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

In case you are not familiar, the FIC’s website says its vision is:

[T]o be the premier organization representing the insurance profession in Florida. The Council will be the recognized and preferred source of information on insurance matters including economic, legislative, regulatory, and consumer issues.

The main point of Marvin's letter seems to be –don’t worry, your insurance company will fairly and quickly handle your insurance claim in the event there is a storm. Mr. Marvin urges Florida policyholders not to hire a public adjuster. Marvin wrote:

Every insurer employs specially trained adjusters who can readily assess your damages and facilitate speedy payment for your losses, all at no cost to you.

Unfortunately, during times of catastrophe, there are some who see crisis situations as an opportunity to get the cash that your insurance company is paying you to help recover your losses.

Allowing anyone to skim 20 percent or more of the funds your insurance company pays for your damages is unnecessary. More importantly, it leaves homeowners unable to fully recover a catastrophic loss…

There is no need for the homeowner to bypass the insurer's adjuster in favor of a public adjuster. After all, any reputable adjuster would make the same determination of loss. The difference is that the public adjuster will keep 20 percent or more of your payment!

…Consumers should recognize that the vast majority of claims are handled promptly and fairly by your insurance company adjuster.

The Florida Association of Public Insurance Adjusters (“FAPIA”) promptly replied and explained where they felt Marvin got it wrong. The response was written by David Beasley, who is the current president of FAPIA. David Beasley was one of the first public adjusters I met when I began working on behalf of policyholders shortly after Hurricane Dennis.

David began the response by agreeing with his adversary: insureds should not panic after a hurricane. But he also explains:

The insurance company adjuster who comes to your house after the storm is there to protect the company's interests.

Following a catastrophic event such as a hurricane, it commonly takes two to six weeks for the insurance company adjuster to visit the property, and that visit is usually by an independent adjuster with no check-writing authority.

Public adjusters are the only individuals licensed by the state to represent consumers and assist with estimating, documenting and submitting claims. Yes, they receive a commission on the claim that is paid, but unlike Marvin's assertion that this represents 20 percent or more "skimmed" from the payment, the commission is capped by state law at 10 percent in the first 12 months following a hurricane.

Beasley goes on to urge homeowners to find reputable help:

…if the damage is more substantial? Is the insurance company adjuster going to focus on giving you the compensation you deserve? Public adjusters work for policyholders.

Their job is to ensure the policyholders receive every penny they deserve. As you might expect, insurance companies, and their representatives such as Marvin, aren't real happy about that.

The Florida Association of Public Insurance Adjusters recommends that homeowners identify reputable public adjusters in advance, so that they can quickly contact them should damage occur.

With the current tropical action in the Atlantic, it is important to stay calm, but it is also important to stay informed and be prepared. I think it is unfortunate that Marvin wrote this post without clarifying that Florida statue regulates the fees charged by public insurance adjusters and, for the first 12 months following a hurricane, the fee is limited to 10%.

I hope Floridians and others in hurricane prone areas understand they need to ensure the insurance company adjusts and pays for all the covered damages provided for in their insurance policy. The process can be challenging and frustrating, but hiring a professional to adjust the loss on your behalf may help a policyholder even the playing field.

Johnson recently wrote a piece in the Florida Underwriter, Public Adjusters, Part 2, which I suggest every public adjuster should contemplate. The part I have considered and disagree, only in part, with is the following:

Your readers need to understand that their homeowners' insurance premium already includes payment for claim service and post-claim consultation and that hiring a public adjuster results in paying "again." After a claim, one of the first things a policyholder should do is call their insurance agent. Many are "independent" and, while appointed by carriers, they hold licenses, which include state-sanctioned authority to adjust claims and assist policyholders in receiving fair payment. Not only are they prohibited from charging additional sums for this service, their locally-owned business and livelihood is based on customer satisfaction.

I am pretty familiar with the adjuster and public adjuster licensing statutes. I have never heard an insurance agent claim he or she can legally do all the activities that constitute being an adjuster. If so, maybe that is an entirely new area of insurance agent errors and omissions I should investigate when things go wrong after a loss. I cannot find where a statute that gives a Florida insurance agent the legal right to act as an adjuster. While they do cover instances where the agent fails to forward notice of the loss to the insurer, I have seen no insurance agent errors and omission policies that would cover negligent adjustment conduct. Perhaps I have been missing the boat.

Indeed, my reading of the Florida licensing statutes seem to indicate otherwise: 

626.112 License and appointment required; agents, customer representatives, adjusters, insurance agencies, service representatives, managing general agents.--
(1)(a) No person may be, act as, or advertise or hold himself or herself out to be an insurance agent, insurance adjuster, or customer representative unless he or she is currently licensed by the department and appointed by an appropriate appointing entity or person.
(b) Except as provided in subsection (6) or in applicable department rules, and in addition to other conduct described in this chapter with respect to particular types of agents, a license as an insurance agent, service representative, customer representative, or limited customer representative is required in order to engage in the solicitation of insurance. For purposes of this requirement, as applicable to any of the license types described in this section, the solicitation of insurance is the attempt to persuade any person to purchase an insurance product by:
1. Describing the benefits or terms of insurance coverage, including premiums or rates of return;
2. Distributing an invitation to contract to prospective purchasers;
3. Making general or specific recommendations as to insurance products;
4. Completing orders or applications for insurance products;
5. Comparing insurance products, advising as to insurance matters, or interpreting policies or coverages; or

6. Offering or attempting to negotiate on behalf of another person a viatical settlement contract as defined in s. 626.9911.
...

(3) No person shall act as an adjuster as to any class of business for which he or she is not then licensed and appointed.

...

(9) Any person who knowingly transacts insurance or otherwise engages in insurance activities in this state without a license in violation of this section commits a felony of the third degree.... (emphasis added)

On the other hand, some public adjusters, even "consultants," have started a new type of business, signing up Florida policyholders to provide advice and compare insurance policies. They provide these additional services if a policyholder signs a public adjusting contract in advance of a loss. This is illegal because those individuals are acting as an insurance agent without a license. Attorneys are exempt from both license requirements, so yours truly has no such problem. Public adjuster errors and omission policies do not cover these agent activities either.

Further, the most important part of Scott Johnson's message might get lost in all this statutory legal discussion. For that, you have to read Johnson's prior article, Public Adjusters and RCV - The Messenger and the Message. I think that Johnson wrongfully takes advantage of a wrongful incident I reported on in Public Adjusters Arrested in Broken Tile Insurance Fraud Scheme. He uses it to buttress an argument that smears all public adjusters and justifies taking away policyholders legal rights:

Facts of his arrest reveal an intimate marriage between PAs and replacement cost coverage — one is the messenger; the other, the message.

The message — the pot of gold that used to be at the end of the rainbow — is now at the beginning. Instead of actually spending new dollars to replace old property, you can get all your money up front, and, even better, you can spend it however you want: on a new big screen TV, on a new car, a vacation, some lingering bad debts, or all of the above. All you have to do is give 20 percent to the messenger.

...

For those who still believe that a purchase of replacement cost coverage warrants replacement cost payments without a hold back, consider this: The price for RCV is roughly 25 percent more than ACV with a hold back provision! Without a hold back provision (ala Espinosa) it's more like 75 percent more and climbing. Florida is the only venue in the entire world that does not have a hold back provision for replacement cost. Replacement cost would not exist if it were not for the hold back provision.

Look at what Espinosa and other bad PAs are doing (though most not as overtly) and ask yourself: Is it any wonder that frequency and severity have skyrocketed? Is it any wonder that losses per policy are up 65 percent? Is it any wonder Florida has 3,200 new PA messengers, almost 90 percent of who are located in Dade and Broward counties?

