Battle Brewing Over Public Insurance Adjusters in Florida

Julie Patel published this article in the Fort Lauderdale Sun-Sentinel earlier this week that I spotted and retweeted on Twitter:

Battle brewing over public insurance adjusters

Florida's three major insurance trade groups are lining up behind legislation to restrict how public insurance adjusters operate.

The Florida Insurance Council, Property Casualty Insurers Association of America and the Florida Property Casualty Association issued statements Wednesday backing bills filed this week by Sen. Mike Bennett, R-Bradenton, and Rep. Janet Long, D-Seminole. They say public adjusters -- who represent homeowners in claims disputes with their insurer -- inflate claims, driving up costs for all policyholders.

"The whole industry is in lock step that there's a pretty serious problem with public adjusters in Florida and their effect on claims handling," said Katie Webb, whose firm Colodny, Fass, Talenfeld, Karlinsky & Abate, represents FPCA.

Public adjusters say they are being unfairly targeted because they help policyholders get claims paid. Chip Merlin, a Tampa attorney who represents policyholders said the measures are a "potential nuclear bomb" for policyholders and public adjusters: "This proposed law is a means for insurers to prevent policyholders from having access to professional help at the time they most need it."

The legislation would:

• Prohibit public adjusters from recruiting customers by phone or in person unless it's someone they know already or a family member. 
• Bar them from sending mailers within 30 days after a hurricane. Ads sent after can't include the public adjusting firm's record in obtaining claim settlements for policyholders. They must say "ADVERTISEMENT" in a large, red letters, and can't resemble legal documents. 
• Close a loophole on the state's fee caps for public adjusters. The fees are capped at 10 percent for hurricane claims and a 20 percent for other but the fee limits don't apply to re-opened claims.

“We have seen a tremendous amount of fraud and short of fraud, a simple over-inflation of claims and it is being drive by public adjusters,” said William Stander, an associate vice president of PCI.

A recent state study found that in the past six years, the Division of Insurance Fraud received 937 complaints about fraud related to public adjusters from insurers and others, investigated 269 of them and made 31 arrests from 2004 to 2009.

The comments to that article are interesting and reflect the extremely polar views people seem to have on the issue of public adjuster regulation. 

Florida policyholder attorney Chip Merlin, the chief contributor to his law firm's Property Insurance Coverage Law Blog--The Policyholders Advocate, has called the proposed legislation "a potential nuclear bomb for policyholders and public adjusters" and believes that the Florida insurance lobby currently controls the rhetoric regarding public adjusting in Florida. Regardless of whether you agree or disagree with his and most of his blog commenters' opinions, his posts are important and informative reading. 

Here in New York, Regulation 10 (11 NYCRR Part 25) allows public adjusters to solicit by telephone or in person between the hours of 8:00 a.m. and 6:00 p.m.  The only prohibitions of public adjusters' methods of doing business in New York State are found in section 25.3 of Regulation 10:

§ 25.3  Prohibition as to methods of doing business

   (a) No person licensed to act as a public adjuster, or named as a sublicensee in any public adjuster's license shall, between the hours of 6 p.m. and 8 a.m., directly or indirectly, solicit the adjustment of a loss from an insured or from any broker or other person, whether by personal interview, by telephone or by any other method, nor shall accept any order, commission or contract for the adjustment of any loss which is within the scope of section 2108 of the Insurance Law, nor shall permit his or its agent, representative or employee to do so.

(b) No such licensee or sublicensee shall divide any fee or give any fee, commission or other compensation to any person, firm or corporation for procuring, or assisting in procuring, the adjustment of any such loss for any such licensee or sublicensee, unless the person, firm or corporation to whom such fee, commission or other compensation is given or paid had at the time when the loss occurred:

(1) a public adjuster's license issued and in force pursuant to section 123 of the Insurance Law; or

(2) an insurance broker's license issued and in force and such licensee either was the broker of record in placing the insurance which was involved in the adjustment of the loss, whether or not designated in writing to act for the insured, or was designated to act for the insured in writing before a loss occurred.

(c) No such licensee or sublicensee shall be employed, or associated with, any person, partnership, corporation, member, officer, director or stockholder, whose license as a public adjuster has been revoked by the Superintendent of Insurance of New York. Any violation of this Part shall be deemed a ground for refusal to issue or renew, or for revocation or suspension of, a public adjuster's license.

There has been no change to any section of Regulation 10 since it was promulgated 24 years ago on February 24, 1986.  To the contrary, I know of several New York insurance law changes that were proposed and enacted due to the lobbying efforts of New York public adjusters, including the addition of subsection (g) to New York Insurance Law § 3404, which was introduced in an attempt legislatively to overrule decisional law that I had obtained for insurer clients.

The supporters of the proposed Florida legislation contend the new rules are needed to address what they assert is the intentional inflation of claims by public adjusters.  Here in New York, a public adjuster's fraud in deliberately exaggerating or inflating a claim may be imputed to the insured customer either for the purpose of recovering paid fraudulent claims (Chubb & Son, Inc. v. Consoli, 283 AD2d 297 [1st Dept. 2001]) or denying them (Latha Restaurant Corp. v. Tower Ins. Co., 38 AD3d 321 [1st Dept. 2007]).  

Does anyone think we'll ever see changes in New York similar to those being proposed in Florida?  Should we?  Before commenting, you should read the January 2010 report of the Florida Legislature's Office of Program Policy Analysis & Government Accountability, which concluded that public adjuster representation in Citizens Property Insurance Corporation (Florida's homeowners' insurance "safety net" created in 2002 to offer property coverage to Floridians without private insurance options) claims extended the time to reach a claim settlement but increased payments to policyholders for catastrophe (hurricane) claims.  Are increased payments to policyholders in public adjuster-represented claims due only to public adjuster fraud or inflation, or are insurers not paying their policyholders the full amount of their losses?  Public adjusters market to policyholders based on the widely held notion that insurance companies will try to pay less than they owe.  Regardless of whether that notion is warranted, the over quadrupling of the number of licensed public adjusters in Florida since 2004 likely has something to do with policholders' mistrust of insurance companies' motives and practices in settling property claims, at least in regard to hurricane losses.  Currently, Florida has 15.9 public adjusters per 100,000 residents compared to New York's 2.4.