The Unauthorized Practice of Public Adjusting

by Ashley Harris, Esquire, Merlin Law Group, August 2017
The Unauthorized Practice of Public Adjusting (“UPPA”) is one of the most important issues facing public adjusters.  UPPA occurs generally when contractors and other tradesmen hold themselves out as competent to represent a policyholder in negotiations with their insurance carrier.  Allowing unlicensed intermediaries between the policyholder and an insurance company harms both the licensed and regulated public insurance adjuster profession and the public at large.
Robert C. Baker III's published paper entitled, The Costs of the Unlicensed Practice of Public Adjusting:  A Legal and Economic Analysis*, summarizes the problem:
The Unlicensed Practice of Public Adjusting (“UPPA”) is a vehicle of consumer fraud that preys upon some of the most vulnerable elements of our society – the disaster stricken, the elderly, the unsophisticated, and those for whom English is a second-language.  Individuals' losses range from a couple thousand to tens of thousands of dollars, and frequently victims are left without a remedy because UPPA offenders disappear or are not worth suing. But outright fraud is only one piece of the UPPA problem. A less malicious but nonetheless harmful variant seeks to help homeowners but executes poorly, sometimes leaving consumers far worse off than when they began. Particularly for smaller damages, this incompetent execution is especially troubling because it is difficult to detect and, if not quickly discovered, it becomes permanently concealed once home repairs cover up the evidence. The resulting financial losses from UPPA trigger a tangled web of social and economic consequences to the public, the insurance industry, and the economy.  State legislatures have made great strides in recent years to curtail UPPA's impact, but significant consumer costs remain.
Baker identifies insurance restoration contractors as the most frequently guilty:
UPPA has become synonymous with fraud perpetrated by disreputable contractors, ne'er-do-well storm chasers, and similar predatory ilk.  The stereotypical transaction involves the fraudsters going door-to-door after a natural disaster advertising repair and insurance negotiating services. Then, once retained, the fraudsters engage in pro forma negotiations with the insurance company and, depending on the circumstances, (1) invalidate the insurance claim due to incompetence, (2) steal the settlement check, (3) demand a steep public adjusting fee, (4) perform shoddy repairs, or (5) some combination thereof.  Less frequently discussed, however, is the variant of UPPA not found in malice, but mediocrity.  These contractors conduct the pro forma negotiations but then actually complete the repairs.  No obvious harm is done and no impetus for complaint is provided. But, nonetheless, the consumers are assessed the opportunity cost of substandard adjusting – the additional recovery, peace-of-mind, and time-savings they could have enjoyed with a licensed public adjuster.
The Georgia legislature defines a public adjuster as:
Ga. Code. Ann. §33-23-1. Definitions
(13) “Public adjuster” means any person who solicits, advertises for, or otherwise agrees to represent only a person who is insured under a policy covering fire, windstorm, water damage, and other physical damage to real and personal property other than vehicles licensed for the road, and any such representation shall be limited to the settlement of a claim or claims under the policy for damages to real and personal property, including related loss of income and living expense losses but excluding claims arising out of any motor vehicle accident, and who, for compensation on behalf of an insured:
(A) Acts or aids, solely in relation to first-party claims arising under insurance contracts that insure the real or personal property of the insured, in negotiating for, or effecting the settlement of, a claim for loss or damage covered by an insurance contract;
(B) Advertises for employment as a public adjuster of insurance claims or solicits business or represents himself or herself to the public as a public adjuster of first-party claims for losses or damage arising out of policies of insurance that insure real or personal property; or
(C) Directly or indirectly solicits business, investigates or adjusts losses, or advises an insured about first-party claims for losses or damages arising out of policies of insurance that insure real or personal property for another person engaged in the business of adjusting losses or damages covered by an insurance policy.
The Georgia legislature also provides what specifically a public adjuster can and cannot do: 
Ga. Code. Ann. §33-23-43. Adjusters; authority; prohibitions; penalties
(a) An adjuster licensed as both an independent and public adjuster shall not represent both the insurer and the insured in the same transaction.
(b) An adjuster shall have authority under his or her license only to investigate, settle, or adjuster and report to his or her principal upon claims arising under insurance contracts on behalf of insurers only if licensed as an independent adjuster or on behalf of insureds only if licensed as a public adjuster.
(c) No public adjuster, at any time, shall knowingly:
