What's UPPA With Your Insurance Claim?

by Mark Goldwich

There are always many hot topics in the insurance industry. Right now, especially in Florida, a major hot topic is the Unlicensed Practice of Public Adjusting (UPPA, for short).  In essence, this is where a contractor or other service provider performs the services of a public adjuster without being licensed to do so. This can include things like interpreting an insurance policy, discussing coverage or negotiating a claim settlement. Contractors do this on a  regular basis – and a few of them may not know they are committing a felony.  The rest of them know, but don’t appear too concerned.  Several of them recently spoke before a committee in Tallahassee, explaining, while on camera, how they're performing a needed and valuable service by “assisting” policyholders with their claims.  While the video was sent to the Florida Department of Financial Services for review, the contractors still don’t seem concerned about doing what professionals in my industry have been specifically trained and licensed to do.

Can you imagine a parade of plumbers getting up before a legislative committee, one by one, and

stating for the record that they regularly do repairs to electrical components without a license since they are “familiar” with electricity, have seen electrical work done, and have even done it before themselves?  They could argue that by the time a licensed electrician could be called out, they could have already fixed the problem, saving the consumer time and money.  Unfortunately, those of us in the field who are being hurt by this, as well as the insured consumers who are not getting the full benefit of a licensed, dedicated advocate, can’t expect much will change anytime soon, because we see little to no enforcement of this law.  But we are not giving up, and we will continue to be on the look-out for UPPA violators.

What’s the harm?  Contractors will say that after handling thousands of losses where insurance claims were presented, they know much more than the average homeowner.  And this may be true, but the fact is the vast majority of them are not trained as are licensed Public Adjusters when it comes to dealing with a variety of complex insurance policies, state statutes, and so on.  Also, there is often more involved in these insured losses than just building restoration.  There can be Loss of Use, Additional Living Expenses, Contents, and other policy provisions not related to the building.  As licensed public adjusters, we are familiar with handling all aspects of an insurance claim.

Image courtesy of beausrsj.wordpress.com

It would be like me saying, “I have seen so many homes damaged by water, I know better than most homeowners how to extract the water, and use fans and dehumidifiers to dry the home quickly, so you don’t need to hire a water restoration company, I can do that for you.”  NO!  I'm not licensed to do that!  That is why they have a water restoration license, or a contractor’s license, or an electrical license, and I have a public adjuster’s license.

So, why do many contractors insist on handling claims they know they aren't licensed to, especially when they also know public adjusters ARE licensed to do so?  In my opinion, it comes down to time, and money.  The contractors feel sure they can settle claims quicker, and possibly make more money by handling the claim themselves, rather than having a licensed public adjuster handle the claims.  The truth is, they may be able to get the claim settled faster, but they usually have to concede on the amount of money being paid in order to do so.  Most contractors also feel they are good enough at what they do that they can get the same amount of money on a claim that a licensed public adjuster can get.  Time and again, we have found this not to be the case.  Still, many contractors view the fee paid to licensed public adjusters as money drained from their pocket, when in many cases, that money would never have been there if it weren’t for the public adjuster’s expertise.

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Consider this as another consumer alert.  Hire only professionals licensed to handle the task at hand. According to the Florida Department of Financial Services (formerly the Department of Insurance):

“The definition of a public adjuster, as explained in Section 626.854, Florida Statutes, is any person, except an attorney, who, for money or any other thing of value (which would include a contract for repairs):

• Prepares, completes or files an insurance claim form for an insured,
•  Aids in any manner on behalf of an insured in negotiating for or effecting the settlement of a claim, 
• Advertises or solicits for employment as an adjuster of such claims.

Courtesy of thecontractorcoachingpartnership.com

If a contractor is acting as a public adjuster in any manner by negotiating or effecting the settlement of an insurance claim on your behalf, without being licensed as a public adjuster (Section 626.854, Florida Statutes), they could be subject to arrest and may be charged with a third-degree felony as provided by Section 626.8738, Florida Statutes.”

