Attacking Those That Help Policyholders Rebuild, Make Claims, and Battle Insurance Companies

Chip Merlin | Property Insurance Coverage Law Blog | November 4, 2019

The Tampa Bay Times published an article yesterday which should be of concern to all policyholders. Florida’s elected official who then overseas the Department of Financial Services is calling for a 30-day time period for policyholders to cancel public adjusting contracts.

One can imagine what is going to happen. Insurance companies delay and deny claims. Their policyholders get upset and hire a public adjuster. Those that hire public adjusters then get calls directly from the insurance company promising better service and more payments if they will just fire their public adjuster saving 10 percent. The public adjuster gets terminated. The insurer does a little better, but not enough. The pattern repeats itself over and over. Delays and under payments are even more rampant.

The elected official making this suggestion owns a seafood restaurant. I wonder if he would be willing to allow his customers to pay only a portion of their bill if they did not like their meal or a portion of it?

I can understand an insurance company officer blaming anybody but his claims department for taking too long to pay a claim or wrongfully denying it. I can understand why those that run insurance companies do not like those in academia writing books—like Professor Feinman, who wrote Delay, Deny, Defend—which expose the systemic wrongful claims practices which many insurance companies engage. It does not take a rocket scientist to figure out that taking premiums and not fully and promptly paying claims is a lot more profitable than playing by the rules and doing so. What wrongful acting insurance company wants all that pointed out?

So, maybe those insurance executives can work with government officials overseeing insurance to blame those helping the policyholders rebuild, make their claims and enforce the insurance contract so they cannot do so? I can imagine those insurance executives and their lobbyists can make up a strategy to find some bad apples in the ranks of those helping policyholders as examples and make laws that shut up those troublemakers and keep them from helping the policyholders.

The elected Florida official had this to say about public adjusters:

I’ve seen PAs that sign people, and then they sit back there on Facebook all day long, because they know that they have got an airtight contract, and they will leave you twisting in the wind.

It is hard to deal with this logic. Who are all these public adjusters? I am aware of one panhandle public adjusting firm with hundreds of clients that has a huge backlog of pending cases and has an immense presence on Facebook in Panama City—everybody in Panama City knows the firm I am talking about. But virtually all public adjusters I know want the claims they are working on paid quickly so they can make money and move to other work.

Which leads to the big question—why aren’t Florida government officials suggesting laws and regulations to the entities not fully and promptly paying the claims? Policyholders do not want to hire people like me to sue their insurance companies or help get the claims payments fairly made for the full amount owed. They are forced to do so because their own insurers have let them down.

Just as academia has noted, policyholders and society need strong unfair claims practice laws which are enforceable and which the insurers are afraid enough of that they will stop underpaying and delaying the payment of their customers’ claims.

Insurance Consultants and People Not Licensed as Public Adjusters Cannot Work on Property Insurance Claims

Chip Merlin | Property Insurance Coverage Law Blog | July 2, 2017

Florida law is significantly more specific about who may work on, aid in, or prepare a claim for a policyholder. Many insurance restoration contractors, all insurance consultants, and all those non-licensed third parties who help contractors, policyholders and public adjusters with insurance claims should get ready for a new way of doing business when a new law takes effect on January 1, 2018.

The new law has other significant changes, especially regarding public adjuster apprentices, but today, I focus on the following:

19) Except as otherwise provided in this chapter, no person, except an attorney at law or a public adjuster, may for money, commission, or any other thing of value, directly or indirectly:

(a) Prepare, complete, or file an insurance claim for an insured or a third- party claimant;

(b) Act on behalf of or aid an insured or a third-party claimant in negotiating for or effecting the settlement of a claim for loss or damage covered by an insurance contract;

(c) Advertise for employment as a public adjuster; or

(d) Solicit, investigate, or adjust a claim on behalf of a public adjuster, an insured, or a third-party claimant.

Insurance Consultants, who are not licensed public adjusters or attorneys, advertise, and I suppose provide, all types of services to policyholders, contractors, and public insurance adjusters. Frequently, these unlicensed consultants act as a “back room” or “third party administrators” for contractors and public adjusters. They send, prepare, and work on property insurance claims. These acts are unlawful in many states, including Florida. The new law clarifies those who may lawfully assist policyholders in preparing and making claims. I suggest those unlicensed individuals who do this work stop or obtain a public adjuster license right away.

Restoration contractors are important. After disasters strike, communities need competent and motivated construction professionals. Restoration contractors who have pre-arranged temporary but experienced help willing to do first class work in places far from home should be congratulated for their work. Some people say they may be “storm chasers,” but the best restoration contractors do quality jobs and are a blessing when a community is devastated. Policyholders, insurance companies and the public need professional restoration workers devoted to rebuilding communities when disaster strikes.