(1) Misrepresent to an insured that he or she is required to hire an independent or public adjuster to help the insured meet his or her obligations under his or her policy;
(2) Accept or agree to accept any money or other compensation from an attorney or any person acting on behalf of an attorney which the adjuster knows or should reasonably know is payment for the suggestion or advice by the adjuster to seek the services of the attorney or for the referral of any portion of a person's claim to the attorney;
(3) Hire or procure another to do any act prohibited by this subsection;
(4) Advertise or promise to pay or rebate all or any portion of any insurance deductible as an inducement to the sale of goods or services. As used in this paragraph, the term “promise to pay or rebate” includes:
(A) Granting any allowance or offering any discount against the fees to be charged, including, but not limited to, an allowance or discount in return for displaying a sign or other advertisement at the insured's premises; or
(B) Paying the insured or any person directly or indirectly associated with the property any form of compensation, gift, prize, bonus, coupon, credit, referral fee, or other item of monetary value for any reason;
(5) Misrepresent to a claimant that he or she is an adjuster representing an insurer in any capacity, including acting as an employee of the insurer or as an independent adjuster, unless appointed by an insurer in writing to act on the insurer's behalf for that specific claim or purpose. A licensed public adjuster shall not charge a claimant a fee for adjusting a claim when he or she is appointed by the insurer for that specific claim or purpose and the appointment is accepted byt eh public adjuster;
(6) Solicit, or attempt to solicit, an insured during the progress of a loss-producing occurrence as a defined in the insured's insurance contract;
(7) Have a direct or indirect financial interest in any aspect of a claim other than the salary, fee, commission, or other consideration established in a written contract with the insured which shall incorporate all of the conditions and provisions set out in Code Section 33-23-43.1;
(8) Charge to or collect from an insured any amount, other than reasonable compensation for services rendered based on time spent and expenses incurred, in any transaction where the insurer either pays or commits in writing to pay the policy limit or limits for all coverage under the insured's policy within three business days after the loss is reported to the insurer;
(9) Misrepresent to an insured or insurer that he or she is an attorney authorized by law to provide legal advice and services or that a policy covers a loss or losses outside the scope of the coverage provided by the insurance contract;
(10) Permit an unlicensed employee or representative of the adjuster to conduct business for which a license is required; or
(11) Hire or procure another to do any act prohibited by this subsection.
(d) For purposes of subsection (c) of this Code section, the term “public adjuster” shall include licensed public adjusters as defined by Code Section 33-23-1, persons representing themselves to be public adjusters who are not properly licensed by the Commissioner, and persons committing any act under paragraph (4) of subsection (c) of this Code section.
(e) Any person who violates any provision of subsection (c) of this Code section shall be guilty of a misdemeanor and such violation shall be grounds for suspension or revocation of licenses under this chapter.
Ga. Code Ann. §33-23-43.2. Duties of public adjusters
(a) A public adjuster is obligated, under his or her license, to serve with objectivity and complete loyalty to the interest of his or her client alone and to render to the insured such information, counsel, and service within the public adjuster's knowledge, understanding, and opinion that will best serve the insured's insurance claim needs and interest. 
(b) A public adjuster shall faithfully observe all of the terms and provisions of the public adjuster contract as prescribed in Code Section 33-23-43.1. (Find a complete listing of the public adjuster contract requirements here).
The Georgia legislature provides that any person who violates any provision of subsection (c), including those representing themselves to be public adjusters who are not properly licensed by the Commissioner, shall be guilty of a misdemeanor.  This does not directly confront the issue of unlicensed individuals interpreting policy language and negotiating with insurance carriers on behalf of policyholders.  The Georgia legislature has not prescribed a penalty/punishment for this behavior. 
Of course, grey areas exist as to when someone crosses the line from acting as a contractor or tradesman and acting as a public adjuster.  Differences of opinion exist throughout the insurance industry, but generally it can be said that public adjusters should not dictate how the policyholders repair the damage and contractors should not adjust insurance claims.
Ashley Harris, Esquire, Merlin Law Group, (813) 229-1000


Why Hire a Public Adjuster?

Claimants who hire a Public Adjuster receive substantially more on their insurance claim than those who try and go it alone.