There's no room for subtlety. Senate Bill 2044 was just a start. For a return to normalcy, we must limit the activities of PAs and completely eliminate the prohibition against a replacement cost hold back provision. (emphasis added)

Scott Johnson is wrong about replacement cost holdbacks not existing absent the provision. A number of insurance carriers sell this product in states without the law and seem to do very well making profits--they keep selling the product. Further, Florida has a longstanding common law allowing for no holdbacks for real property loss. I noted the fallacy of his arguments in An Interesting Day in Tallahassee and Thoughts on the Pending Replacement Cost Coverage Legislation. Scott Johnson is bootstrapping two different issues:

1. Should we reduce policyholder benefits by removing consumer protection statutes?
2. Should there be stronger oversight of public insurance adjusters?

From the policyholder's viewpoint, I think the answers are:

1. No
2. Yes

I will understandably catch grief from insurers and public adjusters for these answers. Yet, when I helped form the Florida Association of Public Insurance Adjusters eighteen years ago, I told those in attendance that they would succeed so long as they always looked at their vocation as first serving policyholders. If so, they would always be "on the side of angels." I suggest that the same should hold true for those managing insurance companies, insurance agencies and those making laws for Florida citizens.

Nobody likes to read bad press. It is worse when some suggest that criminal acts are automatically attributable to the group, as Scott Johnson suggested. Yet, his views are shared by many within the leadership of Florida's insurance industry. While I acknowledge that it is in the insurance industry's interest to have this viewpoint, the same way it was in the interest of Halliburton to support the view that Saddam Hussein had a significant number of weapons of mass destruction, the question posed to public adjusters should be:

Can you better serve policyholders by raising the professional bar of what is expected of you and your peers?

Scott Johnson is an honorable person and his perception that some public adjusters charge too much in return for too little is worthy of reflection. I have talked with Johnson on various insurance matters and have read his book regarding the history of Florida's independent agents, From Cartel's To Competition (2004). He has a deep commitment to Florida's insurance market and to the extent he has expressed a view, I am certain many others share it as well.

I have been very up-front when people ask me what changes I would suggest could be made. Keeping it simple, I suggest a significant raise in the public adjuster licensing fee so that more market conduct studies of public adjusters files would routinely be conducted by the Office of Insurance Regulation. The law is already in place to do so, but it is rarely done regarding public insurance adjuster files. Knowing that regulators will periodically be looking at files and talking with clients is one sure way of raising the professional bar of public insurance adjusters.

Could you imagine how honest all Americans would be regarding income tax if there were no audits? This simple regulatory step would be significant if used with significant penalties for non-compliance. Hardworking, honest and professional public adjusters would support this change as well because it would show either their industry has significant problems, as suggested by the insurers, and help clean it up, or, alternatively, it would help prevent wrongful conduct by adding a significant risk that otherwise honest public adjusters would be caught.

Maybe we can come together and make some win-win laws and regulations. And with that kumbaya thought, how about this appropriate song from one of the best rock and rollers of all time:

Nicole Vinson's observations in Public Adjusters and Continuing Education: The Education Pays Off are certainly correct. Adding to that, is my belief that people pay a lot of money to come to these seminars and they deserve their money’s worth. From surveys our firm has conducted, we find that people want to bring back practical knowledge which will make their work easier, more enjoyable and more profitable. This is what my speeches and presentations try to accomplish. The law is left to the paper in the handout. The part to take home is found in the speech.

Tips and techniques are important. Learning from those who have experience from the other side of the table is extraordinarily valuable. Recognizing that methods used in the past need to be changed to achieve a better outcome for the client is paramount. I bet there are quite a few adjusters and insurer attorneys for that would love to put their two cents in on this presentation. Many public adjusters could do a much better job for the policyholder if they would just consider and appreciate the needs and role of the insurance adjuster.

On Wednesday, the conference will be over and everyone who attended will be back to work—business as usual. Or, maybe not. After spending three days at a conference with “our side of the industry,” I am recharged. I am invigorated to advocate on behalf of the policyholders. The feeling is a little hard to explain, but after spending time surrounded with others who fight on the same side, it is kind of like a pep rally before the big game.

At education conferences, I try to learn more than the materials in the handouts, and take advantage of the opportunity to sit and discuss issues with those of you who are working the claims in the field. Sometimes this will happen during a random elevator ride or in line at breakfast. The discussions vary. Sometimes I hear in-depth testimonials of big wins and disappointing losses. I get more than the summary of the claim; I hear the passionate details of the claims. I have a better perspective into the actions of insurers and the situations of insureds. And after the conference has come to a close, these stories and comments that stick with me. When I am doing legal research or trying to formulate a good strategy for a mediation, I am more motivated to advocate for the policyholders. I work harder, push a little further.

Like most conferences in any industry, for the public adjusters who attend conferences, the competition is all around. In this economic climate, I can see how the room could be filled with hostility. However, in my experience, most public adjusters at educational conferences are friendly and treat each other with professionalism. I think this approach of working together as a more unified front or group makes sense and is very beneficial to each of you as an individual and for your business.

I think everyone should join voluntary associations and take advantage of continuing education events, no matter your occupation. So I encourage you to reach out to those who may be the competition. Join associations, make associations and learn from each other. We all have something to share and many things to learn. It is important to take these steps and keep an open mind.

As I explained in the beginning of this series in my post, Public Adjusting Case Stories, I think sharing information will help all of us. I think it is important to share resources, especially from others who are in the same line of work. The information is very valuable but not always easily accessible.

I previously discussed this legislation in a post, Policyholders and Public Adjusting Under Attack in the Florida House of Representatives. I have met with and discussed the proposed House Legislation with Representative Janet Long which lead to a post last week, Representative Janet Long Gets a Hug From Chip Merlin.

Many Public Adjusters are quite understandably concerned about this legislation. I would urge those that would like to participate in this process to contact and do so through the National Association of Public Insurance Adjusters (NAPIA) and the Florida Association of Public Insurance Adjusters (FAPIA) to learn how your participation can be most positively effective.

Here is the Senate Bill as it currently reads:
 

Florida Senate - 2010                                    SB 2264

      By Senator Bennett

       21-01397-10                                           20102264__

    1                        A bill to be entitled                      

    2         An act relating to public adjusters; amending s.

    3         626.854, F.S.; providing a definition; prohibiting

    4         public adjusters from making certain employment

    5         solicitations; prohibiting certain unsolicited written

    6         communications; providing exception requirements;

    7         revising prohibited solicitations; revising prohibited

    8         charges by public adjusters; providing a definition;

    9         amending s. 626.8796, F.S.; specifying required

   10         information in public adjuster contracts; creating s.

   11         626.70132, F.S.; barring certain personal lines

   12         residential coverage insurance claims subject to

   13         certain notice requirements; providing a definition;

   14         providing nonapplicability to certain civil actions

   15         limitations; providing an effective date.

   16 

   17 Be It Enacted by the Legislature of the State of Florida:

   18 

   19         Subsections (5), (6), and (11) of section Section 1.

   20 626.854, Florida Statutes, are amended to read:

   21         “Public adjuster” defined; prohibitions.—The 626.854

   22 Legislature finds that it is necessary for the protection of the

   23 public to regulate public insurance adjusters and to prevent the

   24 unauthorized practice of law.

   25         (5)As used in this subsection, the term “solicit” or (a)

   26 “solicitation” means contact in person or by telephone,

   27 facsimile, United States postal service, electronic mail, or any

   28 other method of communication directed to a specific recipient.

   29         Except as provided in paragraph (c), a public adjuster (b)

   30 may not solicit professional employment from a prospective

   31 customer with whom the public adjuster has no family or prior

   32 professional relationship, in person or otherwise, when a

   33 significant motive for the public adjuster’s doing so is the

   34 public adjuster’s pecuniary gain.

