At our recent seminar on insurance adjustment techniques and practices, Texas Hold ‘Em" #2: Merlin Law Group’s Seminar for Texas Public Insurance Adjusters, I warned public adjusters that wrongful practices, especially the unauthorized practice of law by giving legal advice, would probably result in lawsuits against them. Yesterday, I found an article, Class Action Lawsuit Targets Fees Charged by Public Adjuster, that addresses some of my concerns.

The article suggests that a public adjusting firm violated specific fee rules which are mandated by the Florida Office of Insurance Regulation:

"The complaint in the lawsuit seeks class action status and alleges Ameriloss
overcharged some clients. Specifically, the suit alleges Ameriloss sought fees of 33.5 percent for adjusting a claim by Clyde Lightbourn related to Hurricane Katrina in 2005, when state law limited fees to 10 percent.

Lightbourn attorney Lance Harke, of Harke & Clasby in Miami, said his client
argued with Ameriloss about the fee, but the company insisted a third was the “standard” amount, and Lightbourn was desperate to get additional money for needed repairs.

“It got us pretty angry to think someone in that situation could be taken
advantage of in this way. It’s price-gouging,” said Adam Moskowitz, an
attorney with Kozyak Tropin & Throckmorton in Coral Gables, who is handling
the lawsuit with Harke.

Lightbourn received a favorable declaratory statement from the Florida
Department of Financial Services dated Jan. 13 that said “the public
adjusting firm [Ameriloss] could not properly charge a fee in excess of 10
percent under the specific facts of this case.”

Most public adjusters charge fees no more than ten percent. In the vast majority of the claims I review, public adjuster services result in a recovery far greater than the ten percent fee and everybody is very happy, except the insurance company.

My primary concern is a longstanding one addressed repeatedly by most leaders in the public adjuster field–public adjusters must not practice law. Doing so is illegal and will subject public adjusters to fines, loss of their licenses and jail. It will certainly lead to calls by insurers to prohibit public adjusting. The public adjusting industry must remain vigilant to prevent errant public adjusters from committing acts that endanger the profession and service for all: providing legal advice, giving legal opinions, and arguing law.

It is very easy to overstep the bounds of public adjusting and engage in the practice of law. For example, when a public adjuster advises a client to not file a lawsuit and go to appraisal or administrative appeal, that is practicing law. Whenever a person tells another what type of legal procedure should be taken to resolve a dispute where competing legal benefits and rights are at issue and need analysis, that is the practice of law. People who are not lawyers do this everyday.

This example, and hundreds of others like it, were a primary concern of the late Paul Cordish, the General Counsel for the National Association of Public Insurance Adjusters. Virtually every annual address Cordish presented to public adjusters had remarks and warnings about not practicing law. In my discussions with him, it was obvious he was concerned that some in the audience listened, but failed to behave accordingly. We both recognized how legal analysis aids adjustment disputes and why public adjusters so often fall into the trap of acting like lawyers and practicing law. The problem is that it is illegal–criminal in most states.

Public adjusters help policyholders in a number of different ways. There are many bright and dedicated people who spend their life helping policyholders obtain the full benefits owed following a disaster. I am humbled to be acknowledged as a past National Association of Public Insurance Adjusters Co-Person of the Year. I suggest that all public adjusters realize the significance of Paul Cordish’s warnings. If a class action over a fee amount has been filed, how many public insurance firms could be sued for routinely practicing law?

In this case, my instruction to public adjusters is simple: Just Don’t Do It!