Restoration contractors who choose to ignore this new law and who prepare, complete or file an insurance claim on behalf of a policyholder or third-party claimant should also look for a criminal defense attorney. As indicated in NAPIA Annual Meeting in San Antonio Will Discuss Water Damage Claim and Unauthorized Practice of Public Adjusting, they are breaking the law and the Florida Department of Financial Services has issued a bulletin warning of the possible penalties.

Here is a good example of a Florida contractor advertisement promising to perform illegal activity:

We specialize in insurance claims, you can rely on us to take care of your claim from start to finish. All you have to do is make the call to start the claim. We handle the rest. They make their estimate, and we make ours. We negotiate with the insurance company to find not only an agreed upon price, but also an agreed upon scope. Once everyone is on the same page, we get contracts signed, and begin work. Every company is different in how the handle claims, we work directly with your insurance adjuster to make sure that everything is done in a timely manner and gets finished properly. Giving you a stress-free insurance restoration claim process.

When dealing with unexpected damage to your home, filing an insurance claim can feel like a nightmare that never ends. Trust our team with over 10 years of insurance claim experience to handle the process from start to finish.

Our goal is to make sure the claim is payable at an amount that is large enough to restore your home to its pre-damage state.

• Fire and smoke damage

• Wind and storm damage

• Water damage

• Tree damage

• Car damage

All an enterprising State Attorney would have to do to build a case is simply send investigative subpoenas to this contractor and take statements from that contractors’ employees who solicit contracts. The State Attorney would then inquire of policyholders what the company representative told them at the time of solicitation and during the claim. The State Attorney could also send investigative subpoenas to the independent and company adjusters who negotiate the claims with the contractor to determine who wrote emails about the insurance claims and what the company representatives said and did during the claims process. This would establish whether a person not licensed as a public insurance adjuster or an attorney acted to “aid,” “prepare,” or “negotiate” the insurance claim. As an aside, I suggest that insurance adjusters should be careful not to aid those who are endeavoring to break Florida law.

I am truly surprised that the Florida insurance industry—which has complained about some of these contractors in Dade and Broward counties—has not asked why the Attorney General and the State Attorneys in those counties are not pursuing charges. Some insurance claims executives have told me that they have complained to authorities, and nothing has happened.

The bottom line:

  1. The new law strengthens previous law.
  2. The new law better protects consumers and the insurance industry.
  3. People involved in the restoration industry and those estimating and dealing with insurance companies in any way should be careful not to break Florida law.

The Ethics of Using Public Adjusters as Expert Witnesses

Todd Tippett | Zelle Hofmann Voelbel & Mason LLP | September 25, 2015

Those familiar with the issues faced by insurers in Texas first-party insurance claims, particularly in the realm of hail damage claims, are undoubtedly aware of what has been labeled the “Progressive Claim Syndrome.” In a nutshell, the Progressive Claim Syndrome is the process of systematically increasing the scope and alleged value of an insurance claim during the adjustment, appraisal and even thereafter through the course of litigation.

Somewhere in Texas at this very moment a public adjuster is knocking on the door of a home or business owner offering to inspect the roof for wind or hail damage and assist with the submission of an insurance claim. It is inevitable the public adjuster will find some “evidence” of wind or hail damage. At that point, the public adjuster will encourage the homeowner or business owner to sign a 10 percent contingency fee contract that in essence states the public adjuster will not get paid unless he can convince the building owner’s insurance carrier the structure incurred covered storm damage. Once the homeowner or business owner signs the public adjuster’s 10 percent contingency fee contract, the public adjuster has a vested interest in making sure the claim is paid. The larger the claim, the more interested the public adjuster becomes.

Insurance carriers and public adjusters obviously do not always agree on the existence or extent of coverage for a claim. Disagreements can include, among other things, scope of damage issues, unit pricing issues or even whether there was a weather event during the policy period significant enough to have caused the damage claimed. In such instances insurance carriers often deny claims either in whole or in part and litigation ensues. Each week, hundreds of hail damage lawsuits are filed all across Texas.[1]

During litigation, the attorney representing the building owner must decide which fact witnesses to call and which expert witnesses to retain. Given their knowledge about the alleged damage and claim history, the public adjuster who initially handled the claim is often designated by counsel for the building owner as a fact or expert witness.

This designation is not without considerable risk.

Rule 3.04 of the Texas Disciplinary Rules of Professional Conduct provides as follows:

A lawyer shall not:


(b) … pay, offer to pay or acquiesce in the offer or payment of compensation to a witness or other entity contingent upon the content of the testimony of the witness or the outcome of the case. But a lawyer may advance, guarantee or acquiesce in the payment of:

(1) expenses reasonably incurred by a witness in attending or testifying;

(2) reasonable compensation to a witness for his loss of time in attending or testifying;

(3) a reasonable fee for the professional services of an expert witness.

In a nutshell, Rule 3.04 states that a Texas lawyer (and his client) cannot pay a fact witness or an expert witness on a contingent fee basis. It is simply unethical to do so. There are no Texas cases addressing whether a public adjuster who signed a contingency fee contract presuit can serve as an expert witness or even as a fact witness, in litigation and expect to retain his contingency fee. However, the Texas Center for Legal Ethics issued an opinion in August 2004 that is instructive on the issue.

