Now that an unprecedented package of tort reform has finally moved through the legislature and is on its way to the Governor, another piece of equally important reform has just begun its trek. SB-1398 and its’ House companion HB-1185 (by Rep. Giallombardo) are consumer protection initiatives from the CFO’s office—the varied subject matter thankfully includes Public Adjusters (PA’s).
You may remember my recent articles on last December’s Special Session. One of them, AOB, Attorney Fees & Bad Public Adjusters, referenced a report that within days of Hurricane Ian’s landfall perhaps 50 PA firms descended, moving door-to-door through devastated neighborhoods soliciting signatures to lock traumatized victims into their contingency contracts.
After inspecting the stricken areas Florida CFO Jimmy Patronis confirmed “… there are bad public adjusters swarming impacted areas, soliciting, and trying to make a quick buck. They are promising to help while betraying the trust of people who have lost everything.”
That CFO Patronis so quickly lasered on the problem is commendable. To learn how he plans to solve it watch the recent House Banking & Insurance Subcommittee meeting—it covers both his plan and what a score of PA’s don’t like about his plan, beginning at the 9:35 mark here.
The following highlights of his proposal (which passed unanimously) affirm Florida’s CFO is trying to get at the “bad guys” who took advantage after Ian and other storms. For exact wording see Committee Substitute for HB-1185 beginning with Section 9 on line 352.
Attorney Loss Consultants—The bill partially addresses the problem of so-called attorney “loss consultants” that perform services identical to that of a PA but without a PA license. It clarifies that the attorney adjusting exemption does not apply to “…employees, interns, volunteers, or contractors…” of any attorney or firm.
PA’s & 3rd parties—The bill prohibits a PA from contracting with 3rd parties (such as water firms or build back contractors) unless the homeowner client provides written consent. If done without consent, the 3rd party invoice is paid out of the public adjusters’ fee.
PA Contract Cancellations–A major problem after both Hurricanes Michael and Ian was PA’s signing up policyholders then taking weeks, sometimes months, to begin work. The CFO’s bill provides that after a declared emergency policyholders have 30 days to cancel their contracts, without penalty or obligation. The contract must state this fact and also state it can be cancelled if the PA fails to provide a copy of an “unaltered ” written estimate within 45 days of signing. (See NOTE #3 below)
Paying the Policy Limits–Under the bill if no later than 14 days after the loss is reported the insurer pays, or commits in writing to pay, the policy limits, the PA must inform the insured that such payment might not be increased and that the PA is entitled only to reasonable compensation for time and expenses incurred.
Contingency Fee Calculations-Under the bill if a public adjuster has a contract effective after the insured receives an insurers offer and the PA increases the insurers offer, the PA’s percentage is calculated on the difference between the original offer and the final payment, not the total claim payment.
Claim Payments–When a claim is settled while the insured is represented by a public adjuster, the insurer must pay via check(s) and must issue one check to the public adjuster and another for the balance made payable to the insured.
Miscellaneous Policyholder Benefits–The bill changes and/or creates other requirements for PA contracts that should be helpful in expediting the claims process, lowering fraud and protecting the policyholder (See NOTE #1 below)
During the committee hearing a number of PA’s offered amendments they’d like to see in the CFO’s bill, none of which would be helpful to consumers in my opinion. However, it brought to mind a few amendments that I believe would be helpful and should be considered instead:
- In the opinion of many, there is no need for “non-resident” public adjusters. The license (Fs. 626.8582) should be eliminated and PA’s from other states should be prohibited from practicing in Florida… whether there’s a hurricane or not. Frankly, this might be the first of my idea’s that Florida’s 1400 or so resident PA’s might like. I’ve spoken to no one that opposes the idea of eliminating non-resident PA’s.
- Along with many others I believe it is bad public policy to pay Public Adjusters based on a percentage of a claim payment. According to testimony of those who represent Public Adjusters a percentage of, say… 20% (Florida’s non-catastrophe cap) is an inducement to illegally inflate the claim or to “create a claim where one otherwise did not exist.” The law should be changed to require that PA’s charge a reasonable hourly rate (cat & non-cat) and let competition determine how much that rate is. (See Note #2 below)
Me dos centavos.
Note #1: Other PA contract requirements follow. Any public adjuster contract that does not comply with these requirements is invalid and unenforceable. For exact wording see Committee Substitute for HB-1185 beginning with Section 9 on line 352.
- The contract must be titled “Public Adjuster Contract” in at least 12-point font.
- The anti-fraud statement required in the contract must be in at least 18-point bold font and placed in the space above the insured or claimant’s signature.
- A copy of the executed contract must be provided to the insured or claimant at the time of execution and to the insurer within three days thereafter.
- The public adjuster shall not provide services until both the insured and insurer have been provided with unaltered copies of the executed contract.
Before signing the contract, the public adjuster must provide the insured with a separate disclosure that the insured must sign that does the following:
- Defines the types of adjusters who may be involved in the claims process, including company adjuster, independent adjuster, and public adjuster.
- Explains that the public adjuster is not a representative or employee of the insurer. o Explains that the insured is not required to hire a public adjuster.
- Explains that the insured has the right to communicate directly with the insured’s attorney, the insurer, the company adjuster, the insurer’s attorney, or any person regarding the settlement of the claim.
- Explains that public adjuster’s salary, fee, commission, or other consideration to be paid to the public adjuster is the insured’s responsibility.
Note #2: When I researched PA laws in other states a few years ago I found 14 states had fee caps for PA’s. Florida’s 20% cap was (and is) among the highest. At the time Alabama did not allow Public Adjusting as it was considered to be the unlicensed practice of law. Also at the time, Louisiana prohibited PA’s from charging a percentage of the claim. Listen to legislative testimony from Public Adjuster representatives (NAPIA and NJPIA) regarding fraud incentives from contingency fees here.
Note #3: According to a Citizens study and a report by the Office of Program Policy Analysis & Government Accountability (OPAGGA)… “As shown in the exhibit, when public adjusters represented policyholders, claims processing typically took between 132 to 296 days longer than claims without public adjuster representation.” See page 6 “Citizens claims with public adjuster involvement took longer to close.”
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