Speaking of Public Adjusters and the contribution too many of them make to Florida’s property insurance fraud problem, a recent petition delivered to the Department of Financial Services (DFS) may be instructive for those of us paying the highest homeowner premiums in America.
On July 19 DFS received a Petition for Declaratory Statement from Universal Property & Casualty Insurance Company. Basically it asks DFS to opine on whether family relationships some PA’s have with remediation contractors are in violation of Florida Law, specifically portions of Fs-626.8795 Public adjusters; prohibition of conflict of interest; which reads as follows:
A public adjuster may not participate, directly or indirectly, in the reconstruction, repair, or restoration of damaged property that is the subject of a claim adjusted by the licensee; may not engage in any other activities that may be reasonably construed as a conflict of interest, including soliciting or accepting any remuneration from, of any kind or nature, directly or indirectly; and may not have a financial interest in any salvage, repair, or any other business entity that obtains business in connection with any claim that the public adjuster has a contract or an agreement to adjust. [emphasis added]
In its’ petition Universal describes what’s going on:
“A company that provides water mitigation services expands the scope of area damaged by the loss reported citing the need for remediation. These actions include drilling into walls & kitchen cabinets; removal of wood and tile baseboards; removal of walls; and removal of flooring even though the areas were not involved in the loss being reported or exhibiting any actual damages. In certain claims the same mitigation company is also the company used to trench floors even though they did not hold the license to perform the service.
All of this is performed before the claim is even reported to the insurance carrier and subsequently prejudices the ability to determine if a loss occurred or that damages were sustained. In these claims the only supporting evidence that a policyholder presents in support of the loss is the records prepared by the mitigation company which also has a direct relationship with the public adjuster they have contracted. In many incidences my investigation has discovered that the policyholder had no knowledge of the relationship until they had been advised by me. Furthermore, in many incidences we have discovered through the policyholder that the water mitigation company is brought into the claim by the public adjuster themselves or a public adjuster from their public adjusting company they own.
The actions detailed above involves 100’s if not 1,000’s of homeowners throughout the State of Florida.”
The statutory prohibition (and thus the petition), is more consequential when you ponder facts stated in the petition. Universal cites three PA’s that, as either mother or wife, have a familial relationship with the entity or person responsible for repairing or reconstructing many of the properties upon which the PA has an adjustment contract. In fact, the petition states the PA hired their family members’ water firm, 45 out of 47 times in one case, 373 out of 393 times in another and for 100% of the claims (243 out of 243 claims) in yet another example. For just this one carrier!
In my opinion this goes to the heart of Fs-626.8795 as the title purposes it to be a “Prohibition of conflict of interest.” My recollection is the law was intended to keep PA’s from choosing vendors for reasons other than competency, competitive pricing and the like. Lawmakers were trying to remove some incentive (or ability) to inflate repair costs as a means to inflate the PA’s percentage-based contingency payment.
Of course I’m not a lawyer. I do speak English though, and even assuming no communication whatsoever by the PA as a parent or spouse of a remediator, the question is also: does the familial relationship constitute a violation of a statute that states the PA “may not engage in any other activities that may reasonably be construed as a conflict of interest.”
I’m not sure how else to “construe” hiring your own son 100% of the time if not an activity that could reasonably …[be] a conflict of interest. And, of course, the concern is amplified if the relationship is one of husband and wife.
But this is all just my lay, and somewhat speculative, opinion.
And it’s certainly not my decision. That belongs solely to DFS. And just FYI, according to the law governing Declaratory Statements (Chapter 28-105) DFS can take 90 days, choose to hold a hearing or not, then file a Notice of Disposition in the Florida Administrative Register. Or… it can do as it and other agencies often do and decline to render any Declaratory Statement on the matter. (See Note #1 below)
So, there you have it.
Personally, I believe the facts are true as stated in the petition. Indeed, I believe that these types of relationships exist much more than we realize, and that they are predominantly with water remediation vendors, as opposed to roofers or contractors. Regardless of DFS’s findings one way or the other, I believe the existence of these affiliations is one more reason why water remediation firms need regulation.
Please, share your opinion by leaving a “reply” below. Especially if you’re a lawyer, tell me whether you believe the familial relationships described in the petition violate Fs-626.8795 . Second, after reading “Should We or Should We Not…Regulate Drying Firms?” please share your opinion on that issue as well.
Someday maybe all the pieces will be in place for Florida to be more like other states; especially with regard to the sky high premiums we all must pay.
NOTE #1: The law (Chapter 28-105) provides that “the agency [DFS] may rely on the statements of fact set out in the petition without taking any position with regard to the validity of the facts.” In other words, DFS is being asked to opine whether it’s a violation of the statute “IF” the alleged affiliations were to exist. And, finally, based on my inquiries and some limited experience, the most likely response is for DFS to not agree to provide a Declaratory Statement at all. This, for a variety of potential reasons, including lack of “standing” by the petitioner.
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Mark Boardman saysAugust 12, 2021 at 8:49 am
Your opening statement “Speaking of Public Adjusters and the contribution too many of them make to Florida’s property insurance fraud problem, ”
This is typical Mr. Johnson lump everybody together through the language you use.
I want to make it clear as a 40 year public adjuster. I helped established some of the language that you are quoting from the statutes. And I agree that there may be a violation of the moral intent intent of those statutes. I’m not so sure how you can establish something legally.
Let’s take this one step further how many insurance companies have preferred vendor programs Or in fact they even have financial Ties to the actual contractor that my policy the insurance is required to use.
How about the establishment insurance companies of administrative companies that handle all of their is there internal paperwork as well as claims claims. And these administrative companies charge extremely high rates for the work they do. And who owns these companies. Please look into that Question.
Not all public adjusters are in the business of business of trying to cheat the insurance companyMost of us are in the business to keep the insurance company from cheating the insured. Believe me this happens Mr. Johnson.
Your whole life is supported by insurance companies is that not a conflict of interest?
scott saysAugust 13, 2021 at 12:31 pm
Mark: I specifically did not lump every PA in with the comments I made about the “Few Too Many.” who are part of Florida’s fraud problem. I have friends who are PA’s and they agree with me. Even you said “I agree there may be a violation of the moral intent of the statute.” Remember, one of those in the petition had such a moral violation 100% of the time.
Your point about Insurers using preferred vendors completely misses the point. First, using preferred providers is not against the law, what the PA’s in question are allegedly doing is against the law, at least “morally.” Second, Florida is the only state that has so many preferred providers for property coverage. It’s not because insurers want to use them, but…because of the fraud and abusive practices by contractors and PA’s that makes it necessary in Florida.
The fee’s charged by the subsidiaries of the carriers that act as MGA’s are scrutinized by the OIR and approved as part of the rate approval process. The water vendors in the petition have no regulation whatsoever & no rate approval process. Besides, the work being done by the carrier’s subsidiary is work that has to be done. Would you feel better if it were being done by insurer employees vs. a wholly owned subsidiary?
You’re right, most PA’s are not in the business of cheating the insurer. I’m only trying to get rid of the “Few too many” that are. Why don’t you join me in this effort by reporting to me when you see one of them breaking the law, “morally” instead of pointing to the alleged violations of insurers. Anyway, if/when there are such insurer violations,…two wrongs would not make a right.
My whole life is not supported by insurers. I do not get paid to defend insurers and never have. My whole life has been dedicated to supporting independent insurance agents which often meant doing battle with insurers. My life now is dedicated to helping consumers and the best way to do that is to fight the overwhelming fraud in Florida’s property insurance system, in my opinion.
Finally, you didn’t answer my question. What do you think about the need for water remediation to be regulated?
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