If a contractor knows they are committing a felony, even if they are confident they can get away with it by acting as a public adjuster without the proper licensing, you need to consider what else they would be willing to do, whether for money, convenience, time, or anything else.  We know a lot of contractors, and we regularly recommend they change the wording of their ads, car signage, websites, etc., as well as what they say to consumers and insurance adjusters.  We don’t want to see them get into trouble, and we remind them that in 2013, three roofers from a well-known local roofing company were arrested, booked, and faced up to 5 years in prison because they informed homeowners they were “insurance specialists” and could assist the homeowners in dealing with their insurance companies.  While those arrests certainly have not stopped this practice from occurring, we believe insurance companies and the DFS are  looking to make examples of contractors engaged in UPPA.

Whether you are a contractor or a consumer, it's better to be safe than sorry by understanding how UPPA can affect your insurance claim.

Mark Goldwich is president of Gold Star Adjusters, a group of public insurance adjusters dedicated to helping citizens get the maximum settlement for any insurance claim.  

Deflectors to Maximum

By Mark Goldwich

Rules of Engagement (Star Trek novel) (Photo credit: Wikipedia)

If you are a Star Trek fan then you will remember that any time the Starship Enterprise was being menaced by hostile aliens Captain Kirk would always tell Scotty to set “Deflectors to maximum.”  The ship’s deflectors would then be activated in order to give the Enterprise a way to defend itself against attack.  While both the ship and crew portrayed in the sci-fi series are works of fiction, believe it or not, there is at least one industry that has learned to use deflection as a means of avoiding payment to its customers.

In my book, UNCOVERED, I list three strategies that insurance companies routinely use to reduce or avoid claim payments. The three “Ds” as I call them are Delay, Deny, and Deflect. Deflection is what happens when the insurance company finds reasons to avoid paying money that you actually have coming to you on your claim. Although deflection is listed last on my list of three “Ds”, it can be encountered at any time during the claim.

What, exactly, does the “deflection game” involve? It involves the insurance company finding ways to avoid giving a direct, truthful answer to what would seem to be a fairly basic question: “Who has the moral and legal responsibility to make sure that my legitimate claim is paid in full, promptly and to my complete satisfaction?”

Isn’t that obvious? Doesn’t the insurance company itself have the obligation to pay the claim? The answer that seems obvious to the policyholder, sometimes becomes not all that obvious to an insurance company.  Especially once they involve a multitude of adjusters, engineers, restoration companies, attorneys, insurers, re-insurers, and third-party administrators that are all paid to do their bidding. There are so many cases of insurance companies dodging this issue that I can’t really do justice to the topic in a blog of this size. I can say, though, that it seems the legal system has finally begun to catch up with a few of the worst offenders.

Case in point: In Ohio, a jury held that a life insurance and disability management services company was guilty of breach of insurance contract; the jury awarded the plaintiffs $429,400 in compensatory damages for nonpayment of claims. But that wasn’t all. The jury also found the insurance company guilty of bad faith insurance practices, and mandated an award of $1,130,000 to the plaintiffs. They coupled this with a whopping punitive damages award of $3 million.

Documents from the case give some sense of the elaborate lengths to which some companies will go to avoid paying people the money they are owed. This particular insurance company used a third party administrator, and an affiliate re-insurer (which was also a 40% owner of the third party administrator) to combine their efforts in an illegal scheme to avoid paying completely legitimate claims.

The scheme involved a whole host of complex accounting maneuvers, as well as false information that was submitted to an insurance commission. Now, I realize that, at this point, you may be having some difficulty getting your head around all this. That’s because a) such cases are pretty complicated and b) you’re probably still thinking of insurance companies as responsible businesses with an obligation to take care of their customers. All too often, it seems they’re simply not very responsible and are not thinking about the interests of their customers. 

What in the World?

There are other cases like the Ohio case.  Many have a disturbing, and all-too-common, theme – the insurance company says that paying is actually someone else’s responsibility. But the “someone else” either never follows through or only partially follows through on its obligation to pay. Or they say that the other party’s report or advice “prevents” them from paying you (as if they can’t override the opinion of an outside party). I’ve personally seen this happen many, many times. 

