There are differing views at this time as to whether Texas general insurance adjusters can write letters of notice under Chapter 542A of the Texas Insurance Code. It is important to emphasize the difference between whether they can and whether they should . There is limited case law that supports Texas insurance adjusters being able to write these notices (which is a discussion for another time). 1 But just because someone can do something does not mean they should . To understand why public adjusters should not write 542A letters of notice, we will review what "Texas law practice" means, who can practice law in Texas, what Chapter 542A requires in the letter of intent, and why public adjusters should not write them.
What is "Law Practice" in Texas?
To begin, let's first look at what the Texas Government Code defines as "the practice of law." Section 81
We can see from this language that" practice in law "in Texas specifically includes any service that requires the use of legal skill or knowledge. Notice how the Texas Government Code does not limit "practice in law" to litigation only; it is not limited to courtroom proceedings. The definition extends far beyond litigation to services – that is, other activities – that require specialized legal skills and knowledge. If it does not enforce this restriction, persons who are unlicensed, inexperienced and unskilled in legal matters may be able to perform legal services. The result? Undisputed harm to the public. 2 While courts have the power to ultimately determine what is the practice of law from case to case, 3 they have not avoided defining "practice of law" that includes all advice to clients and all measures taken for clients in matters related to the law. 4 The main reason is to protect the public from damage by acts or services, of a professional nature, which are considered by the legislature and the courts to be exercised as law, performed or performed by those who by law are not considered qualified to perform them . 5
] Who can practice law in Texas?
Let's then look at who can practice law in Texas. Section 81,102 states, (a) Except as provided in subsection (b), a person may not exercise law in this state unless the person is a member of the Government. (b) The Supreme Court may issue rules prescribing the restricted practice of: (1) lawyers licensed in another jurisdiction; (2) bona fide law students; and (3) unlicensed doctoral students attending or attending a law school approved by the Supreme Court.
This means that persons who may practice law in Texas are restricted to members of the State Bar of Texas only and those who follow the Texas Supreme Court's rules of law. Does this include adjustments to general insurance? No, it does not. Chapter 4102 General Insurance Regulators of the Texas Insurance Code states section 4102.003, “CERTAIN CONSTRUCTION FOR PROHIBITION OF THE LAW. This chapter may not be construed as entitling a person who is not licensed by the Supreme Court of Texas to practice law in this state. "This clearly means that this chapter does not authorize non-attorneys, especially public insurers, to practice law in Texas. However, if there is any remaining uncertainty regarding this, section 4102.156 specifically states, “PROHIBITION PROHIBITION. A licensee may not provide services or perform acts that constitute the practice of the law, including providing legal advice to any person who holds the licensee as a public insurance adjuster.
Texas courts have enforced the view that general insurance. adjusters are not allowed to engage in unauthorized legislation. 6 Public adjusters who compile and send demand letters for settlement of client claims, identify and advise clients on what he / she considers to be their compensable damages, advise clients on how much damages he / she considers they have right under the law, and advises clients on their rights, obligations and privileges under the law engaging in unauthorized law enforcement. 7 Although this is not an exhaustive list, all of these activities require specialized legal skill and knowledge. When a person acts for himself or others and undertakes to advise potential employers or customers through words or conduct about their legal rights and the possibilities of resolving personal injury, accident or other legal claims, thereby encouraging assertion or prosecution of allegations or lawsuits, this person goes beyond the bounds of a legitimate investigation of facts and engages in unauthorized law . 8
What is Chapter 542A Message Requirement?
Now that we understand what "practice in law" in Texas includes and who can practice law in Texas, let's dive into Chapter 542A of the Texas Insurance Code, in particular the requirement on message letters according to section 542A.003. In simplified terms, the notice is a trial. According to this section, 60 days before the filing of a lawsuit concerning a "natural force" or "weather-related" event, 9 a policyholder or the policyholder's representative must send a notice of detailed costs for the repair of property and legal fees to date. The letter must specify the individuals and entities to which the policyholder intends to bring an action, the specific amount requested for repair costs for the damaged property and legal fees incurred so far. In addition, the Charter requires that the letter of notification contain at least the following:
- A statement of the acts or omissions that give rise to the claim;
- The specific amount alleged to be owed by the insurer on the claim. for damage to or loss of covered property; and
- The amount of reasonable and necessary legal fees for the applicant, calculated by multiplying the number of hours actually worked by that applicant's lawyer, from the day the notice is given and reflected in simultaneously kept time registers, with an hourly rate usual for similar legal services. 10
The issue with this notice is that if the claim goes to trial, the judgment is measured against the amount alleged in the letter. If the judgment on the repair costs is not within 80% of the number in the letter of notification, the reimbursement of law firms will be reduced. 11 If the judgment on the cost of repairs is less than 20% of the number in the letter of notification, then the lawyer's fees cannot be awarded at all. 12 In addition, if a policyholder does not send a notice that meets the requirements of the charter and the insurer can prove that it was entitled to one, but did not receive one, a court may decide not to allocate law firms at all. 13 Therefore, policyholders must send notification letters that are as thorough and as accurate as possible.
