It’s hardly a secret the insurance industry would prefer having no Public Adjusters (PA’s) or certainly, having far fewer of them. Despite disappointment by some about this years’ bill (SB-408) with respect to PA’s generally, I think there’ll be cause to pop some bubbly in the not-too-distant future.
Dissenters, or rather; those who wished lawmakers had done more to directly curtail the practice of public adjusting, often refer to states like Alabama where it’s a crime. Or, Louisiana; where percentage fee’s by PA’s are statutorily forbidden.
Policyholders for one Florida carrier, organized as a mutual, have voted to disallow themselves from using public adjusters. Other carriers, non-mutual’s, would like lawmakers to do for them what they cannot do for themselves; like in Alabama. But, Florida has already crossed the line. PA’s aren’t permitted in Alabama because it doesn’t require “any” adjusters to be licensed. They rely on lawyers or those hired by insurers, that’s it. Public adjusting, therefore, is the unlawful practice of law without a license. Read more by control/clicking here.
The criticism is usually directed only at SB-408’s direct references to public adjusting; such as: placing additional restrictions on unsavory advertising practices, additional requirements for their fee contracts and more responsibilities in their dealings with carriers after a claim. Good changes, but…to those who wanted barricades these are mere speed bumps.
However, it’s the indirect impact on public adjusting in SB-408 that will have doubters singing “Sweet Home Alabama”. They are:
1) Filing Deadlines
a) Statute of Limitations (SOL)–runs from the date of loss rather than the date of breach (when carrier denies or makes offer) and substantially reduces the number of available claims.
b) Claims Filing Deadline–limits time for filing “wind” claims to three years after the event and thus the number of potential claims available to PA’s.
2) RCV Holdback–without the ability to receive cash instead of repairing damage there’s no money to pay a public adjuster.
3) Sinkhole Holdback & Other Sinkhole Changes–similar to RCV holdback; no money to pay the public adjuster if repairs must be performed.
a) Reopened/Supplemental Claims–PA payment clarified to be limited to 20%.
b) Citizens–limits PA compensation for Citizens claims to 10% of the difference between the amount paid and the amount originally offered vs. the full amount paid.
c) FIGA–claims from an insolvent carrier will not include either attorney or public adjuster fee’s and cannot exceed the face amount of the policy for sinkholes.
5) Inspection Programs–specifically authorizes inspections and when approved by OIR allows carriers to decline to provide sinkhole coverage when there’s pre-existing damage.
6) Citizens Glide Path Exemption for Sinkholes–the price of buying sinkhole coverage in Citizens will not be limited to the glide path increase of 10% annually.
7) Citizens Sinkhole Definition–sinkholes in Citizens will no longer include driveways, patios, sidewalks, etc.
Let’s talk perspective.
Of these, reinstating the holdback provision for RCV claims dominates, in my opinion. Without a cash-up-front arrangement for the claimant, there is not only less incentive to file false, inflated or frivolous property claims, there’s also no money to pay a Public Adjuster. The difference this will make in the number of PA’s could be huge, in part because the definition of “building” also includes roofs and tile floors.
If the ability to “holdback” also applies to sinkhole claims via the separate provision requiring policyholders to repair damage according to the carrier’s expert recommendation, then the handful of PA firms responsible for the majority of sinkhole claims will have to seek another cottage for their industry. Few homeowners, I figure, will file frivolous sinkhole claims without the ability to pay off their mortgage or buy a new home with the cash. And, thus…fewer individuals will seek to become public adjusters.
Of course, with so much at stake court challenges are assured and depending on the issue and the specific outcome, the full potential might be hamstrung, even entirely muted. But, there’s more.
Number 4b. above, limiting Citizens compensation, is viewed with disdain among the PA community, in part, because Citizens has been such fertile ground. Don’t discount its value. Since the SOL on Wilma claims expired last November, and since most carrier’s don’t write policies in sinkhole alley or provide sinkhole activity coverage without an inspection, Citizens has been the go-to market, for consumers and thus, for public adjusters. Over 250,000 policies are in Citizens from sinkhole alley. Only 22% actually purchase sinkhole activity coverage and are suspected of doing so in anticipation of filing a sinkhole claim. And, currently, Citizens has no sinkhole inspection program to keep from providing coverage in even the most obvious cases with pre-existing damage.
The point is that Citizens may not need an inspection program, “if” PA’s have no funds to be paid due to the claim dollar being spent on repairs, and “if” PA’s can only be paid on the difference between what was offered and what was finally accepted, and “if” new language excluding driveways, sidewalks, and patios from sinkhole damage (#7 above) isn’t repealed by the courts.
Then there’s the biggie. As mentioned, only one in five (22%) of Citizens policyholders buy sinkhole activity coverage today. But, what happens when # 6 above takes effect? Since the rate for such coverage will “no longer be limited by the glide path cap of 10%”, Citizens sinkhole premium could rise by 500% or more.
Only time will tell, but…do you see why I say that those who want to do away with PA’s may find cause to pop some bubbly…someday?
MEASURING POINT–My very first “grown-up” job was at the OIR (then the DOI) in 1972. I was in charge(?) of licensing and qualifying adjusters, which included twelve (12) public adjusters. At their height, after the 2004/2005 storms there were nearly 3,000 PA’s, 89% of which were in southeast Florida. Due mostly to competitive saturation, the expiration of the Statute of Limitations on Wilma claims and perhaps a few other reasons; there are exactly 1888 Public Adjusters today.
Check back for updates on this number.