters usually turn over the financial income loss claims to insurance accounting firms like Campos & Stratis, a company I have long battled.

The BP Oil Spill will probably be the greatest loss event in terms of business income loss claims in my lifetime. Many of the BP claimants have never contemplated business loss insurance, but that is essentially what the OPA and corresponding state laws have provided. Adjusters, accountants and claimants need a quick education into the nuances and considerations of these types of losses.

Examples of reasonable mitigation expenses which will help commercial enterprises survive during the revenue loss need to explained and paid for immediately. Many of those businesses that could be expected to survive will not because BP is not proactively paying costs of survival mitigation. Most businesses simply do not have the cash or credit to front these costs themselves.

Time is of the essence for the entire Gulf Coast community when it comes to preventing this second financial catastrophe. This is truly an extraordinary situation where large scale economic ruin can be prevented if timely systems of remedy are put in place now. I believe our jurists need to appoint special masters who can listen to the concerns I have raised and put in motion a working claims process that will address the unique nature of business interruption and mitigation claims.. Everyday we fail to address the claims payment process properly, the greater the long term implications of economic damage in our Gulf Coast Community.

This comment was absolutely correct. Many agents and carrier representatives are knowledgeable and capable of guiding an insured through the basic requirements of mitigation, and with a smaller loss that might be all that is necessary.

Unfortunately, as I mentioned in last week’s post, An Insurer’s Actions May Excuse Mitigation Requirements, many times we run across individuals who may lack some of the fundamental knowledge necessary to guide a policyholder through the maze of provisions included in a policy. A comment that I have been mulling over for the past week is this:

Your article only serves to reinforce my continuing comment that education is sorely lacking if an adjuster working for a carrier makes that type of inane comment. Even a rookie should not make such a stupid comment. I guess this situation is like manna from heaven for litigators it however illustrates the industry wide lack of commitment to properly educating claims personnel. With the disappearance of veterans from the field this is unfortunately what the future looks like.

I guess this comment stuck in my head because, even though I recently found a grey hair, I am part of the generation which will attempt to carry this field into the future. I have been extremely blessed to have had the opportunity to learn so much from so many people over the past years, but I understand that not everyone is so fortunate.

While the point of my post last week was to explain how carriers could be estopped from asserting a mitigation defense if its actions cause the insured to not properly protect the property, it definitely highlights the fact that there is a lack of training and education out there. As the comment says, the veterans are beginning to disappear, and, many times, new adjusters are thrown into the mix before they are ready.

While the ideal situation would be for everyone in the industry to have an experienced mentor to show them the way, the reality is that this is not feasible. Therefore, it is important for people who are new to the industry to completely immerse themselves and learn something new at every opportunity.

I recently ran across the following post on Dimechimes:

We receive hundreds of emails yearly if not monthly from new adjusters specifying they now have their adjuster’s license and are ready to go as they look for independent adjuster assignments. Many will have great backgrounds in construction, auto repair backgrounds, insurance agency, and other related fields.

What they do not have that they do not understand is a grasp on the functional essentials to properly adjust a claim. They may have learned state ethics requirements for adjusters, some basic policy to pass the adjuster’s license exam, but little regarding practical file requirements, carrier claim handling guidelines, forms required, proper communication tools and appropriate forms of communication.

If you think you are ready…try taking this self assessment and see how many questions you are comfortable with before you go out on assignments and see if you are ready!

Whether you take our 50 Hour Fundamentals of Claims Class or obtain training elsewhere, please do not go out on assignments without taking much needed training from PROFESSIONAL sources.

The post goes on to provide a 125 question test to help new adjusters determine if they are “ready for action.” While the test is intended for independent adjusters, I think it is helpful for public adjusters, attorneys, and agents as well. To succeed in this business, you need to understand all of the different parts, and finding the answers to these questions is a great place to start.

You can find the Dimechimes post and test here.

For insurance adjusters, I recommend that you also follow Dimechimes. It has training information, news, and career information for those in the company and independent adjusting business. For example, in one of yesterday's posts, Texas full of claims news! TWIA Adjuster 2010 classes, TX Appraisal update, TWIA Class Action lawsuit from January 2010, there was useful information about the Texas adjustment scene. The comments about me were "dead on."

Protecting Pipes from Winters Bone Chilling Freeze is a post tweeted to me by Dimechimes from an excellent insurance website, Insurance Answers. Citing to StormForce31.com Weather Blog » Blog Archive » Cold Could Burst Your Pipes, Insurance Answers noted that "State Farm insurance reports that the average cost for water claims is on the rise – that the average cost per claim – approx $15,000 – is up 33% from 2007 to 2008." I have no idea how an average water damage claim can go up so much in one year, but those are not small losses for most homeowners on tight budgets.

The State Farm spokesperson stated the following:

“A small crack in a pipe can cause extensive damage,” says State Farm spokesman Roszell Gadson.

“In most cases, water losses can be avoided by taking a few simple precautions. Spending a few minutes to protect your pipes could save you time and expense down the road.”