Why should public adjusters not write Chapter 542A message?
Writing a Communication on Chapter 542A requires legal skill and knowledge. Determining the extent of legally compensable damages inherently requires legal skill and knowledge. 14 Determining the number of reasonable and necessary law firms requires legal skill and knowledge. What type of services are considered Texas law? Everything that requires legal skill and knowledge. Who is identified as legal skill and knowledge? Members of the State Bar of Texas. The requirement to disclose attorney's fees is only one of the more obvious signs that a Chapter 542A notice should be written by an attorney or someone with legal experience.
If a public alignment writes a Chapter 542A message, he may find himself in the hot seat of writing a letter that does not meet the requirements. This may well result in the public adjuster later being the subject of a trial or disciplinary complaint. It's not worth the risk of trying to write one.
The damage from a Chapter 542A notice written by someone who lacks the necessary legal skill and knowledge is the dismissal of the lawsuit and / or the policyholder has to pay more out of pocket as opposed to the insurance company paying attorney fees. If a lawsuit is filed, the insurance company will use the letter against the policyholder to limit their unfaithfulness and will be used to reduce all judgments that are favorable to the policyholder.
As explained by Rene Sigman, Merlin Law Group's Texas Regional Litigation Chief, in her blog post, The Truth About "The Hail Bill" That Messes with Texas there are several procedural barriers to bringing an action under Chapter 542, why the policyholders "[should] do not take on the burden of termination before termination without consulting a lawyer ."
If you are a public adjuster who is unsure whether to provide a type of legal service in Texas, consider asking yourself two questions: 1) Am I a member of the State Bar of Texas? and 2) Does this service require the use of legal skill or knowledge? If you answer "no" to the first question and " yes "on the second question, I urge you to reconsider providing that service and instead ensure that experienced counsel is retained to ensure compliance with the law. For more information on unauthorized law enforcement in Texas, please contact the Supreme Court of Texas as Unauthorized practice for the Law Committee website useful.
1 See J.P. Columbus Warehousing, Inc. vs. United Fire and Casualty Co. 2019 WL453378 (SD Tex. January 15, 2019), report and recommendation adopted by JP Columbus Warehousing, Inc. v United Fire and Casuality Co. 2019 WL 450681 (SD Tex. 4 February 2019); Gateway Plaza Condo to Travelers Indem. Co. of Am ., 2019 WL 7187249 (ND Tex. 23 December 2019).
2 Grievance Committee State Bar of Texas, twenty-first congressional district against Coryell 190 SW2d 130, 131 (Tex.Civ.App. – Austin 1945, wr ref. Wom).
3 Unauthorized Practice Committee, State Bar of Texas v. Cortez 692 SW2d 47, 50 (Tex.), Cert. nekad, 474 U.S.C. 980, 106 S.Ct. 384, 88 L.Ed.2d 337 (1985).
4 Quarles v State Bar of Texas 316 SW2d 797, 800, 802 and 804 (Tex.Civ.App.— Houston 1958), pets. denied for certificate. to the Supreme Court of Texas, 368 U.S.C. 986, 82 S.Ct. 601, 7 L.Ed.2d 524 (1962).
5 Grievance Committee of State Bar of Texas, twenty-first congressional district against the dean 190 SW2d 126, 129 (Tex.Civ .App.-Austin 1945, without writing).
6 See Brown v. Unauthorized Practice of Law Committee 742 SW2d 34 (Tex.Civ.App. – Dallas 1987); see also Bennie Green v. Unauthorized Practice of Law Committee 883 SW2d 293 (Tex.Civ.App. – Dallas 1994).
7 Bennie Green v. Unauthorized Practice of Law Committee 883 SW2d 293 (Tex.Civ.App. – Dallas 1994).
8 Quarles v State Bar of Texas 316 SW2d 797, 800, 802-03 (Tex.Civ.App. – Houston 1958), pet denied for certificate. to the Supreme Court of Texas, 368 U.S.C. 986, 82 S.Ct.601 (1962).
9 Tex Ins. Code Ann. § 542.001 (2) (C) (2017) (“derives from damage to or loss of covered property caused in whole or in part by natural forces, including an earthquake or earthquake, a wildfire, a flood, a tornado, lightning, a hurricane, hail, wind, a blizzard or a downpour. ”).
10 Tex. Ins. Code Ann. § 542A.003 (b) (2017).
12 Tex. Ins. Code Ann. § 542A.007 (d) (2017).
13 Tex. Ins. Code Ann. § 542A.007 (d) (2017).
14 See Brown v. Unauthorized Practice of Law Committee 742 SW2d 34 (Tex.Civ.App. – Dallas 1987).