A personal note: for those thinking I don’t like public adjusters, don’t even go there. It’s neither relevant or true. I have friends who are public adjusters. They are honest, hardworking professionals. They agree with me on this. As do many I do not know.
So, why ask this question now? Why not some other time?
Frankly, now is the perfect time to ask if PA’s charge too much, for two reasons:
- During the 12 months following Hurricane Irma they performed essentially the same work for half of what they charge for non-catastrophe claims. There is a statutory cap on PA contingency fees of 10% for disaster related claims. But, not for everyday claims where the cap is twice as high causing some consumers to forfeit 20% of their claim payment. (See Note #1 below)
- Lawmakers will soon be in Tallahassee and will spend important time addressing insurance issues, (possibly including those that might emerge from Tropical Storm Gordon). Shouldn’t they also look at ways to lower consumer claim costs for non-catastrophe claims by reducing Florida’s PA fee cap, which is the highest in America?
A public adjuster friend of mine, with whom I also have a business relationship, said this:
“…10 or 15 % is more than enough to compensate our services if the Public Adjuster is prepared and efficiently trained to do his/her job…When a claim occurs, policyholders are the victims of that event and they are too often victimized again by non-well-trained PA’s charging the maximum permitted fees…That’s why after the deductible and public adjuster fees they don’t have enough to pay for the damages…”
Again, I didn’t say that. A public adjuster did.
There are two issues here. One is fraud, and whether or not the higher contingency percentage of 20% is an incentive to inflate or create losses. The other is whether PA’s can make a reasonable profit, as my friend believes, charging less than the current 20% cap.
First, the issue of fraud. The question is whether Florida’s 20% cap motivates “some” PA’s to either inflate or create losses to increase their dollar take. Included in this would also be the desire to keep a policyholder from paying out-of-pocket to rebuild while still taking as much of their claim payment as the law permits.
I’m sure you’ve already figured where I stand on this. But, you may be surprised to learn what many public adjusters think.
For example. In public testimony by the National Association of Public Insurance Adjusters (NAPIA) during hearings on super storm Sandy we learned that a 20% fee is not only an incentive to inflate losses but, it’s an incentive to “…create losses where none otherwise existed.”
Again, I didn’t say that.
It was taken from testimony by Jonathan Wilkofsky who, at the time, represented NAPIA, the largest and most respected association of public adjusters in the country. He was arguing for a 12.5% cap across the board in opposition to NJ Assembly bill, SB-2472 that allowed something higher for non-cat losses. He said 12.5% “works well in other states like New York”.
It’s important that you believe me on this so, several years ago I annotated a recording of his presentation to the New Jersey legislature on Assembly Bill 359. Please, it’s important–listen to his testimony, here.
Also, in its’ letter to the New Jersey Assembly, NAPIA General Counsel, Brian Goodman, states “We are in complete agreement and support…” of the 12.5% cap. (p.2 of the NAPIA letter)
QUESTION: if this is all true (and it is) why does Florida allow an additional five percentage points to be charged and subtracted from the consumers’ pocket when representatives of those receiving the money believe that 20% is an incentive for fraud?
Anyway, for now let’s forget about the fraud argument and look at whether PA’s are able and/or willing to take less than 20% from the consumers pocket.
A number of years back, the founder of FAPIA (Florida Association of Public Insurance Adjusters), trial lawyer, Chip Merlin, wrote a blog titled: “Do Some Public Adjusters Charge Too Much?”. His article included a paragraph about him asking that question during a public forum. Two very reputable and experienced public adjusters, Chris Aldrich and Mike Miller answered and, according to Merlin, “both said ten percent and that the figure could be negotiable depending on the size of the claim.” I assumed “negotiable” meant less than 10% as the claim gets larger.
Another PA, Larry Bathgate, also indicated “… that most of his clients signed up with public adjusters between 5-10% of a loss recovery.” (See Note #2 below)
Amy Bach, Executive Director of one of the most prominent insurance consumer groups in America, United Policyholders (UP), said that most “reputable” public adjusters would sign up clients for 10% of the claim settlement.
A number of years ago I found numerous references to PA fees on the internet. A recent check shows some of the sites are no longer operable, but…fortunately I had already excerpted the language and the addresses. For example:
Publicadjusters.com stated public adjusters receive “typically 10% to 12.5% or more of the insurance claim settlement depending on the size of the claim…Public adjusters and clients are free to negotiate contingency fees less than the standard 10% to 12.5% contingent fee arrangements on vary large claims.”
According to Insurancequotes.com as posted by Merlin Law Group as written by Gina Roberts-Grey “The fee normally ranges from 10 percent to 15 percent of your claim payout.”
On a website for Real Estate Investors and Property Managers called “Ins and Outs” George Skidis a “licensed and bonded” public adjuster said “Many Public Adjusters charge 10% of the total loss as their fee for this service.”
After a declared catastrophe in Oklahoma, Insurance Commissioner, John D. Doak issued a bulletin advising all PA’s to not charge more than 10 percent of the total claim settlement. After Florida’s storms in 2004 and 2005, Florida’s OIR did the same thing.
And, it goes on and on and on! Ten percent here, ten percent there. It is the “average”, the “norm”, the “cap”, the most used percentage.
While not specifically due to allegations of fraudulent claim inflation, a number of years ago, a Florida legislative proposal reduced the 20% fee cap to 15% as part of HB-743. The provision was amended out of the bill but, both NAPIA and CPCPI (Council for Property Claim Professionals, Inc.), a Florida based PA organization, confirmed to me they supported the reduction. (See Note#3 below)
So let’s summarize. According to some public adjusters a fee cap of 20% is an incentive for fraud. According to some public adjusters they can operate profitably with a fee cap of 12.5%, even less.
And, so… this article ends with the question Chip Merlin asked in 2013: “Do Some Public Adjusters Charge Too Much?”
My answer: Yes!
My question: What, if anything, will lawmakers do about it in 2019?
NOTE #1: On September 10, 2017, Irma made landfall as a Category 4 storm in the Florida Keys, near Cudjoe Key, with 130-mph winds. A storm surge of over 10 feet was recorded in parts of the Keys. A second landfall then took place a few hours later on Marco Island as a Category 3 storm with 115 mph winds. The application of the 10% fee cap begins on the day the Governor declares an emergency and extends until one year after that. It applies only to claims that are for losses from the declared emergency. See Fs. 626.854(10)
NOTE #2: One of the New Jersey audience members said he contracted with an out-of-state public insurance adjuster for 23.5%. This followed an earlier discussion about a public adjuster who was charging a 50% fee, although noting the fee was only for additional amounts over the amount previously paid. Merlin wondered how the claim could be financially litigated if the fee was that high. Merlin also stated that some public adjusters were charging from 15% to 33 1/3% following Superstorm Sandy. Amounts such as these, I believe, are exactly why fee caps have been implemented in 14 states, including Florida.
NOTE #3: Based on my research, only FAPIA (the Florida Association of Public Insurance Adjusters) and AAPIA (the American Association of Insurance Adjusters) opposed the reduction in Florida’s PA fee cap to 15%. See AAPIA’s letter. See FAPIA letter in which it blames the provision to reduce the fee cap on the insurance industry trying to increase profits. The FAPIA letter also states, in direct opposition to the facts of this blog, including the testimony and letters from NAPIA, that “There is no evidence that public adjuster fees are too high”.
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