When property damage occurs, an insurance policyholder is entitled to hire an unbiased, licensed public adjuster to review and assess and provide a fair evaluation of the damage. Unfortunately, sometimes persons not licensed as an adjuster attempt to pass themselves off as licensed adjusters. Using an unlicensed adjuster places the policyholder’s claim at risk. While these instances are widely known as the unauthorized practice of public adjusting (UPPA), many wonder if the concept can apply to licensed insurance agents as well.
The Unauthorized Practice of Public Adjusting
The unauthorized practice of public adjusting (UPPA) refers to instances where someone other than a licensed claims adjuster works with a policyholder to settle a property insurance claim. Over the last several years, there has been an increase in UPPA activity by contractors who choose to act as and perform adjusting tasks that they are not licensed or trained to perform.
This is important because UPPA presents great risks to unsuspecting policyholders, and can adversely affect those who are properly licensed and ethical members of the public adjusting profession.
In most cases, there are three different types of adjusters, including:
Company adjusters: Those employed by a single property insurance carrier.
Independent adjusters: Those who work on the behalf of insurance carriers, but are not employed by a single carrier.
Public adjusters: Those who are licensed to work on behalf of the insured in a first-party property claim.
Licensed public adjusters in Texas are issued an adjuster license from the Texas Department of Insurance (TDI). In order to receive this credential, applicants must pass the adjuster-licensing exam, submit their fingerprints, undergo a background check, and submit an application, a $10,000 public adjuster bond, and any requested additional documentation to the TDI.
Licensed public adjusters must not have an affiliation with an insurance company and must work solely for the benefit of the insured on an unbiased and independent basis. Those who are unlicensed or unauthorized contractors and claims adjusters do not have the necessary credentials needed to handle a property damage claim on behalf of the insured. Accountants, restoration companies, contractors, roofers, and other tradesmen are all typically among those who practice unlicensed adjusting.
UPPA and Licensed Insurance Agents
While it is clear as to what makes someone a licensed insurance public adjuster as opposed to an unlicensed one under UPPA, many have wondered whether UPPA regulations apply to licensed insurance agents. Simply put, a licensed insurance agent is not the same as a licensed insurance adjuster because the insurance agent – at the core – is a representative of the insurance company itself.
A licensed insurance agent has the authority to sell potential policyholder’s insurance. Insurance agents are licensed by the state of Texas and are employed by an insurance company to sell policies on their behalf. The insurance agent is the first point of contact for questions about a policy or if a claim needs to be filed for property damage.
An insurance adjuster is someone who has a license for insurance adjusting that allows them to properly investigate, analyze, and determine the liability of the insurance company for a property damage claim. The responsibility of the public adjuster is to help settle claims on behalf of the policyholder, not the insurance company.
Because public adjusters should have no affiliation with an insurance company and work solely for the benefit of the insured on an independent basis, licensed insurance agents have a conflict of interest when it comes to evaluating a claim. Therefore, a licensed insurance agent acting as a public insurance adjuster would fall under the rules and regulations of UPPA.
Under the Texas Penal Code, the following actions by licensed insurance adjusters are unauthorized:
Interpreting insurance contracts
Discussing or negotiating coverage matters with insurance companies
Engaging in a course of conduct that encourages litigation and the prosecution of claims
Determining liability, the extent of legally compensable damages, and a claimant’s legal rights and privileges
Advising a claimant to accept a settlement under some circumstance
Public Adjusters and Contingency Fees
While there are many ways public adjusters can be paid, the most popular method is via a contingency fee. According to the Texas Association of Private Insurance Adjusters (TAPIA), this fee is determined based on a percentage of the final claim settlement. In Texas, this fee is capped at ten percent of the claim. However, these fees are negotiable and usually based on the size, location, and complexity of the property loss. While some public adjusters may charge flat or hourly rates, the total fee may not exceed 10% of the settlement the policyholder receives from the insurance company in Texas.
To further combat conflicts of interest when it comes to the payment of the adjuster, the Texas Insurance Code has placed additional limits on what compensation public adjusters can receive. For instance, public adjusters cannot accept a referral fee, commission, or any other valuable consideration of any nature in exchange for the referral of the adjuster by the policyholder to any third party. This includes attorneys, appraisers, umpires, contractors, etc.
Insurance Recovery Attorneys
At Raizner Law, our insurance recovery attorneys will examine your claim and advise you on the best way to proceed. Put our experience and national reputation to work for you. If you need assistance with an ongoing claim or have questions about your commercial property policy, contact our office today to speak with an experienced insurance attorney.