Adjusting to Change
Pending Florida legislation will change how public adjusters conduct business.
In 2004 and 2005, Florida was hammered by two of the worst hurricane seasons in recent memory.
Seven hurricanes struck the Sunshine State in just 14 months, causing loss of life and property damage in the tens of billions of dollars. Hurricanes Charley, Frances, Ivan and Jeanne from 2004; and Katrina, Rita and Wilma from the following year, will not soon be forgotten.
In the aftermath of these storms, it became clear that some members of the public had been taken advantage of by unscrupulous public adjusters. Florida citizens reportedly were subjected to a range of improper and unethical conduct, including adjusters operating without a license; others who abandoned claims; still others who charged excessive fees; and even adjusters who offered "commissions"--such as wide-screen televisions--to homeowners who hired them to challenge their insurers.
That is not to say that all, or even a large percentage, of public adjusters used these tactics. But enough did to catch the attention of Florida State Rep. Julio Robaina, R-Miami.
To combat these abuses, Robaina introduced House Bill 661 in January. A similar bill, SB 1098, was introduced in the Florida Senate the same month by Sen. Mike Fasano, R-New Port Richey.
These bills are designed to toughen the standards for public adjusters in Florida and to protect the public from the kinds of overreaching that occurred after the 2004 and 2005 hurricanes. They also will reduce the number of fraudulent claims submitted to insurers. Therefore, the bills could be a win-win proposition for the public as well as the insurance industry.
HB 661 proposes a range of measures to ensure that policyholders are treated fairly by public adjusters. The bill addresses solicitation and advertising; licensing requirements; right to cancel a public adjuster's contract; permissible fees; creation of a public adjuster apprenticeship program; continuing education requirements; nonresident public adjusters; and prevention of fraudulent claims.
At the heart of HB 661 is the desire to protect the public from unfair, abusive and/or overreaching tactics in the solicitation of business by public adjusters.
The bill includes a number of restrictions to combat such tactics, such as forbidding public adjusters from soliciting insureds or claimants between 9 p.m. and 8 a.m. The bill also imposes a 72-hour waiting period after the occurrence of an event that may be the subject of a claim during which a public adjuster may not solicit business either by phone or face-to-face, or enter into a contract with any insured or claimant. However, the insured or claimant is allowed to initiate contact.
The bill also prohibits public adjusters from giving incentives to prospective clients--defined as "any article or merchandise having a value in excess of $25 to any person for the purpose of advertising or as an inducement to entering into a contract with a public adjuster"--as well as giving or offering a loan or cash advance to a client or prospective client.
Florida law requires that public, independent and insurer-employed adjusters pass an examination to receive a license. However, different types of adjusters face distinct challenges and have differing loyalties. Therefore, the bill requires a newly created licensing exam for public adjusters, and a separate exam for licensure as an independent or insurer-employed adjuster.
The bill also requires that applicants have two years of specific, relevant experience; successfully complete accredited insurance courses; or have one year of employment as a public adjuster apprentice. It also tightens the requirements for reinstatement of a suspended or revoked adjuster's license.
Under present Florida law, the Department of Financial Services specifies the terms and conditions of public adjuster contracts, including the right to cancel. The department has promulgated rules with respect to the cancellation of such contracts, as follows:
"A public adjuster's contract with a client shall be revocable or cancellable by the insured or claimant, without penalty or obligation, for at least three business days after the contract is executed. The public adjuster shall disclose to the insured that the insured has the right to cancel with prompt notice within the revocation period. If the insured elects to cancel the contract, prompt notice shall be provided to the adjuster. Nothing in the provision shall be construed to prevent an insured from pursuing any civil remedy after the three-day cancellation period."
While HB 661 codifies certain aspects of this rule, it also clarifies the cancellation process and provides some additional leeway to the insured. For example, the bill (like the rule) contemplates a three-business-days time period for cancellation. However, unlike the rule, the time period in the bill begins to run from the date the contract is executed or the date on which the client has notified the insurer of the claim either by phone or in writing, whichever is later.
Additionally, while the rule merely states that "prompt notice" is required, HB 661 seeks to inject greater clarity into the process by requiring that notices of cancellation be submitted "in writing and sent by certified mail, return receipt requested, or other form of mailing that provides proof thereof."
Public adjusters' fees would be capped at no more than 15% of the claim payment for non-hurricane claims and no more than 10% for hurricane claims. They also would be prohibited from collecting any fees based upon claim payments for additional living expenses or claim payments made before the insured executed the public adjuster contract.
Robaina has taken a cue from Donald Trump that an apprentice program provides the aspiring public adjuster, as well as the aspiring chief executive officer, with hands-on experience.
The proposed legislation therefore creates a public adjuster apprenticeship program. A one-year apprenticeship would enable the applicant to qualify as a public adjuster, assuming he or she has met all of the other applicable requirements, including passage of the written exam.
While HB 661 does not add additional hours to the current continuing education requirements, it adds greater specificity to the types of courses a public adjuster must take to meet the requirements.
The current law broadly requires public adjusters to take courses in subjects "designed to inform the licensee regarding the current laws of this state pertaining to all lines of insurance other than life and annuities."
The proposed legislation states that the courses also should address "the duties and responsibilities of public adjusters as set forth in this part" and "the current rules of the department which are applicable to public adjusters and standard or representative policy forms used by insurers, other than forms for life insurance and annuities."
This change is in keeping with the overall purpose of the bill to increase the competence of public adjusters and to ensure that they adhere to applicable law.
Targeting Fraudulent Claims
HB 661 mandates that a fraud warning be included on the first page of all public adjuster service contracts. The required warning is as follows: "Any person who knowingly and with intent to injure, defraud, or deceive any insurer files a statement of claim or proof of loss containing any false, incomplete, or misleading information is guilty of a felony of the third degree."
Additionally, the bill mandates that when a policy requires that the insured submit a proof of loss containing an estimate of the costs to repair or replace damaged property, a public adjuster under contract to adjust the claim must affirm the proof of loss.
The required affirmation is as follows: "I,..., do solemnly, sincerely and truly declare and affirm that I have reviewed the estimate of the cost of repair or replacement of damaged property as set forth in this proof of loss and that in my best judgment the estimated costs are reasonable and, to the best of my knowledge, the proof of loss does not contain any false, incomplete, or misleading information."
If this statement is not printed on the proof of loss form, the bill requires the adjuster to add the statement to the form or attach a separate page containing the signed statement.
HB 661 further guards against fraudulent claims by stating that "[A] person commits a felony if that person, with the intent to injure, defraud, or deceive any insurer, prepares, presents or causes to be presented a proof of loss in support of a claim under an insurance policy knowing that the proof of loss contains any false, incomplete, or misleading information concerning any fact or thing material to the claim."
While a fraudulent insurance claim has always been a crime (albeit one infrequently prosecuted), it remains to be seen whether the "fraud warning" and public adjuster affirmation requirements will have a therapeutic effect in further reducing the incidence of fraudulent claims--including those that are grossly exaggerated.
HB 661 continues to wind its way through the corridors of power in Tallahassee. Presently it is being considered for action by the House Jobs & Entrepreneurship Council.
By Philip C. Silverberg and Ira S. Bergman
(Contributors: Philip C. Silverberg is a partner with the law firm of Mound Cotton Wollan & Greengrass in New York City and a member of the firm's Executive Committee. Ira S. Bergman is the managing partner of Mound Cotton's Fort Lauderdale, Fla. office. They may be reached at email@example.com and firstname.lastname@example.org.)