Public Adjusters Should Routinely Double Check Contracts for Compliance and Avoid Fines or Class Action Lawsuits

What happens if a public adjuster’s contract is not legal, does not comply with insurance department regulations, and is otherwise not enforceable? Certainly, nothing good for the public adjuster.

After I finished Friday’s ethics presentation, which seemed to go over well for the almost 200 public adjusters who attended the virtual class, I was thinking about Florida Statute 626.8796 (7), which states:

“A contract that does not comply with this section is invalid and unenforceable.”

When statutes and regulations of various states require exacting terms for compliance by licensed individuals, technical non-compliance can result in fines, loss of fee revenue otherwise earned, and possible class action lawsuits, as I long ago noted in A Small Insurance Case May Cost Many Florida Public Adjusters Millions in Class Action Lawsuits. I provided the following advice in Public Adjuster Warning—Do Not Make Illegal Contracts:

Public adjusters should have a competent lawyer who provides them with compliance advice on retainer. All contracts should be written and approved by a lawyer who does a substantial amount of work in that area of public adjuster compliance. I teach this at seminars and show a slide with an attorney’s name and phone number—Holly Soffer.

These regulations and guidelines regarding contract terms are designed to protect policyholders from potential abuses and ensure that public adjusters operate within the bounds of the law. My concern is that if the literal letter of the law is applied to contract requirements that are then not met because of a technical deficiency, public adjusters and policyholders will be in otherwise unnecessary litigation. Public adjusters may be subject to hefty fines because a form contract with a technical flaw could be repeated hundreds of times. The necessity of investing in competent legal advice to ensure contracts are legal and comply with ever-changing laws and regulations is an important part of a public adjuster’s business.

FAPIA Managing Director Nancy Dominguez and Holly Soffer, Esq.

Nancy Dominguez shared similar concerns for Florida public adjusters because the result of a technical deficiency is harsh. She asked that I highlight her legitimate concern in my presentation. I am also following up with this blog post.

These contractual compliance issues are compounded whenever a public adjuster practices in more than one state. Each state has its own set of laws and regulations governing the practice of public adjusting. Public adjusters must be thoroughly familiar with these laws, especially those related to contract terms, fee structures, and licensing requirements. This knowledge ensures that contracts are drafted in compliance with legal standards, avoiding terms that could render the contract void or unenforceable. If you have a public adjusting business in more than one state, how are you going to keep up? I can almost guarantee that you will be under greater scrutiny by insurance regulators if you are licensed as a non-resident public adjuster.

I know of one public adjusting business that was sued in a class action over a contract term that was approved by an attorney.  There are many attorneys that may practice in a given area of the law. There are a lot of “pretender” and otherwise incompetent attorneys in many areas of the law that hope to learn what to do versus those that are competent and really know what to do.

Do you want to hire a pretender attorney when the stakes are high? Holly Soffer was at the last NAIC conference and spoke with insurance regulators about the matters impacting public adjusters. Was the attorney reviewing your public adjuster contract there? And I get nothing from Soffer for saying this. She is the only attorney I know who is passionately involved with specializing in public adjuster contract compliance throughout the United States.

A big shout-out goes to Nancy Dominguez and the leadership of FAPIA. Their virtual seminars help raise awareness and raise the bar of knowledge for public adjusters. “Tired of Boring Ethical Education Classes? Do the Ethical Rules For Public Adjusters State That a Public Adjuster Is an Advocate For the Insured? Can Public Adjusters Advertise That They Are Advocates?” predicted that this would be a fun event with some novel ways to look at the role of public adjusters.  I will write briefly about a couple of those ideas later this week.

If you are a public adjuster, take some action and review your public adjuster contract to make certain it is currently compliant. Better safe now than sorry later.

Thought For The Day

Let me be clear- no one is above the law. Not a politician, not a priest, not a criminal, not a police officer. We are all accountable for our actions.

—Antonio Villaraigosa