If you were a public adjuster and God judged the truth of your answer, would you say you are the best public adjuster to choose on a given claim? I have posed a similar question to members of our law firm, stressing the importance of professional and technical excellence. If you are not good enough to be the best or at least among them in that discussion, why should a policyholder choose you as the professional to represent them rather than someone better?
The bottom line is that the selection of the public adjuster to represent a policyholder is extremely important. In some rare cases, the wrong choice can be disastrous, as evidenced by a recent case in Illinois where the public adjuster̵7;s fraud was attributed to the policyholder.1
The case involved a situation where the public adjuster took the insurance company’s payment, forged the policyholder’s signature and negotiated the check. The banks honored the forged check. The policyholder subsequently sued the insurance company and claimed that the insurance company never paid the policyholder’s claim.
The Illinois court made the following holding for the insurance company:
Paramount was Thirteen’s appointed public adjuster, its claims settlement agent and a joint co-payee. Thirteen, by agreement, Paramount “retained to be [its] agent and representative to assist in the preparation, presentation, negotiation, adjustment and settlement of the fire loss. Thirteen even “directly[ed] all insurers to include Paramount … on all payments on” the fire loss claim. Thus, Paramount acted within the scope of its express, actual authority when it negotiated, settled, and accepted the checks for the claim….
Nothing in the policy says that the checks should be sent to Tretton. But more importantly, Foremost’s delivery to Paramount was, by law, delivery to Thirteen. Kelly v. Parker, 54 NE 615, 619 (Ill. 1899) (‘A delivery to an agent is a delivery to the principal …’). Indeed, Illinois law contemplates that a public adjuster not only negotiates claims but also “receives, accepts or holds … funds on behalf of an insured for the settlement of a claim for loss … in a non-interest-bearing escrow or trust account . ‘ 215 ILL. COMP. STATISTICS. 5/1580. All this is to say that Paramount received the settlement checks on Thirteen’s behalf.
…[P]Various debates give way to Illinois’ apparent statutory preferences, revealed through its licensing and regulation of public adjusters. See generally 215 ILL. COMP. STATISTICS. 5/art. XLV. Public adjusters must be required to provide restitution “on behalf of any person for whom the public adjuster is found to be legally liable as a result of any wrongful act, omission to act, fraudulent act, or unfair practice in his or her capacity as a public adjuster.’… . They “may not agree to any settlement without the knowledge and consent of the insured.” 215 ILL. COMP. STATISTICS. 5/1590(k). And failure to comply with statutorily defined standards can result in a civil penalty as well as consequences for a public adjuster’s license… The Illinois Director of Insurance also has “authority to enforce the provisions of and to impose any penalties or remedies” for violations of Article XLV.§ 5/1555(e).
Requiring the insurer to bear the costs of a public adjuster’s violation of statutory standards is contrary to Illinois law, under which the public adjuster bears such consequences, either through damages or through remedies and penalties under the licensure system. It would be strange if an aggrieved insured could pursue the insurer – which did not participate in the selection of the public adjuster/agent – for the agent’s alleged wrongdoing. It would be even more strange if an insurer were to bear the possible negligence of a drawing bank in disbursing funds without ascertaining the proper approval of joint co-payees.
Thirteen seeks to impose monitoring duties on the insurer far beyond their insurance contract. Mainly agreed to provide coverage and payment for negotiated claims. But it did not agree to take responsibility for the actions of the public adjuster Thirteen hired or to ensure the bank carried out proper due diligence before paying a withdrawal.
There are a number of lessons learned from this holding. First, policyholders must carefully research who they hire as their public adjuster. What qualifications and experience does the public adjuster have? Have you asked others in the industry about the professional reputation and past performance? A lot of information can be gathered by searching the internet and following up. Never be pressured into signing a public adjustment agreement without first doing this investigation.
Second, public adjusters must recognize the significant responsibility they assume when they agree to represent policyholders. The common law imposes increasingly high duties and regularly treats public adjusters as fiduciaries.
Third, if the law places such higher duties on the public adjuster profession, what are the leaders of the public adjuster profession doing to raise the bar for who should be allowed to practice as a public adjuster? Right now, almost anyone who can read English can study and pass a public placement test. After passing the test, they can advertise and apply for positions as a public adjuster with little supervision and zero property insurance adjusting experience—with the notable exception of those states that require some experience.
The bottom line is that it is very easy to get a license to become a public adjuster in most states.
I imagine some readers are wondering if I should mention the attorneys who recently injured thousands of policyholders in Louisiana? Yes. Bad and greedy lawyers are a problem. Policyholders should fully and carefully investigate lawyers before choosing them to see if they have disciplinary problems at the bar, and also question mass advertising methods commonly used by lawyers. Attorneys who do all types of law and without in-depth experience in property insurance claims will often advertise that they have some secret knowledge or method to get results. The copy produced in Internet advertising by lawyers can be misleading and is often not bar-monitored.
As a result, the best public adjusters often wonder how certain attorneys are allowed to practice in the area of property insurance law. Getting a law degree and saying you practice in the area of property insurance law is meaningless when it comes to the level of skill needed to properly accept an insurance company on a complex property insurance claim. Property insurance law is only a very small part of what is needed to be a competent property insurance lawyer. A property insurance attorney will not learn the best way to handle a property loss simply by reading property insurance cases and laws.
IN PayUp!: Prevent a disaster with your own insurance companyI noted the following about the selection of the best public adjusters:
When you hire a public adjuster, do your due diligence and know them well. Make sure they are licensed. Check their references. Check to see if they participate in your state’s professional organizations for public adjusters. In general, the best public adjusters are active in the field, highly experienced, continuing education and working in leadership roles.
The insurance industry would love for policyholders to stop hiring public adjusters and attorneys. The reason is obvious, and there are additional costs for policyholders who do not engage experienced help, as I further noted in Pay!:
Not getting a public adjuster has costs. Without a knowledgeable attorney, policyholders are more susceptible to being taken advantage of by the insurance company. After a loss, policyholders want to get through the hassle of the claims process as quickly as possible. They often accept the insurance company’s assessments and estimate at face value. If you do, the claim may be paid more quickly – but at what cost? Insurance company adjusters are often trained to lowball policyholders. They won’t always inform policyholders of benefits they don’t know they have.
Insurance company adjusters don’t always alert the policyholder to the possibility of hidden claims that won’t show up for weeks, months or years. Water can hide behind walls and lead to mold problems that are not immediately obvious. Toxins and particles can hang in the air undetected. Drywall can hide structural damage that only becomes apparent when the building settles. Damage to the insulation can lead to higher energy bills that may not be apparent until colder or warmer seasons.
Events that cause major property damage can lead to all sorts of secondary problems that policyholders can’t see right away. Sometimes the insurance company hides these problems. A coat of paint can hide a lot — for a little while. “Silver coat” can be applied to attics, literally spraying everything down with a layer of metallic paint, without first tearing out wet insulation. Sealing in the water can lead to mold and structural damage that the homeowner may not discover until trying to sell the house.
Experienced public adjusters know how to spot these problems. The insurance company’s adjuster’s job is to represent the insurance company, not you. By hiring a public adjuster, you can keep track of the situation and what the insurance company is doing.
When Tom Watson is on your team, you’ve won. His passion, professionalism, attention to detail and leadership are second to none.
1 Thirteen Investment Co. v. Foremost Ins. Co.No. 22-2203 (7Th Cir. 2 May 2023).