In a rare move, the Texas Attorney General’s Office intervened on behalf of the Texas Department of Insurance in the Chapter 11 filing by Correct Claim Public Adjusters, LLC, a firm domiciled in Nevada. A March 30, 2017, letter from the Texas Association of Public Insurance Adjusters (TAPIA) to the Texas Department of Insurance prompted a probe into the firm’s questionable practices. The association became aware of Correct Claim when it was contacted by an employee of the firm intent on utilizing TAPIA members to further its business model.
The public adjusting firm is well known to Steve Badger, a Dallas attorney with Zelle LLP. Several clients received letters relating to hail and wind claims indicating Correct Claim had been retained as a public adjuster on behalf of their Texas insureds. He, too, described his concerns about the company in a letter that was eventually entered into the bankruptcy records.
A dispute arose between the owner of the firm, Sergio De La Canal, and his financial backer, David Komet, resulting in both filing numerous documents and adversary actions in the bankruptcy proceeding which exposed questionable business practices.
The documents detailed the relationships among what appear to be related firms and prompted a reorganization plan, filed and approved last week, which contains quite a few restrictions governing the firm’s insurance activities going forward. In addition, a $2 million client restitution fund was created as part of an agreement with the Texas Attorney General’s Office and the Texas Department of Insurance.
According to Badger, there were numerous troubling business practices being conducted by the public adjusting firm.
As Badger investigated Correct Claim’s business dealings, a question arose surrounding the impartiality of the estimators used by the firm. For example, OnPoint Appraisal Services, appeared to be owned by De La Canal’s brother, Carlos.
According to Badger, this company sold damage estimates to Correct Claim for $350 each.
“Correct Claim’s financial partner then created companies to essentially purchase these estimates and in turn sell them for $2,000 each to the lawyers that Correct Claim referred homeowners for lawsuits,” Badger explained. “Sadly, the excessive $2,000 cost of these estimates was then passed along by the lawyers to the homeowners as a litigation expense. Hopefully, the Restitution Fund administrator will identify the homeowners charged this improper expense and ensure they are properly reimbursed.”
A similar issue surfaced with respect to the appraisals conducted by Drew Jacoby, a named appraiser in many matters Badger handled. Correct Claim demanded appraisals on behalf of its clients and named Jacoby in 770 appraisals.
“Obviously, one individual cannot handle 770 appraisals all demanded at essentially the same time,” Badger said. “Even worse, the appraiser was an employee of a company owned by Correct Claim’s financial partner, David Komet.”
Jacoby was employed by Urban Earth, LLC, owned by Komet. Both businesses were located within the same building as Correct Claim.
Correct Claim filed a pleading admitting that only five appraisals were ever completed, said Badger.
Further investigation by Badger revealed a website, wwwonpointappraisalservices.com, was being developed and was register to Komet. Due to the obvious relationship between De La Canal and Komet, Badger objected to Jacoby as an appraiser in the matters because he was “neither impartial or disinterested”.
Badger said the most troubling business practice was the sheer number of clients that Correct Claim represented.
“Correct Claim stated in one of its filings that it had over 2,600 clients. Obviously, it is impossible for a public adjuster to adequately represent 2,600 clients,” said Badger. “We found that some public adjusters employing this mass-marketing model were signing up clients and promptly flipping their customers to lawyers for lawsuits. To end this practice, in 2015 we worked cooperatively with reputable public adjusters in asking the Texas Legislature to amend the Texas public adjuster licensing statute to require that public adjusters actually adjust claims for their clients and not just be conduits for lawyer referrals.”
He is skeptical that the Fund will see any restitution.
“The Correct Claim business reorganization plan, which is where the Restitution Fund proceeds will come from, is based on Correct Claim signing up 1,000 new clients a year. Not only is that unrealistic, it is also the same mass-retention model that created the entire mess to begin with,” said Badger. “No public adjuster can properly perform their statutorily required duties for 1,000 claims a year.”
Badger suspects the “reorganization plan will crumble in the next few months and consumers will never see a dime.”
“These complex and financially lucrative schemes demonstrate why we are seeing such an increase in disputed claims and litigation,” he said. “People have realized they can make enormous profit by finding ways to inject themselves into the insurance claims process. Unfortunately, all of them don’t do it in a legal manner.”
Court records indicate De La Canal will surrender his equity interest to Yully “Julie” Toro. The relationship between the two is unknown. Toro recently acquired a Texas public adjuster license. According to Kaye Beneke, executive director of TAPIA, Toro has not applied for membership with the association.
According to Badger, the TDI’s active participation in the bankruptcy, which included taking depositions of all involved parties, highlights a consumer protection issue that needs to be addressed.
TAPIA will continue to work to protect consumers and promote ethical adjusting practices, said Beneke.
“TAPIA is committed to preserving the integrity of the profession of public insurance adjusting. Ethical public adjusters work diligently to represent the interests of their clients in the insurance claims process and work towards the fair and timely resolution of their claims,” Beneke said. “There is simply no place in our profession for individuals or companies whose underlying goal is to sign up thousands of homeowners and refer those matters to the appraisal process or litigation. Once TAPIA became aware of certain actions being employed by Correct Claim Public Adjusters, Inc., we promptly alerted TDI in an effort to protect consumers and promote good public adjusting practices. If this bankruptcy agreement puts a dent in that type of behavior, it’s a good thing for Texas property owners and ethical public adjusters who play by the rules.”
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