In general, the usual deflection is as follows. After a supposedly licensed and professional insurance company adjuster inspects the property, he or she just can’t seem to figure out whether or not to pay the claim. So, they hire an engineer to help determine what the “cause of loss” was, in order to determine whether or not it is covered. Sounds reasonable, right? Keep in mind, we have done hundreds of these where the cause of loss was as simple as “wind” or “hail”. And the real kicker is, the engineer always tends to be the same one the insurance company uses over and over and over again.  Surprised?  Well you shouldn’t be, since this individual’s very livelihood may depend on maintaining a good relationship with the insurance company. You can probably see why we are not surprised when again and again, the engineer’s report suggests that it was not really wind that caused the shingles to fly off the roof or get beat up during a storm, but that it was just an “old roof” that was “improperly installed”, and had “manufacturing defects”. The adjuster might then say something like, “I’m sorry, but the engineer says it’s not covered, so there’s nothing I can do about it.” THAT’S deflection, and fortunately for our clients, there IS something that can be done about it!

Do all of these cases wind up in court? No. In my opinion, very few of the cases that could go to court ever get there and most policyholders in these situations do not get the impartial hearing they deserve.

Why not? Because many policyholders simply don’t have the time or perseverance to wander through a bureaucratic maze that has no clear resolution. (As we all know, going to court can be a long, expensive process.) After all the delays and denials, many people are simply sick of the process of trying to get the insurance company to pay up. They either take whatever crumbs they’ve already been tossed, settle prior to trial, or give up altogether.

It’s not really that surprising that most of these situations don’t land in a courtroom. By the time most people start thinking about lawsuits, they’ve already been battling the insurance company for a year or more. Then they are told the lawsuit will probably take another two to three years! Be honest. What would you do? Sometimes, when people find themselves caught in the “deflection game,” they’ll give just about anything to be done with the process.

Isn’t the legal system supposed to correct problems like this? In theory, yes. And there are some encouraging signs. A 2007 DecisionQuest poll of practicing attorneys found 75% of respondents would now expect jurors to agree with the sentiment that insurance companies “would do anything to avoid paying even legitimate claims.” That’s refreshing evidence of reality-based thinking within the halls of justice. But most of these cases, as we have seen, never reach a jury. For your own protection and economic well-being, it may be wisest to stop thinking of insurance companies in terms of your friendly neighborhood insurance agent, and start thinking of insurance companies as resembling the people who ran their firms into the ground by setting up a nearly-incomprehensible maze of wholly-owned, partially-owned, and “affiliated” companies … companies whose relationship with one another seems to require an advanced degree.

I realize that sounds like a harsh assessment. But the irresponsible use of deflection warrants it, in my view. Let me give you a brief example that may help you understand why I feel as I do about this.

Think of a big insurance company. Let’s call it Baseball, Mom, and Apple Pie Insurance – BMAPI for short. BMAPI’s motto is, “Faithful and friendly, during good times and bad.” It has an expensive ad campaign that features gorgeous sunsets, adorable puppy dogs, and happy policyholders who dearly love and respect their local BMAPI agent.

Now, if BMAPI handles, say, 1.5 million claims in a year, and then deflects an average of just $300 on each claim, that adds up to nearly five hundred million dollars more for BMAPI to keep for itself and invest as it sees fit.

Yes. Nearly half a billion dollars.

Follow me on this next part, because it’s extremely important.

The number I just used to get to roughly half a billion dollars of extra income for BMAPI was, you will recall, three hundred dollars of, shall we say, “savings.” Now, you might well ask: How realistic is that figure I just used? Is three hundred dollars a valid number - or a dubious number? Hear me, please, when I tell you that my typical additional recoveries – that is, the money I get the insurance company to agree to pay in valid claims over and above what it had already agreed to pay out – is NOT in the hundreds of dollars.

It’s in the THOUSANDS of dollars. That’s an average case.

star trek phaser model (Photo credit: Wikipedia)

Realizing that hundreds if not thousands of dollars are being withheld by the routine use of insurance company deflectors are not science fiction.  They are all too real.  Now if I could only find my phaser.

For more information on bad faith insurance issues, visit: www.badfaithinsurance.org.

Mark Goldwich is president of Gold Star Adjusters, a group of public insurance adjusters dedicated to helping citizens get the maximum settlement for any insurance claim.