   35         An unsolicited written communication to an insured for (c)

   36 the purpose of obtaining professional employment is prohibited

   37 unless it complies with the following requirements:

   38         The first page and the lower left corner of the face of 1.

   39 the envelope of such written communication shall be plainly

   40 marked “ADVERTISEMENT” in red ink in 14-point font.

   41         The communication must be sent only by regular United 2.

   42 States mail and not by registered mail or any other form of

   43 restricted delivery.

   44         The communication may not be made to resemble legal 3.

   45 pleadings or other legal documents.

   46         The communication may not contain any information as to 4.

   47 the public adjuster’s or public adjusting firm’s record or

   48 history in obtaining claim payments or settlements for other

   49 insureds.

   50         The communication may not be mailed less than 30 days 5.

   51 after the occurrence of an event that may be the subject of a

   52 claim under an insurance policy. A public adjuster may not

   53 directly or indirectly through any other person or entity

   54 solicit an insured or claimant by any means except on Monday

   55 through Saturday of each week and only between the hours of 8

   56 a.m. and 8 p.m. on those days.

   57         A public adjuster may not (6) directly or indirectly

   58 through any other person or entity initiate contact or engage in

   59 face-to-face or telephonic solicitation or enter into a contract

   60 with any insured or claimant under an insurance policy until at

   61 least 48 hours after the occurrence of an event that may be the

   62 subject of a claim under the insurance policy unless contact is

   63 initiated by the insured or claimant.

   64         If a public adjuster enters into a contract with an (11)(a)

   65 insured or claimant to reopen a claim or to file a supplemental

  66 claim that seeks additional payments for a claim that has been

   67 previously paid in part or in full or settled by the insurer,

   68 the public adjuster may not charge, agree to, or accept any

   69 compensation, payment, commission, fee, or other thing of value

   70 based on a previous settlement or previous claim payments by the

   71 insurer for the same cause of loss. The charge, compensation,

   72 payment, commission, fee, or other thing of value may be based

   73 only on the claim payments or settlement obtained through the

   74 work of the public adjuster after entering into the contract

   75 with the insured or claimant. The contracts described in this

   76 paragraph are not subject to the limitations in paragraph (b).

   77         A public adjuster may not charge, agree to, or accept (b)

   78 any compensation, payment, commission, fee, or other thing of

   79 value in excess of:

   80         Ten percent of 1. any the amount in excess of the insurance

   81 company’s claim valuation to repair or replace damage to covered

   82 property payments by the insurer for claims based on events that

   83 are the subject of a declaration of a state of emergency by the

   84 Governor. This provision applies to claims made during the

   85 period of 1 year after the declaration of emergency.

   86         Twenty percent of 2. any the amount in excess of the all

   87 other insurance company’s claim valuation to repair or replace

   88 damage to covered property for all other insurance claim

   89 payments.

   90         For purposes of this subsection, the term “claim (c)

   91 valuation” means the total amount offered in writing or actually

   92 paid, or any combination of such amounts, by the insurance

   93 company to the policyholder for the claim for the damaged

   94 property, including loss of use, additional living, emergency,

   95 and any other expenses required to be paid under the terms of

   96 the policy.

   97 

   98 The provisions of subsections (5)-(13) apply only to residential

   99 property insurance policies and condominium association policies

 100 as defined in s. 718.111(11).

 101         Section 626.8796, Florida Statutes, is amended Section 2.

 102 to read:

 103         Public adjuster contracts; fraud statement.— 626.8796

 104         (1)All contracts for public adjuster services must be in 

 105 writing and must prominently display the following statement on

 106 the contract: “Pursuant to s. 817.234, Florida Statutes, any

 107 person who, with the intent to injure, defraud, or deceive any

 108 insurer or insured, prepares, presents, or causes to be

 109 presented a proof of loss or estimate of cost or repair of

 110 damaged property in support of a claim under an insurance policy

 111 knowing that the proof of loss or estimate of claim or repairs

 112 contains any false, incomplete, or misleading information

 113 concerning any fact or thing material to the claim commits a

 114 felony of the third degree, punishable as provided in s.

 115 775.082, s. 775.083, or s. 775.084, Florida Statutes.”

 116         A public adjuster contract must contain the names and (2)

 117 addresses of the public adjuster, the public adjusting firm, and

 118 the insured, together with the signatures of the public adjuster

 119 and the insured and the signature date. A copy of the contract

 120 must be remitted to the insurer within 30 days after execution.

 121         Section 626.70132, Florida Statutes, is created Section 3.

 122 to read:

 123         626.70132Duty to file windstorm or hurricane claim.—A 

 124 claim, supplemental claim, or reopened claim under an insurance

 125 policy that provides personal lines residential coverage, as

 126 defined in s. 627.4025, for loss or damage caused by the peril

 127 of windstorm or hurricane is barred unless notice of the claim

 128 was given to the insurer in accordance with the terms of the

 129 policy within 3 years after the windstorm or hurricane first

 130 made landfall, or the windstorm caused the covered damage, in

 131 this state. For purposes of this section, the term “supplemental

 132 or reopened claim” means a claim for recovery of additional

 133 payments from the insurer for losses from the same hurricane for

 134 which the insurer has previously paid pursuant to the initial

 135 claim. This section may not be interpreted to affect any

 136 applicable limitation on civil actions provided in s. 95.11.

 137         This act shall take effect July 1, 2010. Section 4.

The Bill introduced by State Representative Janet Long has raised many critical concerns among those aligned with the interests of insurance consumers. Given the significant campaign contributions to Representative Long by insurance lawyer lobbyists, insurance companies such as Allstate, Tower Hill, Travelers and many insurance agents, is there any doubt as to the interests she was protecting when introducing this legislation?

This is probably the first of many anti-policyholder laws that will be proposed. And, many of the most devastating laws will first be proposed as amendments in the final hours on the last days of legislative session. For consumers and hard working policyholders who are not funding an army of professional lawyer lobbyists and public relations firms like the insurance industry, such last minute changes to proposed insurance laws do not provide enough time. The average Floridian cannot counter the onslaught of insurance industry legislative deals worked out months before in private meetings with legislators, such as Representative Janet Long. I truly believe that insurance company interests will be prominent in the 2010 Florida legislative session. The title to this post is for everyone, including those who are not in the insurance industry. Insurance is an important product, and it impacts everyone. Over the last few years, many voters have not been provided the truth regarding the insurance industry agenda of higher insurance rates and less regulation. This agenda fosters the biggest problem with insurance-- insurance companies that are denying, delaying and not paying claims. Suddenly, Public Adjusters and greedy policyholders are being singled out as the cause of problems in insurance. This is not by accident and has been orchestrated by very effective public relations techniques and constant lobbying of Florida leaders by the insurance industry.

We need to get involved in our political process. We need to recognize who our elected officials are. We have civic obligations to inform them about the issues of which we have specialized knowledge and training. Public adjusters need to explain what we do for our clients, and take our clients to our legislators and to Tallahassee so that the insurance company lawyers and lobbyists will be called out for the lies and deception they are attempting. Letters, videos and face to face accounts by policyholders of what really goes on during the claims process is the best evidence of the need for insurance company claim reform. This will also demonstrate why Floridians need professional and trained claims experts on their side immediately after a loss.

I strongly recommend that any Public Adjuster that lives in Representative Janet Long’s District 51 call and make an appointment with her. Those with policyholder clients should be taken to her local office and in Tallahassee. Policyholder clients in her district should be contacted by phone, email, and letters advising them to petition Representative Long to withdraw her anti-policyholder legislation and explaining how their public adjuster helped obtain a fair settlement from the insurance company. These letters, calls and visits from her constituents will draw attention to the overbroad claims of fraud and inflated claims the insurance industry has made. These will further draw attention that the real need is for laws that prevent insurers from abusing homeowners and business owners at claim time.