Interestingly, State Farm has a "Water Damage" article, describing various steps to protect a building. State Farm also has a loss prevention article, that lists tips to prevent water loss claims from frozen pipes. The frequency of this type of loss was estimated at over a quarter million each year. I felt these State Farm articles were interesting because as I noted in Is the State Farm Policy Really Worth Anything? that State Farm does not always pay for accidental water damage caused by pipe breaks. The best advice for State Farm policyholders is to pay attention and act upon these loss prevention warnings because you never know if your claim will be paid.

Insurance Answers listed some practical ideas to prevent pipes from freezing and causing a loss:

• Run small amount of both HOT and Cold water. Keeping a small amount of both the hot and cold water running through the pipes will help keep them from freezing.
• Open cabinet doors under sinks to allow warm air to circulate around piping.
• Plan ahead and know where the water shut off valve is – not only around the fixtures, but the MAIN valve coming into the house. If a pipe burst in a wall, you can save major damage from occurring if you know where the main valve is and can get to it quickly.
• This may be obvious – but proper insulation on the pipes is also very helpful.
• For homes that have pipes in an open crawl space, be sure to close off the vents to the crawl space.
• Install a whole house water leak detection system.
• If you are going to be gone for extended periods of time, either have someone check the home frequently, or have the lines professionally drained prior to leaving.

And if you happen to be so unlucky as to have a pipe burst, I came across this troubling note by an insurance restoration contractor at Home Disasters Forum:

I am a contractor in the restoration business for decades and seen thousands of residential and commercial insurance loss claims. I have handled losses from less then a thousand dollars to losses in the millions. IMO too many property owners trust their insurance company to properly handle their claim. Most insurance companies, (not all) have contractor programs for one reason and one reason only, to control their costs. I can only count on one hand the number of insurance companies that really care about doing whatever it takes to satisfy their customer after a claim.

When you file an insurance claim, it’s parallel to filing a claim in court demanding money for damages. When in court, both parties have their own independent representation to protect their interests. In the insurance industry, (and the only industry I know of) most property owners allow the other party to represent their interests. Who do you think the insurance adjustor is going be devoted too, you or the company who trained them and signs their paycheck?

For the most part, insurance companies don’t train adjustors how to properly mitigate or repair property damage. Adjustors are not highly trained in construction and if they do have some construction skills they were not taught by the insurance company. Insurance adjustors are trained how to manage the claim. Insurance companies train their adjustors how to negotiate. The primary job of the adjustor is to limit the insurance company’s costs. (emphasis added)

Regulators need to make certain policy language is not changed to make these losses uninsured. To the extent possible, policyholders should take measures to protect their water pipes in freezing weather and buy insurance that works, even if it costs more.

I wrote in response to a comment in The Value of Networking and Sharing Insurance Claim Information:

"The truth is that there are many fine and outstanding adjusters that do a fantastic job getting money to policyholders. The problem in my line of business is that I never hear of those stories because my clients have claim problems."

 

I have watched hundreds of hours of insurance training videos from various major insurance companies such as State Farm, Allstate, Nationwide, and GEICO. Our library is full of insurance claims manuals and training guides. Most of this training is excellent and teach principles of good faith. The public rarely gets to see this. The attorneys in my firm see it because it is our job to question what is taught and learn what is being done in the field.

I often talk with adjusters on cases before litigation--especially when corporations retain us to consult and help prepare their insurance claim with public insurance adjusters. Most of the adjusters are fairly well meaning individuals, but the adjusters in the field always seem to report to managers. Much of an insurance adjuster's claims attitude is determined by the culture and attitude of the claims supervisors. With some notorious exceptions, the attitudes and cultures are usually not in the training videos.

In those commercial losses where we are retained before the need for a lawsuit arises, the dialog becomes somewhat strained as we point out various benefits the insurance product can pay to help reduce the impact of the loss to the corporation. The adjusters seem bewildered because most of the time, they control their conversations with less knowledgeable and experienced policyholders. Even corporate risk managers and loss consultants rarely understand the full benefits available under a policy and leave millions on the table. Usually, after discussion and delay, the field adjuster gets approval for our view of the loss and the adjustment moves on with far greater payment.

The bottom line is that, from the policyholder perspective, there seems to be very little attitude from the insurance claims management to train field adjusters to use the insurance product to soften the financial blow as much as fairly possible. There seems to be little direction from managements to field adjusters to inform policyholders of information which would reduce their loss. If the training and attitude were otherwise, I probably would not have a job in this field of law.

Assuming that insurance claims management really does want its adjusters to help customers as much as the insurance policy allows, training adjusters to understand the product from the customer’s viewpoint is paramount. An example is Factory Mutual, where they specifically train their adjusters in the industry for which the insurance product is written. However, the vast training is not that way. Dimechimes recently explained in its Blog:

"I have been following consumer advocate attorney, Chip Merlin’s blogs since Hurricane Katrina. Rather than present blogs from an “ambulance chaser” perspective, I have watched him try to educate consumers about coverage issues and warn them about looming statute of limitations coming, for instance in MS post Katrina.

