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Do Independent Property Claims Adjusters Need More Legal Protection From Unethical Trustees | Property Insurance Protection Law Blog



The property insurance industry is increasingly turning to independent adjusters rather than corporate adjusters. The number of independent adjusters calling, texting and literally confessing to me about unethical behavior has exploded in recent years. My thinking is that insurance companies hire independent adjusters and then put financial pressure on those entities to reduce the severity of claims. Insurance companies trying to set their financial claims goals will simply hire a competitor to the independent adjuster if those numbers are not met. These independent adjusters, in turn, allow their claims adjusters to place more emphasis on closing claims for less than what is owed—damn regulatory ethics requirements and good faith treatment.

My blog post, The Plague of Wrong and Insurers Formulated Technical Reports by Insurers Retained by Engineers, resulted in a number of independent adjusters contacting each other privately. A public response was:

Another unscrupulous but common practice, especially when the facts favoring the insured are absolute and indisputable, is what the report will not say. For example, on a hail claim on a latex coated flat roof that we were awarded, the insurer̵

7;s “expert” completely ignored the overwhelming amount of damage and instead only considered some very large overview images which of course showed no detail & therefore “no damage visible” & some very close ups on “cracks due to maintenance” & “a bird release.

Most state that licensed insurance adjusters have strong ethical rules for property adjusters to follow. For example, Florida’s regulatory system states in part:

(3) Code of Ethics. The work of adjusting insurance claims involves the public’s trust. An adjuster must put the duty of fair and honest treatment of the claimant ahead of the adjuster’s own interests in each individual case. 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 may not directly or indirectly refer or direct any claimant who needs repairs or other services in connection with a loss to any person with whom the adjuster has a confidential financial interest, or who will or is reasonably expected to provide the adjuster with any directly or indirectly compensation for the referral or for any resulting business.

(b) An adjuster shall treat all applicants equally.

1. An adjuster may not give any claimant preferential treatment.
2. An adjuster shall adjust all claims strictly in accordance with the insurance contract.

(c) An adjuster may 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 full investigation.
(e) An adjuster shall handle each adjustment and settlement with honesty and integrity, and permit a fair adjustment or settlement to all parties without any compensation or compensation to himself or herself other than that to which he or she is legally entitled.

(f) An adjuster shall, when undertaking the handling of a claim, act with promptness and due diligence to achieve a proper disposition of the claim.

(g) An adjuster may not negotiate or effect settlement directly or indirectly with any third party creditor represented by an attorney, if the adjuster has knowledge of such representation, except with the attorney’s consent. In 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 discourage 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 when the claimant or witness is, or may reasonably be expected to be, in shock or serious mental or emotional distress as a result of physical, mental or emotional the trauma associated with a loss. The adjuster shall not enter into a settlement when the settlement would be to the detriment of, or to the disadvantage of, a claimant who is in the traumatic or distressed condition described above.

(j) An adjuster shall not knowingly fail to inform a claimant of the claimant’s potential claims in accordance with the terms of the insurance contract.

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

Independent property insurance adjusters who do their job ethically and correctly have a legal duty to ensure that the policyholder is informed of all benefits available and explain the policyholder’s options under an insurance contract to collect them.

How many claims adjusters give “gold stars” and favorable responses to property insurance adjusters who make this happen vs. closing the claim with money left on the table? How many independent insurance adjustment firms have a written mission that adopts this ethical requirement?

I bet most people will admit that is not the state of the industry. I haven’t had anyone tell me that it is. I’ve never seen it in damage control guides. I invite any CEO of an independent customization company to brag on this blog or even privately tell me how they’ve written goals, statements, and praise for this type of customization behavior. I invite any insurance attorney, including you, Steve Badger, to tell me about a client with such a writing practice.

But how many property insurance adjusters wish it were otherwise? How many independent property insurance adjusters wish they received public praise and financial reward for ensuring that every insurance consumer was treated ethically as required by law and good faith practice? My guess is that everyone does.

I will give a shout-out to AMICA because I heard their claims staff being instructed to make sure their customers got every policy benefit they could find. I have never read AMICA’s internal claims directive because I have yet to have a lawsuit reach that level of investigation. That fact speaks for itself. It makes me think that at least one insurance company has claims adjusters who try to be ethical and follow the letter and spirit of the law.

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

The bottom line for those in the property damage industry is whether or not we take the ethical requirements seriously. If there is no accountability for those who demand unethical activity, there will be no change, and property insurance adjusters will continue to be harassed and coerced into wrongdoing against policyholders. It’s not right, and it has to stop. People should not be pressured into unethical activity by their managers.

Today’s thought

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


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