Next, the same effort that is made for Representative Long should be made with every legislator in Florida. Policyholder clients must tell their story to their elected representative and Senator and they should explain the services we provide.

Finally, those previously not joining the legislative effort must stop sitting on the sideline and letting everyone else work and pay the costs of these efforts. Plenty complain and criticize without joining the effort. Policyholders and public adjusters can join organizations that support consumer interests and flush out the insurance industry’s deception. Public adjusters should join FAPIA or other organizations that will lobby against the formidable insurance industry.

Everyone must join together to do the right thing for Floridians. Protecting policyholder homeowners and business owners is my pledge and honor. I am proud to be a public adjuster, working with my colleagues to make our profession better, and actively “doing” in the political process as Thomas Jefferson suggested is the duty of all long ago.

Below, I have attached the membership list for the Insurance, Business and Financial Affairs Policy Committee: 

Patterson, Pat (R) -- Chair
Grady, Tom (R) -- Vice Chair
Rader, Kevin J. G. (D) -- Democratic Ranking Member
Domino, Carl J. (R)
Eisnaugle, Eric (R)
Flores, Anitere (R)
Hays, D. Alan (R)
Jenne, Evan (D)
Long, Janet C. (D)
Nehr, Peter (R)
Nelson, Bryan (R)
Taylor, Dwayne L. (D)
Wood, John (R)
Workman, Ritch (R)

The Merlin Law Group has sponsored two other fundraisers for Frank as noted in Merlin Law Group Hosting Public Adjuster Ethics Seminar Followed by a Political Fundraiser for a Public Adjuster Running for Public Office and Fundraising Event for a Policyholder Advocate Frank Artiles. I noted the following as the reason why other public insurance adjusters should help get a colleague elected:

Imagine if our legislatures had truly knowledgeable insurance consumer advocates. Do you think the insurance industry would have tried to pass laws in Texas and Florida that allowed insurance rates to unfairly rise or allow immunity for wrongful conduct after a loss occurs like TWIA is attempting in Texas?

By electing Frank Artiles, a Florida public adjuster, for the Florida House of Representatives in South Florida, I don't see those kinds of things happening. My law firm is dedicated to helping this become a reality, and we need your help.
…
You never know what can happen in life until you try. We need your help on this endeavor for Frank.

We hope to see all public adjusters come out in support of Frank next Tuesday afternoon.

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.

The job of a public insurance adjuster requires a great deal of knowledge of the law, but an adjuster must be careful not to practice law; a great deal of knowledge about insurance policies and principles; a thorough understanding of negotiation principles; the skill of insurance estimating; perfection in his/her analysis of damages; satisfying the needs of the property owner during one of the most difficult times that property owner will ever face. An adjuster is often required to negotiate against some of the most powerful companies in the world. This will be the first of several blogs that I will have the privilege of writing with respect to this topic, in hopes of assisting public insurance adjusters in their difficult and complex profession.

Insurance provides a great benefit to society, and in this day and age, it is extremely difficult to think about any profession or type of business that is not insured. However, if an insurance company is to remain in existence, it must make a profit. In making profits, insurance companies are insuring businesses and properties with the hopes of earning an underwriting profit. The property insured is referred to as a risk, and if the expenses and claim payments do not exceed one-hundred percent of the insurance premium, then the insurance carrier has earned an underwriting profit. In fact, many underwriters earn large bonuses at the end of the year after the insurance company has determined that the policies they underwrote have earned an underwriting profit. Insureds and public adjusters face a very difficult task, sometimes monumental, when filing an insurance claim in light of the insurance companies business motives and need for survival/profits.

The first step in preparing a claim for a property owner is to carefully interview the property owner about the ownership, maintenance, damage, and yes, even the cause of the damage. In today’s market, real estate ventures, investment properties, and even the homes of many families have gone into foreclosure, or are only a few months away from being served with foreclosure papers. Sometimes, resolution of the insurance claim is what’s needed to keep some of these properties from going into foreclosure, and time is of the essence. Other times, the public adjuster enters into a contract with a property owner that is too far into the foreclosure process and the property is lost before the claim can be resolved. In that instance, the only winner is the insurance company and the underwriter, because it may never have to pay claim--keeping the expenses below the underwriting premium and earning a profit.

In every property insurance policy, lack of maintenance is an exclusion to insurance coverage. Every insurance company adjuster is trained to look and identify potential maintenance problems. If the field adjuster does not identify this condition, his supervisor will question his ability to properly scope a loss. If the issue of maintenance is addressed up front during the public adjuster’s meeting with the insured and inspection of the property, then the issues of maintenance can quickly and easily be addressed during the first meeting with the field adjuster. Telling the adjuster that your interview with the property owner revealed that there was regular maintenance of the roof with documentation or names of service providers, for example, could dramatically shorten the time it might otherwise take to get a claim paid. If the issue of maintenance can be addressed during the first inspection, the filed adjuster will be satisfied that he has met his duty to address the issues of maintenance and will no longer be concerned about his/her ability to do their job.

A public adjuster should NEVER write their estimate in a way that the total damages do not result from damage caused by a covered peril. We cannot look back in time, but the property owner is one very important source when walking the property and preparing your scope of damage. Many times I hear, “I gotta write it as I see it”; I submit to you that this approach is taking a big risk and the bigger the property, the bigger the risk of having your own estimate used against you by the field adjuster, the claims supervisor, and the defense attorney in an EUO, deposition or trial. The credibility of a public insurance adjuster in the eyes of a jury, and even the field adjuster, is only as good as the accuracy of the estimate and detailed notes kept by that public adjuster. When it comes to negotiating with an insurance adjuster, you have the power of knowledge because you have total access to the owner and the property. The more accurate you are in providing the correct information to the field adjuster, the more powerful you become to that field adjuster. The easier it is for the field adjuster to make his/her recommendations for payment, the faster the claim should be resolved.

A public adjuster’s involvement also frequently increases the dollar amount of a policyholder’s final settlement. By some accounts, the average settlement rises by as much as 20 to 50 percent. See, Peter C. Beller, In the Wake of Disaster, Help for Hire, New York Times (Feb. 2, 2006); and Brian D. Mockenhaupt, For Public Adjusters, Disaster Means Business, Providence (R.I.) Journal-Bulletin (Jan. 18, 1998). The Florida Legislature’ own program policy analysis office has found that, in claims related to the 2005 hurricanes filed by policyholders of the state-run Citizens Property Insurance Corporation, settlements averaged 747 percent higher ...The same legislative report found a smaller but still significant increase – 574 percent -- in settlements when public adjusters represented Citizens policyholders in non-catastrophe claims.

I was amazed at the statistics found and published by Citizens. I think it is far overstated and policyholders should not expect that type of percentage increase unless they have a smaller claim. While I may criticize Citizens' claim handling, there is no way it is that bad and it underpays to that extent that often. If I were a public adjuster, I would advertise this statistic every time I talked with a prospective client. 

This lawsuit seems to be moving along quite a bit faster than a similar public adjuster lawsuit in Dade County which I noted in two earlier posts, Florida Public Adjusters File Lawsuit to Overturn 48 Hour Solicitation Ban and Fee Caps, and Public Adjuster Lawsuit Challenging State's Cap on Fees and Solicitation Ban Survives Venue Change. I expect that the summary judgment will be heard within the next sixty days. Pre-trial hearings are set and the judge seems to be moving this matter along pretty quickly.

