Amy Bach, the Executive Director of United Policyholders recently interviewed public adjuster Masood Khan. In United Policyholders’ summer newsletter, Khan, a vice president of The Greenspan Company Adjusters International, was interviewed regarding a number of important topics. One of the more controversial comments he made will be of concern with accounting firms, consultants and contractors. Masood Khan correctly noted that in most states, those determining, presenting, negotiating and adjusting losses for policyholders without a public adjuster license are illegally practicing public adjusting. In most of the states, it is a crime to do so.

Masood Khan is no stranger to the law. He is a licensed California attorney who found his calling in public adjusting. He has made a point of telling me that he does not practice law in his dealings with insurers. Masood is delightful and very engaging. I have enjoyed working with him on matters where legal representation was required to get a claim fairly paid. I hope he will take a more active role in the leadership of public adjusting because his background and views about the role of adjusters are insightful.

Here are some of his comments about unauthorized public adjusting:

We do not let our lawyers, doctors, real estate and insurance agents, etc. engage in their professions without being licensed. Even our mechanics and our hairstylists are regulated and held to a certain minimum standard. Accordingly, individuals negotiating and compromising the rights of policyholders, particularly after they have suffered a loss, must be regulated, licensed and held to a higher standard.

Unfortunately, there are an abundance of construction firms, water and smoke remediation firms, and accounting companies that are engaging in unauthorized public adjusting, and breaking the law regularly, mostly with impunity.

Unless a CPA is an employee of the insured, it’s illegal for them to represent a policyholder for compensation in the settlement of an insurance claim without a license. A CPA would be an improper person to measure inventory losses. Additionally, simply having a CPA designation will ensure he/she has the skills necessary to measure and adjust the business interruption aspect of the claim. An insured would need the skills of a forensic insurance accountant who has intimate knowledge of the particular business, and one who is skilled in representing policyholders.

The legal audit departments of some major accounting firms and publicly traded consulting companies probably have good cause to be concerned about this interview. United Policyholders’ newsletters are read by the various departments of insurance. It does not take a genius to figure out that an enforcement officer of any department of insurance could simply look on the web to find those people that cannot legally practice public adjusting, but advertise that they provide those services. I am surprised that more public adjusters do not file a criminal notice or complaint. It does not take much to start a mandatory criminal investigation in many states.

So, in the spirit of "The Clash" between public adjusters and those hoping not to get arrested, this song seems an appropriate warning:

 

https://youtube.com/watch?v=16u0wwCfoJ4%3Ffs%3D1%26hl%3Den_US%26rel%3D0%26color1%3D0x2b405b%26color2%3D0x6b8ab6

  • Seth Knudsen

    Good article,

    I have had questions on CPAs’ involvement in claims in the past. I know their value in parts of the claim but never was clear as to if a PA license is required.But it now seems more clear,

    thank you

  • Chip,

    Your articles are always insightful. None more so than this one.

    I do hope to read in the near future about the DFS investigating more roofers as well as accountants, cleaners and contractors. I hold a copy of a contract from a restoration company that has in it’s wording that they will take all the insurance proceeds and make the repairs to the clients’ home. Yet, DFS remains focused on catching PA’s not having their bonds in order, or attempting to ‘sting’ us with silly illegal activity. In a parallel world, I would just like to see equality.

    Thanks for all the posts. I learn to be a better PA thanks to you.

  • Seth and Gary,

    I am just reporting on what the law is in most states and noting that Masood was the one that mentioned it.

    Those that are making a living in violation of the law are certainly going to be concerned about this. But, it is much better that they stop and stay within the bounds of what is legal than risk a criminal sanction.

    Indeed, one client that understood what was going on could probably bring a successful class action lawsuit asking those engaging in the illegal conduct to give back all the fees they have obtained to all current and former clients.

    Attorneys have an ethical duty to bring laws to the attention of the public. The bottom line–if you want to be a public adjuster, get a license.

  • shirley heflin

    Interesting….Mr. Khan got his J.D. but prefers “being” a P.A.

    Guess that makes him happy!

    SHIRLEY HEFLIN

  • James

    This is good info.

    I am a licensed adjuster in Texas. I also own a construction company.

    When I’m called out to give an estimate on a Job I write them up in Xactimate. That is what I give the owner as my estimate. Usually that is what they submit to the insurance company. On many occasions it is the insurance company/adjuster that contacts me about the price.

    Am I on the wrong side of the law? Where do I find this information as it pertains to Texas? I find myself in negotiation with the insurance company even though I didn’t initiate it. Also I have come up in the roofing industry using Consignments of intrest. Where I provide the insurance my price and do the work for what they pay plus the deductable. How does that stand with the law?

    Any info is appreciated. Thanks