Public adjusters should adjust first party claims and not third party liability claims. To do otherwise is the practice of law. I am warning public adjusters about this topic because of an email I received:
Chip, good morning. we need your input on Public Adjusters doing 3rd party claims. In several of your presentations I have heard, Public Adjusters are not allowed to do 3rd party claims. Other FAPIA members said the contrary. Please clarify. Please see the string of emails below in chronological order from the most recent to the latest. Thank you.
The rest of the email string was interesting and shocking:
“Chip has strongly suggested that Florida Public Adjusters avoid processing third party claims. He has never said that it was not allowed.”
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“REF your statement "Florida allows PA’s to do 3rd party claims", Chip Merlin (Merlin Law Group) has indicated many times at FAPIA’s conferences that Public Adjuster’s are not allowed to do third party claims.”
* * *
“I have handled 100’s of subro claims similar to this. (As a side note, Surprisingly, Florida allows PA’s to do 3rd party claims, some states do not. I don’t know where your claim is located.)
You can contact me, but off the top of my head, the roofer is the responsible party, hence his liability policy should pay (only ACV-on
Liability) I don’t know who you represent, but your client can seek the difference from his own carrier, who in turn could submit it to Arbitration Forums (if they are members), and the Roofers Liability carrier would wide up paying them back.An assignment of benefits may also be accepted and/or helpful.
Note: on subro claims, receiving 80% is considered a Home-Run.”
* * *
“I am assisting on a fire claim on an out of state commercial structure where the sub-contractor had a certificate of insurance issued to the prime contractor (my client) for any property damage liability. The sub-contractor caused a fire in the roof of the structure when doing the roof work.. The prime contractor is now a named insured under the sub’s policy through a certificate of insurance. There is a dispute regarding the cost of repairs for fire damage to the structure that the prime contractor incurred while making necessary repairs. The prime contractor got verbal authorization from the sub’s carrier adjuster to do what ever was necessary to get the commercial structure back in business as quickly as possible.
The prime contractor went to defcon four and worked night and day to get the business back open after the fire. When the prime contractors cost were submitted to the sub’s adjuster, he responded with a negative for paying the amounts submitted. They have offered to pay sums that are substantially less than what is owed and require also releases to be signed releasing the sub for all future liability from all parties.
I have asked for a copy of the sub’s policy from the sub’s carrier but I have not had a response. (this is outside the state of Florida) I am not sure how disputes are to be resolved where the sub-contractor’s insurer owes the insured for damages that he had to make good to the structure owner/client of the insured through a certificate of insurance. I have never handled a certificate claim loss before and I understand the issues and not sure how to proceed is seeking the resolution, should the carrier refuse to accept the amounts that is determined to be my clients cost of repairs. Any thought public or private would be appreciated.”
Third party claims handling is not public adjusting. Paul Cordish, the long time general Counsel to the National Association of Public Insurance Adjusters, repeatedly warned that the biggest threat to the licensing of public adjusters are those who attempt to practice law and adjust third party claims. He was concerned that it was a strong financial temptation for many. If it occurred, and insurers and attorneys learned of the practice, bar associations and insurers would bring this to the attention of legislators and outlaw public adjusting altogether.
This point was made in TAPIA is Formed and the Unauthorized Practice of Law is Discussed:
Every six months at every NAPIA mid-year and annual meeting, Cordish presented his views on the current state of public adjusting throughout the country. Cordish always provided wisdom and true insightful thoughts. Many of us miss him greatly.
Today, Brian Goodman performs the same function as General Counsel to NAPIA and does a wonderful job eloquently expressing many of the same messages to the general membership as Paul Cordish. In my view, NAPIA has been blessed by these two attorneys providing terrific counsel to a profession often under attack by the insurance industry and then by the legal bar.
Mary Fortson provides oversight to our firm regarding ethics and logistical oversight of our attorneys. She has attended many NAPIA meetings over the past decade and has heard one clear message from Brian Goodman to all public adjusters, the same message Paul Cordish gave over the five decades he was NAPIA’s general counsel. That message is:
Do not practice law if you are a public adjuster. The unauthorized practice of law represents the most serious threat to public adjusters as a profession because the bar associations may limit or prevent the activities of public adjusting under the guise of protecting the public.
So, I was not surprised when Mary Fortson and TAPIA’s first President, Jim Beneke, asked me to provide a one hour presentation on the unauthorized practice of law at TAPIA’s first meeting. It is an important subject and one professional public adjusters take very seriously.
While I will not provide a detailed analysis of this topic in a limited blog, my view is that many public adjusters hear the warnings, but they still practice law everyday in letters and phone calls. Most of the offenses come in advocating legal issues and coverage disputes with insurance adjusters. The other major offenses come at the time of providing advice to policyholders as to which legal resolution process should be taken to resolve disputes. Advocating a legal position and telling a policyholder to file or not file a lawsuit are acts of practicing law that are routinely breached by well meaning public insurance adjusters.
Over the past year, I have given the same presentation four times. Each time I cringe as I provide examples to the audience of what may constitute the unauthorized practice of law because I can see that public adjusters in the audience are squirming as I explain what they do is illegal–and I am a friend. (emphasis added)
I have covered and taught this topic for almost twenty years. I have always said the same thing—third party claims handling is illegal for public insurance adjusters. In Public Adjusters Have Many Ethical Obligations, Including Not to Practice Law, I noted:
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).
Third party claim handling is the practice of law. It is unethical for a public adjuster to engage in third party claims as the representative or adjuster of the claimant. If you are a public adjuster and do it, expect to be arrested, lose your public adjuster license and harm the reputation of your profession. Public adjusters should expect independent and company adjusters to notify state departments of insurance and the bar associations of unethical conduct any time a public adjuster claims to represent, aid, adjust or act as the consultant to a claimant in a third party liability claim.
Our law firm has lawyers fighting a pending bill in Tallahassee that outlaws public adjusting of Citizens Property Insurance claims. Policyholders and consumers of insurance need the services of public adjusters. Unethical conduct does not help us fight off insurance lobbyists.
If you want to represent claimants in a matter where you interpret law and various theories of tort principals, you need to be a lawyer with a law license in the state where the action is pending.