Public adjusters provide valuable services to insurance policyholders in their time of need. These licensed individuals take the time to review, assess, and provide a fair evaluation of property damage for policyholders to settle an insurance claim fairly with their insurer. In some cases, however, a person may attempt to pass themselves off as a licensed adjuster, when in fact they are not qualified to do so. These cases are widely known in the industry as the unauthorized practice of public adjusting (UPPA) and can put valid commercial policyholder insurance claims at great risk. In certain cases, the same may be applied to licensed insurance agents who may attempt to pass themselves off as public adjusters to take advantage of claimants. Understanding how the unauthorized practice of public adjusting can apply to licensed insurance agents can help commercial policyholders be better informed should they need to file a claim for property damage.
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:
Company adjusters: Those employed by a single property insurance carrier.
Independent adjusters: Those who work on 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 by the Texas Department of Insurance (TDI). To receive this credential, applicants must pass the adjuster licensing exam, submit their fingerprints, undergo a background check, 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.
Licensed Insurance Agents and the UPPA
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 policyholders insurance. Insurance agents are licensed by the state of Texas and are employed by an insurance company to sell policies on its 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 in some circumstances
Working with a Licensed Public Insurance Adjuster
Dealing with property damage of any type can be particularly devastating for business owners. Not only can the insurance claims process be incredibly daunting, but costs can quickly ramp up if the business is left inoperable for some time – making the need for a claims settlement very important.
As with most commercial property damage claims, the business’s insurer will hire an adjuster to investigate the claim. However, it’s important to always remember that these individuals work for the insurance company to settle the claim quickly and save money for the insurer. In these cases, policyholders are well within their rights to hire a public adjuster to act in their interests and help maximize the commercial claim value, and to help recover what is rightfully owed under the policy.
Some of the ways public insurance adjusters help commercial policyholders include:
Understanding policy language: Commercial properties typically have what is referred to as manuscript policies that include endorsements structured based on their unique needs. These policies can be more complex compared to a standard homeowners insurance policy. Commercial public adjusters often have a good understanding of the nuances in these policies and are familiar with industry jargon the policyholder may not be. This makes having a public adjuster incredibly valuable, as they may catch certain policy stipulations the insured may have not.
Looking after the policyholder’s best interests: If a business suffers damage caused by a covered event, the insurance company will appoint an insurance adjuster to handle the claim. These adjusters are different in that they are paid by the insurer to look after its interests. Hiring a licensed commercial public adjuster can help to level the playing field for policyholders by helping to ensure the claim is fairly processed.
Saving business owners time: Owning and operating a business is no small feat, making it devastating when unanticipated property damage occurs. When these unfortunate events happen, owners not only have to deal with the continued day-to-day tasks of running the business, but they must also file an insurance claim and ensure their employees are properly taken care of. These tasks on their own are quite time-consuming. While company owners can potentially manage all of the work that comes with the insurance claims process, it will likely come at the expense of something that is just as important. Licensed public adjusters know the ins and outs of the commercial claims process and having one can save business owners quite a bit of time, allowing them to focus on the business and staff.
Helping negotiate the best possible settlement: Insurance companies are known to often make lowball or bad settlement offers to business owners. A commercial public adjuster can help in the negotiation process by offering an unbiased investigation of the damage to help ensure the policyholder’s claim is represented as fairly as possible to get the best potential settlement offer they are entitled to under the policy.
Adjuster 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 10% 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 paying an 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.
Commercial Insurance Claims Attorneys
The use of the UPPA by insurance companies as a means to thwart the claims system for their own interests is nothing new; however, unsuspecting commercial policyholders can easily be taken advantage of by these and other tactics employed by insurers. While hiring a public adjuster to act in your corner can be a great help, it is often in the best interests of the policyholder to also consider hiring a commercial insurance claims attorney.
At Raizner Slania, our insurance claims attorneys have the experience and national reputation necessary to help you. Our legal team is well-versed in the variety of ways insurance companies attempt to take advantage of policyholders and will take the time needed to thoroughly examine your claim to find the best way to proceed. If you need assistance with an ongoing commercial property claim or have questions about your policy, we can help.