I have recently noted the concern that some insurance restoration contractors are acting as surrogate public adjusters and not in the best interests of the policyholder in my posts, Are Insurance Restoration Contractors Ripping Off Insurers and Policyholders? and Former Restoration Insider Comes Out Swinging Against Florida's Limitation of Public Adjuster Solicitation.

The 48 hour solicitation ban was a coup of the insurance companies and Citizens Property Insurance Corporation. I attended the Citizen’s Claims Review Task Force meetings. It was obvious that Citizens claims managers and executives blamed many of their controversial claims delays and underpayments on the involvement of public insurance adjusters. The insurance industry used the Task Force as a vehicle to place before legislators a few examples of how public adjusters solicit for business following a disaster. Door hangers and the lining up of a dozen public insurance adjusters were suggested as being “unsavory’ by many. I guess the connotation is that those that get paid for professional help following a catastrophe must be taking advantage of victims. From the insurance industry’s perspective, it was a “perfect storm” to reduce the retention of pubic adjusters.

The 48 hour solicitation ban states:

A public adjuster may not directly or indirectly though any other person or entity initiate contact or engage in face-to-face or telephonic solicitation or enter into a contract with any insured or claimant under an insurance policy until at least 48 hours after the occurrence of an event that may be the subject of a claim under the insurance policy unless contact is initiated by the insured or claimant.

The lawsuit emphasizes the constitutional aspect of one’s freedom to speak and to contract.

8. By prohibiting the Plaintiffs from directly or indirectly initiating contact or engaging in face-to-face or telephonic solicitation with any insured or claimant, or entering into a contract with an insured or claimant in the first 48 hours after an event that has not been declared an emergency, subsection 626.854(6) constitutes a prior restraint on protected speech in violation of the First Amendment to the United States Constitutions and Article 1, Section 4 of the Florida Constitution.

It also points out some of the practical reasons why the laws are objectionable:

39. Subsection 626.854(6) is not narrowly tailored to further a significant government interest, and other less intrusive means are available to control or prevent any practices of public adjusters which might be needed to adequately protect the public

40. Subsection 626.854(6) is overbroad, in that it restricts the speech of all public adjusters, including Plaintiffs, who are competent, scrupulous, honest, and professional in their dealings with the public

41. Subsection 626.854(6) denies significant business opportunities for Plaintiffs and other public adjusters by denying property owners the services of a licensed public adjuster at the time they are in most distress and have the greatest need.

42. By preventing public adjusters from contacting property owners immediately following a natural disaster, subsection 626.854(6) prevents public adjusters from having any contact with the most severely damaged property owners at the only time they can be located before moving to an unknown address.

43. Section 626.854(6) amounts to an impermissible restriction on the time, place, and manner of conducting the business of public adjusting, and unduly restricts Plaintiffs' freedom of speech.

Pat Catania has done an excellent job assembling a great legal team and getting a case stated clearly. Using a Shakespearean phrase, he told me yesterday that “if they [the insurance industry] want a war, I’ll show them the war.” Pat is not a part of FAPIA or NAPIA. He is creative, bright, energetic, and I find him fun. I believe the lawsuit has a good chance of success. He asked me to let other public adjusters know that he would like to include others as plaintiffs in the lawsuit.

Catania is also a fantastic marketer and entrepreneur. He started two web sites, MySmartClaims.com and SmartClaimsPro.com which help policyholders and professionals regarding the estimating and submittal of property insurance claims. He is a passionate consumer advocate and tireless opponent. I predict he will prevail and many public adjusters will be thanking him for his efforts.

Catania also told me that his dream is to submit the final proof of loss State Farm will pay on before it leaves Florida. He considers State Farm completely unworthy to be in the insurance business because he asserts that most State Farm policyholders are not treated properly regarding claims. He has some inside information on that issue--his wife worked as a property insurance claims adjuster for State Farm.

Following my post, Umpires Following Unfavorable Appraisal Awards May be Subject to Suit, I wrote one of the most active umpires in property insurance appraisals and a teacher in the Umpire Program, John Voelpel. Voelpel is one of the busiest property insurance umpires in Florida. He was part of a roundtable discussion on “Umpires and Umpiring” at the Florida Association of Public Insurance Adjusters 2009 Annual Convention. I asked John if there were any written procedures regarding the appraisal process. He indicated no, but directed me to the Wind Umpire Directory.

The Wind Umpire Directory has been widely distributed to judges in the coastal areas of the United States and to the members of the Windstorm Network. It lists certified umpires and is a far better source for a policyholder find an umpire than a list provided by an insurance company. The appraisal procedures explained in the Wind Umpire Directory are rather basic and barely more than what is written in standard insurance policies:

What is the appraisal process?

The appraisal process is a contractual process for resolving valuation issues. Appraisal provisions have been included in insurance contracts for over 100 years. Most appraisal clauses in insurance contracts provide that if the insurer and the insured cannot agree on the value of the property or the amount of the loss, either party may make a written demand for an appraisal. Each party then selects their own appraiser and the appraisers perform their own independent evaluation. Prior to the evaluation, the umpire is selected by the appraisers or the Court is petitioned to appoint an umpire. If the two appraisers can agree on the value of the property or the amount of the loss, that amount is established and the process is concluded. If they cannot agree on the value of the property or the amount of the loss, then the matter is submitted to the Umpire for resolution. The Umpire’s decision becomes binding only by a majority agreement (2 of 3).

The most admirable work other than the teaching Voepel and others have done with the Windstorm Network has been to develop an Umpire Code of Ethics. More than anything else, this Code of Ethics provides some semblance of fairness to the individual required to be the “judge” of this very informal and important process. While not truly a judge, an umpire’s powers in the appraisal process cannot be overstated. The individuals that painstakingly worked on the Code should be proud--as should the Windstorm Network. I should point out that this Code is copyrighted.

The Code of Ethics for Umpires in Insurance Appraisals^© was prepared in 2004 by the Umpire Directory Committee of Windstorm Insurance Network, Inc. The Officers and Board of Directors approved the Code on August 3, 2004. Pursuant to the Bylaws of the organization, the Code was adopted by the members at the Annual Business Meeting in February 2005, at the annual Windstorm Insurance Conference. The Code was revised in September 2007.

I encourage all to read the Code in its entirety. I think the most important provisions of the Code are:

PREAMBLE:

The use of appraisal to resolve insurance disputes has grown extensively. Persons who act as Umpires therefore undertake serious responsibilities to the public, as well as to the parties. Those responsibilities include important ethical obligations.

…

Although most proceedings are Appraised pursuant to an insurance contract and voluntary agreement of the parties, certain disputes are submitted to Appraisal by the Court. In all such cases, the persons who have the power to decide should observe fundamental standards of ethical conduct… Umpires, like judges, have the power to decide cases. However, unlike full-time judges, Umpires are usually engaged in other occupations before, during, and after the time that they serve as Umpires. Often, Umpires are purposely chosen from the same trade or industry as the parties in order to bring special knowledge to the task of deciding the pending issues. This Code recognizes these fundamental differences between Umpires and judges.

…

CANON I. AN UMPIRE SHOULD UPHOLD THE INTEGRITY AND FAIRNESS OF THE APPRAISAL PROCESS.

A. An Umpire has a responsibility not only to the parties but also to the process of appraisal itself, and must observe high standards of conduct so that the integrity and fairness of the process will be preserved. Accordingly, an Umpire should recognize a responsibility to the public, to the parties whose rights will be
decided, and to all other participants in the proceeding.

B. One should accept appointment as an umpire only if fully satisfied:

(1) that he or she can serve impartially;

(2) that he or she can serve independently from the parties, potential witnesses, and the appraisers;

(3) that he or she is competent to serve; and

(4) that he or she can be available to commence the appraisal in accordance with the requirements of the proceeding and thereafter to devote the time and attention to its completion that the parties are reasonably entitled to expect.

