UPPA: A Persistent Problem for Policyholders, Regulators and Insurers A Presentation to the Market...
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Transcript of UPPA: A Persistent Problem for Policyholders, Regulators and Insurers A Presentation to the Market...
UPPA: A Persistent Problem for Policyholders, Regulators
and Insurers
A Presentation to the Market Actions (D) Working Group of the National Association of Insurance Commissioners
Tuesday, December 17, 2013 Washington, DC
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
2 UPPA—Unauthorized Practice of Public Adjusting
UPPA—What is It?
UPPA is the Unauthorized Practice of Public Adjusting
UPPA is usually perpetrated by contractors including roofers, plumbers and electricians, and sometimes even accountants and other professionals, including public adjusters operating in areas for which they are not licensed
UPPA perpetrators prey upon unsuspecting insureds with promises of big paydays, deductible reimbursements, no hassle claims settlements, etc., without any protection of law or regulation
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
3 UPPA
From the Headlines…
“Contractors Acting as Public Insurance Adjusters Irk States,” Insurance Journal, July 29, 2011: “[S]tates are cracking down on roofing and other contractors who pass themselves off as claims adjusters for customers.”
“Contractor Ordered to Cease and Desist from Unlicensed Public Adjusting,” Property Insurance Coverage Blog, February 2, 2013: “It is important for policyholders to understand they should ask those who attempt to do any [public adjuster-specific activities] whether they are a licensed and bonded public insurance adjuster before they sign any agreements or allow work to be performed.”
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
4 UPPA
From the Headlines…
“Indiana bars unlicensed Illinois insurance adjusters from Lake County,” Northwest Indiana Business via NWI.com. June 12, 2013: Three public adjusters licensed in another state were not allowed to practice in Indiana because they did not hold valid Indiana licenses.
“Roofers acting as Unlicensed Public Adjusters…busted!” Claimconcepts.com, May 11, 2013: “Public Adjusters do NOT do property repairs and a Contractor should never attempt to advise a client and negotiate on their behalf in times of an insurance claim.”
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
5 UPPA
Case Study # 1
Large insurance brokerage (not agency) acquires a small accounting agency to help the brokerage assist clients with “forensic accounting, property insurance, property insurance, exposure quantification, forensic analysis and risk consultancy” in such complex claims areas as business interruption and property damage, including “megaloss disaster response.”
Blurring the lines between broker assisting clients with a claim and doing the business of public adjusting, without the benefit of a license to perform such activities
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
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Case Study # 2
Company holding itself out as a roofing and siding contractor also promises to “assist you with contacting your insurance company to report the loss…prepare a detailed report of all the damage…[and] meet with your insurance company to discuss the necessary storm, wind or hail damage repairs.”
Company emphasizes hail damage which is a particular favorite of contractors engaged in adjusting
No mention of being licensed as a public adjuster; relies on “Angie’s List” and BBB logos to show legitimacy.
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
7 UPPA
UPPA—Why It Is A Problem
For policyholders: they are dealing with largely unregulated entities, with no protections in the law, and are oftentimes left having to chase contractor to perform services which have been paid for through insurance proceeds
For insurers: while some insurers and independent adjusters may be complicit in negotiating with known UPPA predators as opposed to licensed PAs, many insurers now understand they fall victim to the haphazard negotiations and false promises made by UPPAs to their insureds
For PAs: UPPAs are responsible for many of the problem situations that are being characterized as public adjuster frauds, they unfairly compete for business in a largely unsophisticated and unregulated manner, and they create an overall atmosphere of distrust in the claims environment
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
8 UPPA
UPPA—Why It Is A Problem
For regulators: with no direct oversight of UPPAs, their practices have gone largely unchallenged by insurance regulators, who are primarily focused on enforcing laws pertaining to regulated/licensed entities. Other enforcement bodies, such as local and state prosecutors, look at this as an “insurance issue” and default back to insurance regulators, while the regulatory stakeholders, e.g. policyholders, insurers and public adjusters, all continue to suffer from an issue that has fallen between the proverbial cracks
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
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NAPIA’S UPPA Initiative
Outreach to individual insurance departments to educate on UPPA, discuss challenges to effective enforcement, promote those states incentivized to enforce, take direct legal action and support legal actions where necessary and appropriate
NAPIA leadership has determined this to be top priority issue for 2014, and must be addressed regardless of perpetrator of unauthorized practices
NAPIA coordinating with departments and other emergency management resources to also monitor adjuster activities in catastrophes, improve temporary licensure of PAs and move PAs into operating areas to expedite claims settlement
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
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NAPIA’s UPPA Initiative
While recognizing that some states allow adjusters to also serve as contractors, NAPIA has been supportive of initiatives to prohibit PAs from also serving as contractors, such as is the law in Texas
