
After a natural disaster or covered event impacts a commercial property owner, they have the right to hire a public adjuster to represent their interests should a claims dispute arise with their insurance provider. These public adjusters must be certified, licensed, bonded, and adequately trained to serve as exclusive representatives for the policyholder. Despite this, many insureds can be victims of scams that cheat responsible policyholders out of their money. One such tactic is known as the unauthorized practice of public adjusting (UPPA), a serious problem that harms insurance consumers.
The Unauthorized Practice of Public Adjusting
The Unauthorized Practice of Public Adjusting (UPPA), occurs when an unlicensed individual attempts to act as a public adjuster with a policyholder to settle a property insurance claim. Most states, including Texas, have strict laws governing how public adjusters can operate. This often requires the passing of an exam to receive a license to practice, as well as participating in continuing education in some situations. It is a strict certification process designed to protect commercial and residential policyholders from being taken advantage of. When some individuals actively avoid these requirements and act as licensed adjusters, they are engaging in UPPA practices.
These actions are especially common in states prone to natural disasters, like Texas. Texas is particularly vulnerable to instances of UPPA because of the number of severe weather incidents occurring every year. Home and business owners may fall victim to these scams after a devastating hurricane, tornado, flooding, or hailstorm.
Typically, after a natural disaster damages a business, owners may be approached by contractors known to “storm chase” unsuspecting, vulnerable policyholders. These can include roofers, tradespeople, restoration companies, and others. These individuals may offer to manage your claim and act as a public adjuster when they have no qualifications to do so.
In 2019, the Texas House passed an expanded prohibition against UPPA via HB2103, which went into effect on September 1, 2019. These laws prohibit anyone in the state from practicing public adjusting or advertising themselves as a public adjuster unless they meet certain requirements for licensure under the Texas Insurance Code. These include:
- Providing services for compensation on a claim for payment of property damage;
- Receiving fees for services rendered in connection with an insurance claim; and/or
- Representing himself or herself as being able to provide services that constitute adjusting insurance claims.
Official public adjuster licensing is accepted in almost every state and is even recognized in the Model Legislation of the National Association of Insurance Commissioners. Public adjusters should have no affiliation with an insurance company and work solely for the benefit of the insured on an independent basis. This prevents any conflict of interest, which can occur when an adjuster tries to negotiate on behalf of both sides. Adjusters must pick between the insurance company and the policy holder, and advocate for that side only.
Exemptions to UPPA Laws
While there are strict laws prohibiting UPPA actions, there are certain exemptions commercial policyholders should be aware of. For instance, the UPPA does not apply to anyone who is employed by a licensed public adjuster or by a licensed insurance company. However, if the employer is not authorized to hire someone as an adjuster, then they are still subject to prosecution under the UPPA.
Another exemption exists when an individual provides property damage services on behalf of another person who is not prohibited from engaging in public adjusting activities and plans on providing repair estimates only and not in verifying loss or offering settlement advice. For example, legal counsel can also adjust claims without holding an additional license as long as they do not engage in any activities that require licensing from both professions at once.
How UPPA Laws Can be Violated
By law, public adjusters are the only professionals other than hired legal counsel who are allowed to manage certain aspects of property damage insurance claims in most states. The actions these licensed individuals can make include:
- Manage a residential or commercial property insurance claim for a policyholder
- Interpret a policyholder’s insurance policy to help them better understand the legally binding terms with their insurance provider
- Adjust, negotiate, and settle property damage claims
If an individual presents themselves as a licensed public insurance adjuster but is not, they cannot:
- Investigate, appraise, evaluate, or advocate on behalf of a claimant when adjusting a claim
- Prepare the insurance claim for a claimant
- Negotiate the claim with the insurer on the policyholder’s behalf
- Review and/or advise the policyholder on the terms of their policy
- Advertise that they can serve as a claims adjuster
How UPPA Impacts Policyholders
Oftentimes, individuals may pretend to be public adjusters for personal profit. Malicious actors could approach vulnerable policyholders after a devastating natural disaster and offer to manage their claim for them. In some cases, they may even go as far as to offer to pay the property owner’s deductible or give them a cut of the insurance claim payout. In reality, they are more likely to perform low-quality repairs on the business, charge the insurer full price for the repairs, and pocket the difference for themselves. Some may simply take the insurance payout and cut off contact with the insured, effectively stealing money from both the insurance company and the policyholder alike.
When this happens, the insurance company may choose to raise rates to compensate for the loss. This leaves policyholders responsible for paying the higher rates via increased premiums and deductibles. In some situations, the insurer may reduce the coverage options for the impacted policyholder, leaving them much worse off than they were before working with an unlicensed individual.
Commercial Property Insurance Claim Attorneys
Whether you live in Texas or elsewhere in the nation, our Texas-based 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. Reach out to speak with an experienced commercial property insurance claim lawyer today.