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Law \ Legal

Do Independent Property Claims Adjusters Need More Legal Protection From Unethical Managers


The property insurance claims industry is increasingly turning to independent adjusters rather than company adjusters. The number of independent adjusters calling, texting, and literally confessing to me about unethical conduct has exploded over the last few years. My thought is that insurance companies are hiring independent adjustment firms and then placing financial pressure on those entities to reduce claims severity. Insurers trying to make their financial claims goals will simply hire a competitor of the independent adjusting firm if those numbers are not met. Those independent adjustment companies, in turn, have their claims managers place more emphasis upon closing claims for less than what is owed—damn regulatory ethics requirements and good faith treatment.

My blog post, The Plague of Wrong and Insurer Worded Engineering Reports by Insurance Company Retained Engineers, resulted in a number of independent adjusters privately reaching out. One public response was:

Another unscrupulous but common practice, especially when the facts favoring the Insured are absolute and undeniable, is what the report will not say. In example, on a hail claim to a latex coated flat roof we were assigned to, the insurer’s “expert” completely ignored the overwhelming amount of damage and instead opined on just a few very large over-view photos which of course showed no detail & therefore “no damage visible” & a few very close-up photos of “cracks due to maintenance” & “a bird-dropping.

Most states that license insurance adjusters have strong ethical regulations for property adjusters to follow. For example, Florida’s regulatory scheme states in part:

(3) Code of Ethics. The work of adjusting insurance claims engages the public trust. An adjuster shall put the duty for fair and honest treatment of the claimant above the adjuster’s own interests in every instance. The following are standards of conduct that define ethical behavior, and shall constitute a code of ethics that shall be binding on all adjusters:

(a) An adjuster shall not directly or indirectly refer or steer any claimant needing repairs or other services in connection with a loss to any person with whom the adjuster has an undisclosed financial interest, or who will or is reasonably anticipated to provide the adjuster any direct or indirect compensation for the referral or for any resulting business.

(b) An adjuster shall treat all claimants equally.

1. An adjuster shall not provide favored treatment to any claimant.
2. An adjuster shall adjust all claims strictly in accordance with the insurance contract.

(c) An adjuster shall not approach investigations, adjustments, and settlements in a manner prejudicial to the insured.

(d) An adjuster shall make truthful and unbiased reports of the facts after making a complete investigation.
(e) An adjuster shall handle every adjustment and settlement with honesty and integrity, and allow a fair adjustment or settlement to all parties without any compensation or remuneration to himself or herself except that to which he or she is legally entitled.

(f) An adjuster, upon undertaking the handling of a claim, shall act with dispatch and due diligence in achieving a proper disposition of the claim.

(g) An adjuster shall not negotiate or effect settlement directly or indirectly with any third-party claimant represented by an attorney, if the adjuster has knowledge of such representation, except with the consent of the attorney. For purposes of this subsection, the term “third-party claimant” does not include the insured or the insured’s resident relatives.

(h) An adjuster shall not advise a claimant to refrain from seeking legal advice, nor advise against the retention of counsel or the employment of a public adjuster to protect the claimant’s interest.

(i) An adjuster shall not attempt to negotiate with or obtain any statement from a claimant or witness at a time that the claimant or witness is, or would reasonably be expected to be, in shock or serious mental or emotional distress as a result of physical, mental, or emotional trauma associated with a loss. The adjuster shall not conclude a settlement when the settlement would be disadvantageous to, or to the detriment of, a claimant who is in the traumatic or distressed state described above.

(j) An adjuster shall not knowingly fail to advise a claimant of the claimant’s claim options in accordance with the terms and conditions of the insurance contract.

(k) An adjuster shall not undertake the adjustment of any claim concerning which the adjuster is not currently competent and knowledgeable as to the terms and conditions of the insurance coverage, or which otherwise exceeds the adjuster’s current expertise.

Independent property insurance adjusters who do their job ethically and properly have a legal obligation to make certain that the policyholder is being told of all the benefits that are available and explaining the policyholder’s options under an insurance contract to collect those.

How many claims managers are giving “gold stars” and favorable responses to property insurance adjusters who make certain this is happening versus closing the claim with money being left on the table? How many independent insurance adjustment firms have a written goal which adopts this ethical requirement?

I bet most will admit that is not the state of the industry. I have not had anybody tell me it is. I have never seen it in claims management guides. I invite any manager of any independent adjustment company to brag on this blog or even privately tell me about how they have written goals, statements, and praise given to this type of adjustment behavior. I invite any insurance defense attorney, including you, Steve Badger, to tell me of one client with such written practices.

Yet, how many property insurance adjusters wish it were otherwise? How many independent property insurance adjusters wish they received public praise and financial reward for making certain that every insurance consumer was treated in the ethical manner required by law and good faith practice? My guess is that all of them do.

I will give a shout-out to AMICA because I did hear their claims personnel being instructed to make certain their customers received all the policy benefits they could find. I have never read AMICA’s internal claims directives because I have yet to have a lawsuit get to that level of inquiry. That fact is telling itself. It leads me to believe that at least one insurance company has claims managers trying to be ethical and follow the letter and spirit of the law.

So, what do we do about it? My suggestion is that we make laws requiring property insurance adjusters and their managers to report any ethical violation they know of regarding unethical practices or risk losing their license. Further, any such reporting is strictly protected at the risk of the independent adjustment company and insurer losing its license for any retaliation against the adjuster or independent adjustment company.

The bottom line for those in the property claims industry is whether we take the ethical requirements seriously or not. If there is no accountability for those that demand unethical activity, there will be no change, and property insurance adjusters will continue to be harassed and coerced into doing the wrong actions toward policyholders. That is not right, and it must stop. People should not be pressured into unethical activity by their managers.

Thought For The Day

Divorced from ethics, leadership is reduced to management and politics to mere technique.
—James MacGregor Burns



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