While it may be strange to study from free information from an insured plaintiff trial attorney website and standpoint, I have found it quite educational. Just don’t wear your feelings on your sleeve when you view his blogs as there are comments you may not agree with from an adjuster, adjusting firm, or insurance company standpoint.
......
The value I have found in viewing his blogs (there are several on his law firm site at www.merlinlawgroup.com ) is the fact that first he has an insurance defense background prior to becoming a consumer advocate trial lawyer so he knows both sides of the fence. Second, he posts links to active cases involving current claim litigation with links to important court documents we can learn from. I often link to his blog posts on this adjuster information blog when training new adjusters on Bad Faith as he has many great postings and articles there on the subject as well as other issues we need to know about."

So, for all the company and independent adjusters that read this, I understand that it is tough to hear criticism. Many of my clients never read their insurance policies before the loss happens. When they try to read it, they do not fully understand what it says. They certainly do not know how to use it to soften the financial loss they have suffered and how to measure the loss for complete indemnity. You have an important and demanding job to get them paid fully and quickly. They are in your hands.
 

Slabbed is probably going nuts because I am indicating that another case may be resolved confidentially and without public scrutiny. So, to help Slabbed understand a little (there is more) of what we do and provide Dimechimes with some more adjuster training lessons, I am publishing the Reports of the Claims Expert and the CPCU expert in the case.

If this post is not removed, I would appreciate any ideas on this case and would love to share information about AIG and Lexington Insurance Company with those who are having claims problems with them.

Deborah Trotter in our Gulfport office is the primary attorney on this matter. She has flown from one side of the country to the other working on this case. We are on a contingency fee and we report to a receiver in the Bankruptcy Court. The client went into bankruptcy long before we were retained and the Court approved as counsel.

The mediator for the case is Jim Perry. He has an excellent reputation and was the mediator in our Port of New Orleans case. From my one experience with him, he deserves the reputation.

One commentator with personal knowledge about our firm in replying to The Parable of Hurricane Ike Insurance Claims, indicated that our files are "thick" when we go to settlement conferences. Our experience is that most good counsel prepare their cases thoroughly.

However, there is significant debate whether all facts should be used as leverage at a mediation. Even in our law firm, I have seen a strategy that "less is more" at mediation since the lawyers just end up arguing about which case is factually better. As mediation is purely about money, the attorneys following that theory do the trial analysis and simply give a one page summary: pay or go to trial.

I prefer to provide information prior to the mediation and discuss the facts less while there. As indicated in a post last week, our firm is discussing trial technique because we expect that more carriers will try to delay their day of reckoning through trial and appeal as the current economic climate worsens. Still, I have my trusted presentation advisor, Jack Stein of Trial Exhibits, with me because I feel compelled to make a few more points.

Will this case settle? Who knows? If it does, you may be one of the few who will know it existed.

We get told similar stories by other adjusters so long as it is "off the record."

A person with significant experience in the insurance industry, Deborah Moroy of Dimechimes,  wrote in response to Playing the Float and the Wisdom of Warren Buffett:

"I am fiercely committed to improve claims handling in the insurance industry while maintaining positive networking environments. I do not allow any negative posts or adjusting firm or carrier specific "blasting" among our members. I promote the discussion of claim handling in general but regularly post links to great blogs and articles found on the Internet. It has been 3 years of extremely hard work since I cannot post carrier information or ask adjusters to upload file samples so they don't violate carrier code of conduct requirements. So, my sole source of info is through training info I find on the web. The info found on the majority is worthless except in generic format........"

It should be against public policy for insurance companies to have any trade secrets regarding claims practices and there should be even a stronger public policy regarding any codes of conduct which prevent any adjuster or employee from disclosing improper methods or activities of claims adjustment. If we allow insurers to hide behind these shields, all we do is silence the otherwise courageous adjusters because the attorneys for the insurers will threaten them with civil action.

The classic example is the civil prosecution of the Rigsby sisters. They told a story of a State Farm adjuster holding numerous reports which were not being sent to policyholders but were "revised." The revised reports were always worse for the policyholders because they allowed for State Farm to deny claims. Had their story stopped there, they would have been terminated. But their actions went further with Dickie Scruggs, and the rest has been fodder for demeaning posts by the insurance industry.

Still, the message is clear from the insurance industry: We have a Code of Silence that you violate at your own risk.

We have initiated discussions with legislators at the state and federal level regarding these concerns. I could probably use the experience of Congressman Gene Taylor as an example. I took one of the Rimkus engineers to Washington to explain and show how his report was changed and signed without his permission. He did this in front of Taylor. In the civil action, the engineer called just before his deposition to tell us that Rimkus was getting him an attorney. At the deposition, he could barely recall the meeting with Taylor.

While there are legitimate reasons for adjusters and insurance company vendors to remain silent regarding the private information of customers and claimants, laws and contracts which further goals or activities of claims misconduct should never be allowed and there should always be exceptions to any arguments of privacy. The insurance industry should never be allowed to take any retribution against those that publicly make others aware of wrongful claims conduct. Otherwise, the insurance industry is acting like another illegal industry with a code of silence. 

If the insurance industry were really trying to stop bad claims practices, they would be up with me in Washington and in Tallahassee trying to help. I will write and call them to let you know where they stand. Stay tuned.