In Opinion 553, the Texas Center for Legal Ethics considered the contingency fee arrangement of a property tax consulting company that assisted real property owners in protesting property tax assessments.[2] The consulting company’s services included presenting the protest and negotiating with the tax assessor to determine an appropriate tax assessment value. If an agreeable tax assessment could not be reached, the consulting company’s contract obligated it to assist the property owner’s lawyer with a lawsuit against the local tax assessor and to provide expert witness services. The consulting company was paid a contingency fee based on the achieved tax savings — 12 percent presuit and 50 percent if the consulting company assisted with litigation. The Texas Center for Legal Ethics determined that a lawyer’s use of the consulting company’s services as an expert witness was unethical due to the contingent fee agreement:

It is a violation of the Texas Disciplinary Rules of Professional Conduct [Rule 3.04] for a lawyer to use in a case as an expert witness an employee of a business entity that has a contingent fee interest in the outcome of the case.[3]

The fee arrangement described in Opinion 553 is no different than the arrangement sought by most public adjusters in Texas. They expect to be paid their contingent fee regardless of whether litigation is necessary. And they are willing to testify as either a fact witness or an expert in court to earn that fee. So, may a Texas attorney ethically present a public adjuster as a witness when the public adjuster is entitled to a contingent fee? While Texas courts have not opined on the issue, other jurisdictions have found that contingency fee arrangements for fact and expert witnesses are against public policy.[4] In such instances, it is not only unethical for the lawyer to use a public adjuster on a contingent fee as an expert or fact witness, but it could also serve as the basis for a malpractice claim. In Pennsylvania, for example, a court struck the expert testimony of a public adjuster who held a contingent interest in the property insurance claim at issue:

In the instant matter, the court finds the defendants’ attempt to segregate [the public adjuster’s] work as an expert witness from his work as a public adjuster “merely one of form.” It is also of no consequence that the public adjuster contract was entered into prior to the commencement of litigation. What does matter is that [the public adjuster’s] preparation of the expert report followed the commencement of litigation and, as the defendants admit, [the public adjuster] will be entitled under the contingent fee arrangement to a percentage of any damages awarded for their loss. The court cannot help but conclude, therefore, that the opinion rendered in the report is “so undermined as to be deprived of any substantial value”.[5]

The lawyer in this Pennsylvania case likely faced a difficult discussion with his client once the expert opinion on a key issue in the case was struck. Policyholder lawyers must be mindful of such consequences in considering whether to use a public adjuster as an expert witness or even a fact witness. It is unethical, and possibly malpractice, to ignore the ramifications of the public adjuster’s contingent fee.

Roofers Posing as Public Adjusters

Chip Merlin – August 28, 2013

The insurance claims industry has a quiet battle raging with the roofing restoration industry. Insurance companies dislike some roofers’ sales tactics involving assignments of rights, agreeing to absorb deductibles, scope and pricing. Insurance companies have accused some roofing contractors of outright fraud.

Public adjusters are not exactly enamored with some roofing contractors either. Last year, public adjuster Cal Spoon took me around the Dallas area and showed me billboards on which roofers promised to perform adjusting services for policyholders who suffered massive hail damages. He had evidence of more than 20 different advertisements that made such promises.

In Florida, three roofers were arrested and have been charged with posing as public adjusters:

Florida Chief Financial Officer Jeff Atwater announced today the arrests of Derek Shawn Kellogg, 31, Crawfordville; Corey Jermaine Brownlee, 30, Jacksonville; and Sean McCaslin, 49, Tallahassee; employees of Roofmasters, Inc., for acting as unlicensed public adjusters while soliciting homeowners for roof repairs in the Tallahassee area.

An investigation by the Department of Financial Services’ Division of Insurance Fraud revealed that Roofmasters, Inc., based in Jacksonville, used high-pressure sales tactics and informed homeowners they were “insurance specialists” and could assist them in dealing with their insurance companies. Company literature notes that homeowners may be entitled to a new roof with no out-of-pocket expense. Roofmasters, Inc. submitted an insurance claim on behalf of a homeowner, violating Florida law.

Kellogg, Brownlee and McCaslin were booked into Leon County Jail. If convicted, they each face up to 5 years in prison.

CFO Atwater encourages Floridians to Verify Before You Buy to ensure that the insurance adjuster, agent or company you are dealing with is licensed to transact business in Florida.

The criminal cases are still pending.

There are many qualified roofing companies and roofers who do not overstep the legal bounds of their profession. Though illegal in many states, numerous roofing websites claim to “represent” policyholders with regard to their insurance claims. An example is found in this website, which states in part:

“Why Choose Us? All of our staff is specially trained with storm damage claims and will provide you with the best representation possible.”

A good prosecutor may call that website Exhibit #1.

via Roofers Posing as Public Adjusters : Property Insurance Coverage Law Blog.