C. After accepting an appointment and while serving as an Umpire, a person should avoid entering into any business, professional, or personal relationship, or acquiring any financial or personal interest, which is likely to affect impartiality or which might reasonably create the appearance of partiality. For a reasonable
period of time after the decision of a case, persons who have served as Umpires should avoid entering into any such relationship, or acquiring any such interest, in circumstances which might reasonably create the appearance that they had been influenced in the appraisal by the anticipation or expectation of
the relationship or interest. Existence of any of the matters or circumstances described in this paragraph C does not render it unethical for one to serve as an Umpire where the parties have consented to the Umpire's appointment or continued services following full disclosure of the relevant facts in accordance
with Canon II.

D. Umpires should conduct themselves in a way that is fair to all parties and should not be swayed by outside pressure, public clamor, and fear of criticism or self-interest. They should avoid conduct and statements that give the appearance of partiality toward or against any party.

…

F. An Umpire should conduct the appraisal process so as to advance the fair and efficient resolution of the matters submitted for decision. An Umpire should make all reasonable efforts to prevent delaying tactics, harassment of parties or other participants, or other abuse or disruption of the appraisal process.

…

H. Once an Umpire has accepted an appointment, the umpire should not withdraw or abandon the appointment unless compelled to do so by unanticipated circumstances that would render it impossible or
impracticable to continue. When an Umpire is to be compensated for his or her services, the Umpire may withdraw if the parties fail or refuse to provide for payment of the compensation as agreed.

...

Umpires do not contravene this Canon if, by virtue of such experience or expertise, they have views on certain general issues likely to arise in the Appraisal, but an Umpire may not have prejudged any of the specific factual determinations to be addressed during the Appraisal.

During an appraisal, the Umpire may engage in discourse with the parties or their counsel, draw out arguments or contentions, comment on the law or evidence, make interim rulings, and otherwise control or direct the appraisal. These activities are integral parts of an Appraisal…

CANON II. AN UMPIRE SHOULD DISCLOSE ANY INTEREST OR RELATIONSHIP LIKELY TO AFFECT IMPARTIALITY
OR WHICH MIGHT CREATE AN APPEARANCE OF PARTIALITY.

A. Persons who are requested to serve as Umpires should, before accepting, disclose:

(1) any known direct or indirect financial or personal interest in the outcome of the appraisal;

…

(4) any other matters, relationships, or interests which they are obligated to disclose by the agreement of the parties, the rules or practices of an institution, or applicable law regulating umpire disclosures.

B. Persons who are requested to accept appointment as Umpire should make a reasonable effort to inform themselves of any interests or relationships described in paragraph A.

C. The obligation to disclose interests or relationships described in paragraph A is a continuing duty which requires a person who accepts appointment as an arbitrator to disclose, as soon as practicable, at any stage of the appraisal, any such interests or relationships which may arise, or which are recalled or discovered.

...

E. Disclosure should be made to all parties unless other procedures for disclosure are provided in the agreement of the parties, applicable rules or practices of an institution or by law.
…

CANON III. AN UMPIRE SHOULD AVOID IMPROPRIETY OR THE APPEARANCE OF IMPROPRIETY IN COMMUNICATING WITH PARTIES.

…

B. An Umpire or prospective Umpire should not discuss a proceeding with any party in the absence of any other party, except in any of the following circumstances:

(1) When the appointment of a prospective Umpire is being considered, the prospective Umpire:

(a) may ask about the identities of the parties, counsel, or witnesses and the general nature of the case;

and

(b) may respond to inquiries from a party or its counsel designed to determine his or her suitability and availability for the appointment. In any such dialogue, the prospective Umpire may receive information from a party or its counsel disclosing the general nature of the dispute, but should not permit them to discuss the merits of the case.

C. Unless otherwise provided in this Canon, in applicable arbitration rules or in an agreement of the parties, whenever an Umpire communicates in writing with one Appraiser, the Umpire should at the same time send a copy of the communication to other Appraisers.

CANON IV. AN UMPIRE SHOULD CONDUCT THE PROCEEDINGS FAIRLY AND DILIGENTLY.

A. An Umpire should conduct the proceedings in an even-handed manner. The Umpire should be patient and courteous to the parties, their representatives, and the witnesses; and, he or she should always encourage similar conduct by all participants.

B. The Umpire should allow each Appraiser a fair opportunity to present its evidence and arguments.

C. When the Umpire determines that more information than has been presented by the parties is required to decide the case, it is not improper for the Umpire to ask questions, call witnesses, and request documents or other evidence, including expert testimony.

D. Upon the request of either or both Appraisers the Umpire should personally inspect any available damaged property.

…

CANON V. AN UMPIRE SHOULD MAKE DECISIONS IN A JUST, INDEPENDENT AND DELIBERATE MANNER.

A. The Umpire should, after careful deliberation, decide all issues submitted…

B. An Umpire should decide all matters justly, exercising independent judgment, and should not permit outside pressure to affect the decision.

C. An Umpire should not delegate the duty to decide to any other person.

D. In the event that both appraisers agree upon a settlement of issues in dispute and request the umpire to embody that agreement in an award, the umpire may do so.

CANON VI. AN UMPIRE SHOULD BE FAITHFUL TO THE RELATIONSHIP OF TRUST AND CONFIDENTIALITY INHERENT IN THAT OFFICE.

A. An Umpire is in a relationship of trust to the parties and should not, at any time, use confidential information acquired during the Appraisal process to gain personal advantage or advantage for others, or to affect adversely the interest of another.

B. The Umpire should keep confidential all matters relating to the Appraisal process and decision. An Umpire may obtain help from an associate, a research assistant or other persons in connection with reaching his or her decision.

C. It is not proper at any time for an Umpire to inform anyone of any decision in advance of the time it is given to all parties. It is not proper for the Umpire to inform anyone about the substance of the deliberations of the Appraisers. After an appraisal award has been made, it is not proper for an umpire to assist
in proceedings to enforce or challenge the award.

CANON VII. AN UMPIRE SHOULD ADHERE TO STANDARDS OF INTEGRITY AND FAIRNESS WHEN MAKING ARRANGEMENTS FOR COMPENSATION AND REIMBURSEMENT OF EXPENSES.

…

B. Certain practices relating to payments are generally recognized as tending to preserve the integrity and fairness of the arbitration process. These practices include:

(1) Before the Umpire finally accepts appointment, the basis of payment, including any cancellation fee, compensation in the event of withdrawal and compensation for study and preparation time, and all other
charges, should be established.

(2) Umpires should not, absent extraordinary circumstances, request increases in the basis of their compensation during the course of a proceeding.

(3) Umpires should not withhold any decision or award pending payment by any or either party for the services of the umpire.
....

I urge any person interested in becoming an Umpire to take the certification course and then get listed in the Wind Umpire Directory. The classes will be offered at the Windstorm Insurance Conference January 25-28, 2010, in Jacksonville, Florida.

I noted in the introduction that:

“It is incredibly important for a public adjuster to understand ethical issues that can arise in presenting claims. In order to ethically represent policyholders when they are at their most vulnerable it is important for a public adjuster to appreciate and abide by the ethical rules and obligations under Florida Law. The ethical representation of policyholders is the foundation upon which the system of insurance is designed to operate. Without the system's ethical foundation it cannot achieve its purpose to protect the policyholder.”

One of the most difficult ethical aspects of public adjusting is to not practice law. Many non-lawyers do this everyday. When representing an individual as a public adjuster, it is easy to overstep adjusting duties and provide advice or take an advocate position on legal rights. This is clearly practicing law. Regarding the the unauthorized practice of law in Florida, the Florida Supreme Court has explained:

 

In determining whether the giving of advice and counsel and the performance of services in legal matters for compensation constitute the practice of law, it is safe to follow the rule that if the giving of such advice and performance of such services affect important rights of a person under the law, and if the reasonable protection of the rights and property of those advised and served requires that the persons giving such advice possess legal skill and a knowledge of the law greater that that possessed by the average citizen, then the giving of such advice and the performance of such services by one for another as a course of conduct constitutes the practice of law.

