Unauthorized Practice of Public Adjusting (UPPA) has become the predominant discussion among public adjusters at virtually every public adjuster association meeting I attend. Brian Goodman, general counsel for the National Association of Public Insurance Adjusters (NAPIA), said that UPPA is now the most important issue facing public adjusters because licensing of the profession is accepted in almost every state and even recognized in Model Legislation with the National Association of Insurance Commissioners.

The unauthorized practice of public adjusting is a serious problem because when it occurs, consumers of insurance are harmed. Robert C Baker III delivered a paper and a speech on Saturday that crystallizes the issues. Baker’s paper, The Costs of the Unlicensed Practice of Public Adjusting: A Legal and Economic Analysis, was the winning submission of the Paul Cordish writing competition sponsored by NAPIA. His speech was even better than the paper.

Baker’s introduction states the problem calling for a remedy:

The Unlicensed Practice of Public Adjusting (“UPPA”) is a vehicle of consumer fraud that preys upon some of the most vulnerable elements of our society—the disaster stricken, the elderly, the unsophisticated, and those for whom English is a second-language. Individuals’ losses range from a couple thousand to tens of thousands of dollars, and frequently victims are left without a remedy because UPPA offenders disappear or are not worth suing. But outright fraud is only one piece of the UPPA problem. A less malicious but nonetheless harmful variant seeks to help homeowners but executes poorly, sometimes leaving consumers far worse off than when they began. Particularly for smaller damages, this incompetent execution is especially troubling because it is difficult to detect and, if not quickly discovered, it becomes permanently concealed once home repairs cover up the evidence. The resulting financial losses from UPPA trigger a tangled web of social and economic consequences to the public, the insurance industry, and the economy. State legislatures have made great strides in recent years to curtail UPPA’s impact, but significant consumer costs remain.

Baker identifies insurance restoration contractors as the most frequently guilty:

UPPA has become synonymous with fraud perpetrated by disreputable contractors, ne’er- do-well storm chasers, and similar predatory ilk. The stereotypical transaction involves the fraudsters going door-to-door after a natural disaster advertising repair and insurance negotiating services. Then, once retained, the fraudsters engage in pro forma negotiations with the insurance company and, depending on the circumstances, (1) invalidate the insurance claim due to incompetence, (2) steal the settlement check, (3) demand a steep public adjusting fee, (4) perform shoddy repairs, or (5) some combination thereof. 9 Less frequently discussed, however, is the variant of UPPA not found in malice, but mediocrity. These contractors conduct the pro forma negotiations but then actually complete the repairs. No obvious harm is done and no impetus for complaint is provided. But, nonetheless, the consumers are assessed the opportunity cost of substandard adjusting—the additional recovery, peace-of-mind, and time-savings they could have enjoyed with a licensed public adjuster.

In the closing of his speech, Baker called for three things to help remedy the current situation:

  1. Criminalization of the activity with meaningful penalties.
  2. Enforcement of the enhanced criminal penalties.
  3. Enforcement against insurers who allow the practice to take place.

I recently highlighted two cases involving unauthorized public adjusting by contractors:

Public Adjusters Argue For Class Action Certification Against Roofer Accused of Unauthorized Public Adjusting

Unauthorized Practice of Public Adjusting and the Lon Smith Roofing Case Should Scare Contractors and Roofers with Contingent Contracts

I agree with Brian Goodman’s view. Public adjusters should not dictate how the policyholder rebuilds a structure. Contractors should not adjust insurance claims.

My prediction is that there will be more cases involving UPPA, more regulation regarding people acting as public adjusters and contractors at the same time, more enforcement actions preventing UPPA, more civil lawsuits against contractors acting as public adjusters, and more legislation involving contractor insurance restoration contracts—specifically, assignment of benefit (AOB) clauses.

Positive Thought For The Day

"I care not what others think of what I do, but I care very much about what I think of what I do! That is character!"
            —Theodore Roosevelt

  • UPPA is a major problem in the public adjusting industry. Personally, I don’t think our industry does enough to stop UPPA. The DOI’s and Attorney General’s don’t seem interested in the problem. I’m actually surprised that the carrier’s don’t do more to prevent it. If an carrier adjuster REFUSES to deal with a storm chaser then they will eventually go away.

  • Once again, you hit the nail on the head.

    This article is absolutely spot on, Chip. Thank you for continuing to highlight a situation that is absolutely out of control. While FAPIA is dealing with it in Florida, it is clear that we are not alone. This is a proliferating national problem.

    Public adjuster regulations are in place to protect the public, yet there is zero regulation for remediation/restoration companies. They are walking in the shoes of a public adjuster without a license, without the training and with zero fiduciary responsibility to the policyholder. This really needs to stop.

    Insurers who regularly aid and abet this practice should be called out. Thanks again!!!

  • Mike Rump

    Thanks for shining your bright light on this issue Chip. It is my belief this is the biggest threat to consumers there is in our industry. I personally have cleaned up several horrible cases of claims handling by these folks.

    The legislature properly passed in statute that Public Adjusters are not to be involved in the repair process. We agree and support this as being a way to avoid obvious conflicts of interest and protect the policy holder. Why then would it be proper for a contractor to then handle the claim??

    Thanks again Chip for everything you do.

  • susieque2

    The malice, incompetence and the vile victimization of claimants is almost all on the side of the insurers who are in a hurry to deny legitimate claims. This law was passed solely to help them do exactly that. You shouldn’t pretend to be on the policy holder’s side. That’s sleazy.

  • susieque2

    If you’re on the side of the claimants, then by all means fight this law by appealing it when legitimate claimants are denied the coverage they have paid for month after month, year after year. This is egregious. There’s no point to misrepresenting it. That’s what you’re doing.

    Claimants are regularly threatened with having their insurance cancelled if they pursue fair and legal claims. The only way they know what actual damage has been done in an accident, weather event or disaster is when a trained professional looks at it and gives a bid based on fact. Is it a few pieces of siding or is the underlayment fractured? Can that siding, those shingles, that trim or that paint be matched or does it have to be redone entirely?

    Insurers hire these adjusters so that they don’t have to pay the full cost of repairs and that’s the one and only reason.