Erasing the Abuse of Unlicensed Public Adjusters

By Jason Wolf | February 17, 2014

They surface in the wake of any catastrophe or run-of-the-mill claim generating event. Contractors, tradesmen, restoration companies or others emerge, offering not only to repair damage to homes or property, but to also negotiate on behalf of the policyholders with their insurance company.

The proposition offered to policyholders by these unlicensed or “non-public” adjusters is enticing at first glance. They promise insureds that they’ll handle the entire process – beginning with estimating the damage through to claim handling to repairs to ultimate settlement with the carrier. This would leave the policyholder unburdened by the perceived hassle of haggling with the insurance company.

Yet, it’s never that easy. Nor, in many states, is it legal.

Incidents of fraud and both frivolous and legitimate lawsuits stemming from non-public adjuster abuse drive up insurance premiums – and the cost of doing business for private and corporate policyholders. Addressing the presence and practice of unlicensed or non-public adjusters is critical to protecting homeowners and property owners from abusive practices or even fraud.

Addressing the presence and practice of unlicensed or non-public adjusters is critical.

In a majority of states, public adjusters are regulated professionals who undergo training, examination and certification to ensure adherence to specific professional regulations. Practitioners must receive ongoing, continuing education in state insurance regulations to maintain their licenses. Should they stray, they are subject to state punishment or penalties.

Unlicensed public adjusters undergo no training, examination, certification or review by state regulatory authorities. They have no fiduciary duty to the policyholder, and are bound by no professional regulations. Often, the only penalties they may face could be civil claims by the homeowner or property owner, or – if they commit fraud – possible criminal charges.

Unlicensed public adjusters who also serve as contractors are motivated strictly by profit, not by aiding their insured client. Since they effectively “double-dip” in the insurance proceeds, claiming both a commission on the insurance proceeds and a fee for the work delivered, no guarantee ensures the work will be completed. As has been seen in many markets following catastrophes, many are opportunists who arrive, collect their proceeds, and move on to the next catastrophe.

Education and Self-Policing

How can the industry help protect policyholders from potential abuse? Education and awareness are the best defense. It’s vital that policyholders understand the rules in their own states. Regulations differ according to state law, but there are some consistencies. In many states, public adjusters:

  • Must be state licensed and undergo recurring, continuing education to maintain their licensure. They are trained to read insurance policies, know state insurance code and policyholder rights, and how to best represent the policyholder.
  • Cannot legally represent a policyholder in an insurance claim and perform the work in question. In Florida, for example, this is expressly prohibited.
  • Face possible regulatory discipline, including denial, suspension, revocation or refusal of renewal of a license if they violate the state’s public adjuster regulations or code of ethics; non-public adjusters face no such actions.

Addressing and curtailing practices and abuse by unlicensed public adjusters requires industry-wide action. While policing the industry often falls to state regulators, in reality few agencies have the manpower or funding to effectively regulate the industry. Therefore, public adjusters, insurance industry attorneys and even contractors and restoration companies must take the lead in self-policing the industry.

Insurers must call-out unlicensed adjusters who abuse the system, especially by serving as adjuster and contractor on the same claim. Public adjusters and attorneys should alert authorities when they witness unlawful practices. Without a multi-faceted effort by the industry, abuse, fraud, lawsuits – and resulting costs – will grow.

About Jason Wolf

Wolf is lead partner, Property Insurance Defense Practice Koch Parafinczuk & Wolf, P.A.

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