Florida Bar v. Sperry, 140 So. 2d 587, 591 (Fla. 1962). Additionally:

The preparation of legal documents by a nonlawyer, beyond taking down and filling in information to complete a form approved by the Florida Supreme Court, is the unauthorized practice of law. Florida Bar v. Smania, 702 So. 2d 184 (Fla. 1997); Florida Bar v. American Senior Citizens Alliance, Inc., 689 So. 2d 255 (Fla. 1997); Florida Bar v. Schramek, 616 So. 2d 979 (Fla. 1993).

The rendering of services, which could reasonably cause members of the public to rely upon those services to properly prepare legal documents, is the unauthorized practice of law. Florida Bar v. Miravalle, 761 So. 2d 1049 (Fla. 2000).

The use of a business name that may mislead the public and give the expectation that the company has expertise in the field of law is the unlicensed practice of law. Florida Bar v. Davide, 702 So. 2d 184 (Fla. 1997).“

Frankly, many public adjusters know far more law and practical suggestions involving legal aspects of property insurance policies than most attorneys. I find it humorous that a Houston personal injury firm that just started doing property insurance coverage cases is going to provide a seminar to public insurance adjusters. Most public adjusters we deal with have years of experience and could give seminars to attorneys in this field of work. You do not become really good in this field without experience. I have been doing this for twenty-five years, and I learn from some of the most brilliant minds in the insurance claims recovery business everyday—public insurance adjusters.

Everybody has certain obligations to the public. Agents, adjusters and attorneys all play important and distinct roles. I think that many outside the industry do not appreciate how complicated being a property insurance adjuster can be, especially when the public adjuster is trying to accomplish the best result for the policyholder. If you want to be one of those public adjusters, I look forward to seeing you on August 13 and at other NAPIA and FAPIA events in the future.

Most insurance company and independent adjusters log far more hours in training, classes, and supervised situations than most public insurance adjusters. This needs to change.

Policyholders deserve superior adjustment work by trained and skilled public insurance adjusters. FAPIA's leadership discussed mandating standards far higher than those imposed by the State of Florida for membership as well as encouraging the Legislature and Department of Financial Services to go even further regarding testing of new public adjusters.

One of the chief complaints from adjusters and claims managers in the insurance industry is the sloppy estimating and measurement practices by some public insurance adjusters. They imply that the sloppiness is fraudulent rather than accidental. To the extent that is true, it should not be tolerated.

Insurance company and independent adjusters should be able to bring this type of conduct, whether sloppy or fraudulent, to the Office of Insurance Regulation. It is about time that public insurance adjusters are subject to market conduct examinations the same way insurance companies are subject to such examinations. This one regulatory action may help the many professional and honest public adjusters rid the industry of problem public adjusters. I am certain insurers would support public adjusters having the same minimum training requirements their adjusters have. From the policyholder’s perspective, there is no downside.

Over the next several months, I am going to encourage ideas and support for higher standards of professionalism and ethical conduct for public adjusters in Florida.

Policyholders need these skilled professionals immediately following a loss so that evidence can be collected and assistance provided to help soften the financial blow of a catastrophe. I have found that if retained within hours of a loss, skilled public adjusters make the insurance product work far better for the insured and there are far fewer re-opened claims because the claim is adjusted right the first time. But this only happens if the public adjuster is trained, skilled, motivated and has sufficient resources to get the job done right.

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.

Fifteen years ago, there were few construction firms dedicated to property insurance recovery, repair and restoration. Today, it is a huge industry, with many firms actively involved in the business on a national basis. The types of construction related vendors vary from small board-up companies, to water dry-out companies, to well-known vendors such as Servicemaster. Major construction companies such as Belfor USA work almost exclusively in major catastrophe insurance construction. The growth is largely due to the bottom line margins, which typically vary from thirty-five to forty-five percent of the total repair. Catastrophe reconstruction can be very lucrative, and the secret is out in the construction industry.

The National Association of Public Insurance Adjusters (NAPIA) has a longstanding ethical rule that its members not act as repairmen and contractors on losses they adjust. The reasons are obvious: the many conflicts of interest. Adjusters determine a theoretical amount of value of damage. The policy wording, benefits, timing of the benefits, laws and regulations affecting the policy all go to determine the amount the policyholder may take as money, repair as it was, repair differently or replace at another location. There are an infinite number of calculations which can be considered regarding the value of a loss such as scope of loss, values of materials, labor, skill of labor needed, time needed, and material quality. Adjusters determine the measures and make estimates to arrive quickly at a full and fair amount of value.

The people and entities doing the repair work have another mission, a defined repair determined by the policyholder at a profit. The policyholder obviously wants it done as inexpensively as possible, and the repairmen want that defined work done for the maximum willing to be paid by the policyholder. So, what happens when the party paying the repairman is the insurance company and not the policyholder? It does not take long for most to figure out that the policyholder may not be getting the full benefit of the insurance product. Even the insurer may subject itself to a bargaining party primarily interested in increasing profit. And this is the simple concern.

Contractors cannot practice law. They cannot practice public adjusting. Indeed, Texas recognizes the conflict: contractors cannot hold a license as a public adjuster, public adjusters cannot hold a license as a contractor. However, many restoration contractors are doing both. It is often illegal as well as unethical, but there is little regulation because few seem to be raising the issue.

In the field, I am finding many insurance recovery contractors that get construction jobs with one page contracts that ambiguously indicate they will fix the repair for the amount paid by the insurance company. To get the business, many promise they will do the job and "absorb" the policyholder's deductible. The work is started, and the contractor then "negotiates" the insurance claim with the insurance company adjuster. Whether the insurance policy is paying all benefits for the quality of the work anticipated or not, the contractor determines the quality of repair based on the amount of money the insurance company agrees to pay. Does anybody ever consider that the insurer could benefit by having a lesser scope of repair or lesser quality of repair and choose not to question unusually high construction costs? Would the insurance company question the construction costs if the bottom line was less than the full amount it owed? This happens frequently. The policy becomes a repair contract rather than one of indemnity.

Some insurers are realizing that the restoration companies are overcharging the entire job as well. Many insurers and contractors have close relationships; contractors have often introduced insurance adjusters to the policyholder. More than ever before, our firm is called by policyholders when the relationship between the insurer and contractor has broken down.

This issue deserves more discussion by everyone in the industry. It is clear though that only attorneys practice law, public adjusters adjust for policyholders, and contractors should do neither--they build and construct. Contractors have the education and licenses required to build; they do not have the education or licenses required to give legal opinions and interpret insurance policies.

During a break in my presentation at the NAPIA annual conference, Depreciation Should Not Be Taken for Partial Losses That Are To Be Repaired, Dick Tutwiler, a very experienced public adjuster, approached me regarding an ethical obligation he felt I overlooked in the discussion of ethical adjustment of glass door and window claims. He explained:

Public Adjusters have an ethical obligation to submit claims only after conducting a reasonable and honest investigation. Many older glass doors and windows have normal wear and tear and pre-existing loss issues which require the public adjuster to investigate the pre-existing nature of the items rather than to simply submit a claim for all damage seen.

His point is well taken. Adjustment requires investigation and evaluation of damage as well as coverage. Adjusters, whether for the public or the insurance company, are ethically obligated to complete these two primary duties of adjustment. Public adjusters should not place their policyholder clients in the position of having to explain or answer for fraudulently appearing claims without merit because of poor or non-existent investigation into the prior nature of items before a loss occurred.

I neglected to mention this very important point. There is a concern from many leaders in the public adjustment field that the poor work of some creates a public perception that public adjusters care about one thing--how big the claim can be made. A public adjuster’s job is to accurately determine the full amount of the insured's loss. Ethical public adjusting is not a wrongly evaluated claim amount following a cursory investigation. I am certain most professional public adjusters feel the same way and expect their colleagues to perform to this standard or get out of the business in order to maintain the integrity of the profession.

Most public adjusters active in NAPIA and FAPIA have expressed Tutwiler’s concern in a number of different ways. I should have addressed it better in my recent speeches in Florida, Texas and California.

On another note, Sandy Burnette correctly made a comment where I went too far. In response to my post, Is the State Farm Policy Really Worth Anything?, Sandy Burnette made the following observation:

"While I try to resist responding to all your posts, and it sometimes takes quite a bit of restraint to hold myself back, once again I find you have crossed the proverbial line.

Your opening sentence questioning "what is the value of insurance if it doesn't cover an insured loss" is beyond misleading, it is simply untrue. By definition, an "insured loss" is covered.

Suggesting that "insured losses" are not covered by insurance companies is an oxymoron. (Yes, claims are often wrongfully denied. But we have courtrooms to make sure that is corrected.)

It makes for sensational reading when you write those things and it creates a platform for you to once again rail at insurance companies, but unfortunately it just isn't true. This post is nothing more than an expression of the belief that anything bad that happens to somebody "ought" to be covered by their insurance policy."

His comment went on far beyond this quote, but that point is well taken. I wrongly wrote the following line in the context of that post:

"What is the value of insurance if it does not pay for insured losses?"

That is a great and accurate line I have often used in bad faith cases, but not accurate where there is no coverage. I should have written:

"What is the value of insurance if the policyholder is not informed that it will cover only a few losses? How would the public perceive the value of State Farm's product if it fully advertised its positions of what is not covered under the product?"

I think the point is obvious--the value is far less. The security advertised by State Farm in no way reflects how State Farm writes exclusions into its product. Some may say that the ads are disingenuous because they do not adequately warn State Farm policyholders about the common accidental risks of loss that State Farm excludes in its product form. That was my point.  

Policyholders and the public should be made aware of this in advance rather than after purchasing the product or after the loss when it is too late to do anything about it.

I do not want State Farm to be run out of business. As the industry leader, I would hope that somebody in its very able and bright management would critically review these issues. If State Farm changes, many other carriers will do the same. If not, I hope that others with me will raise the issue and make State Farm change through public policy or by purchasing from insurance companies that do not provide false promises of security.

There are other responses to Burnette's comment that need a reply in a later post. I will try to do better in expressing my opinions and not forgetting information. Thanks to all who comment.

Citizens was investigated in 2007 regarding its claims handling. The Citizens claims management explained how they went from an inept claims organization to one which maintained standards at least as good as any in Florida. While that was debatable, I agreed that Citizens responded better to the 2007 storms than it did in 2004.

Five months ago, there was a major change in the Citizens claims organization. Within the last month, we have received complaints regarding hardball, deceitful, and bad faith claims handling by Citizens with the full support of the new Citizens claims management. While Citizens publicizes that its intent is to provide "fast, fair, honest and accurate claims service," recent examples provided to me indicate that mission statement is false.

Insurance adjusters have to investigate coverage and evaluate damages. They are ethically bound to do this promptly, honestly, and in good faith. This is required of every adjuster as part of their license with the state of Florida. Today, Citizens adjusters are being told by its managers not to provide Citizens' estimate of damage to the policyholder or policyholders representatives. At the Florida Association of Public Insurance Adjusters Winter Conference last week, many public adjusters told me that Citizens refuses to provide its estimate of damage, claiming that it is "work product."

How a policyholder knows whether Citizens' payment is accurate without an estimate of how Citizens evaluates the damage is beyond me. It would be like getting an IRS refund and the IRS refusing to tell you how it figured the number. Or, imagine a scenario where a butcher takes the steak you select, tells you to give $20, weighs the steak, and then gives you back $2.02 in change, but refuses to tell you how much the steak cost per pound and its weight. Some may consider this a possible theft, yet this is what Citizens is doing to Floridians every day.

What is worse is that TWIA has been doing the same to its policyholders with a slight twist. It paid most slab claimants approximately 10% of the face value of the policy. It generally provided no estimate for this, but has indicated it was investigating. We have received dozens of calls from potential clients asking how long TWIA can take to investigate and not provide an estimate. Texas public adjusters are calling in furious because TWIA adjusters make up excuses for not providing any of its estimates.

The worst example is a Citizens policyholder now represented by Nancy Dominguez of Florida Adjusting Services Team, Inc. The policyholder was sent a check and complete release without an estimate. Citizens sent these, obviously hoping the client would take the check and sign the release. Nancy learned of this  and demanded an appraisal to resolve the amount of the loss because the check amount was far lower than the amount she estimated. In the appraisal proceeding, the Citizens estimate was finally turned over, and it was for an amount higher than the payment check it sent to the policyholder. The appraisal resulted in an award almost double Citizens' "hidden" estimate and about three times the amount of the fraudulent check.

Insurance adjusters should be prosecuted for this conduct. It is an attempt at insurance fraud.

Maybe our law firm should not complain. Our phones are ringing off the hook. Yet, while insurer bad faith is good for business, it is terrible when it is obvious these practices harm those who are already in desperate need of fair and honest treatment.

Motivated and trained claims professionals are needed to help policyholders obtain benefits the insurers are trying not to pay.  Some of my insurer colleagues may dispute this, but I have yet to read an internal insurer claims goal which increases the amounts paid to its policyholders.  The goals are just the opposite, and the pressure to reduce claims payments is often confirmed by adjusters who leave the insurance industry to become public adjusters.

Tuesday night, I spoke with three former State Farm adjusters.  All three spoke of the pressure to handle and close more claims, to closely read the policy language, and to not pay for certain items following disasters before actually adjusting losses.  They went so far as to have role playing scenarios where they practiced negotiating techniques which dupe customers into believing the insurer position regarding adjustment is proper.  Adjusters should be looking for ways in the policy and facts of the loss to pay more. 

Does any policyholder truly have a chance when all the training is geared towards non-payment? One public adjuster talked of going to a Haag Engineering seminar regarding roof damage.  These are generally attended by the insurance company adjusters.  The Haag trainer opened the seminar claiming that adjusters would learn techniques to pay for little, or possibly nothing, on roof claims where the adjuster would otherwise pay for complete replacement.  How insurance companies can repeatedly escape accountability for procuring outcome oriented investigations still amazes me.  Most policyholders have no clue that an adjustment is being made for the appearance of good faith, when it is anything but that.

These former insurance company adjusters revealed that all these wrongful activities were culturally accepted as proper.  Some admitted they were "brainwashed", by subtle motivation and goal setting on how they paid claims, into thinking they were the guardians of the insurance company treasury.  Without exception, I have never met a public adjuster who wanted to go back to the insurance company.  They all express much greater job satisfaction as public adjusters and genuinely helping people. To be fair, I see the denials and problem cases.  I do not have policyholders calling me when an insurance company adjuster goes out of his way to provide the service required by a good faith adjustment. 

I know there are many well-meaning and professional adjusters helping the company customers.  I am certain I see mostly the unethical adjusters and not those who do their job ethically. So long as the insurance industry promotes severity control goals and motivates its field adjusters to look for ways to pay policyholders less than what is owed, the public adjuster business will be a brisk and growing industry.  In today's claims environment, every policyholder with a significant loss should consider hiring their own claims professional.