NAPIA has also assiduously worked to protect against the inflation of damage claims, inflate the scope of damage, or do other things that are unlawful, unethical or contrary to the consumer’s interest and integrity of the insurance marketplace
NAPIA has also promoted and supported licensing of all public adjusters, continuing education of PAs and other initiatives to improve professionalism of those licensed as PAs
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
11 UPPA
Enforcement Actions In The States
Some states have taken aggressive action against UPPA, and that action is greatly appreciated by NAPIA; however, the action has been limited to a few states, and they acknowledge the shortage of internal resources, natural nexus to the perpetrators, and challenges in coordinating with other enforcement agencies to effectively combat UPPA
Enforcement by insurance regulators is generally limited to cease-and-desist orders for an unauthorized practice of insurance, and perhaps insurance fraud violations in certain instances
Most states surveyed, though, find the C&D to be an ineffective deterrent and too little an outcome for too much work in tracking UPPA cases
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
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Enforcement Actions in the States
The Problem with C&Ds
Limited civil impact, and no criminal penalties
No central repository of C&Ds issued
Transient and “multiple identity” contractors evade most implications of C&Ds or multiple offenders
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
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Enforcement Actions in the States
Enforcement usually falls to the attorneys general or district attorneys (rarely to the US attorneys, though they would have standing to sue/prosecute under theories of interstate commerce)
AGs limited in many instances to civil cases rather than criminal prosecutions
Civil fines and even practice prohibitions generally do not prevent perpetrators from moving to another state as there is no database tracking contractors
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
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Enforcement Actions In The States--Colorado
In response to an inquiry as to whether a roofer can “handle” an insurance claim, the Division opined:
The Division does not regulate the roofing contractors, nor do we enforce the provisions of SB 38, which fall under Title 6 of the Colorado Revised Statutes. However, if the contractor were to transact the unauthorized business of insurance, the Division would investigate the roofers actions.
Roofers, or any other contractor, cannot negotiate the settlement of a claim without a public adjuster license; the roofer cannot negotiate the amount of claim settlement and cannot take the claim out of the consumer’s hands.
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
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Enforcement Actions in the States — North Carolina
In describing protocols for adjuster activities in post-disaster environment, Commissioner Goodwin made clear that “there is no provision in Article 33A allowing public adjusters to adjust claims in NC without a public adjuster license in times of catastrophic emergencies.” (Bulletin 13-B-02)
North Carolina’s focus on the licensing status of those holding themselves out as public adjusters, whether contractors or PAs from other states, is appreciated
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
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Enforcement Actions in the States--Texas
Commissioner’s bulletin focused on problem of unlicensed parties and how they “prey on unknowing consumers by promising to ‘work’ insurance claims to achieve a higher settlement.” Department’s advisory went to all licensed entities, including insurers, to be on alert for these perpetrators:
“The department takes seriously the harm unlicensed individuals and entities can cause on the marketplace when they prey on unsuspecting consumers and the industry. I urge insurers, agents, adjusters and consumers to help call attention to and halt attempts by unlicensed persons to negotiate insurance claims, and I encourage everyone to report these practices to the department and the TDI Fraud Unit.”
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
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Enforcement Actions in the States—Texas
Texas is to be commended for having the most progressive platform of public adjuster regulation and enforcement
Law prohibiting PAs from having financial interest in contractors
Model act implementation
Advisory council including PAs, independent adjusters and insurers—”huge advantage having PAs on the council”—TDI official
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
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Enforcement Action in the States--Ohio
Special mention is needed also for Ohio’s aggressive pursuit of contractors generally and when they serve as insurance claims adjusters
An important part of the contractor scam is to maintain control of the insurance relationship, from beginning to end, which means a consumer must not seek out the services of a licensed and authorized public adjuster
Ohio’s Insurance Department has worked to coordinate efforts among the numerous local prosecutors, state prosecutors and licensed insurance entities to improve the understanding of the UPPA problem
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
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Enforcement Actions in the States — Ohio
“Despite state laws, contractors have been found to be acting in the capacity of public insurance adjusters
Contractors are advertising and/or including language in their contracts indicating they will assist the homeowner in the filing, negotiation and/or settlement of their claim
Contractors are charging consumers a set fee to file, negotiate and/or settle their claim” -- Ohio Insurance Department
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
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Enforcement Actions in the States — Ohio
Contractors are requiring consumers to sign a power of attorney relative to their insurance claim
Contractors are filing claims on the consumer’s behalf
Contractors “representing” and/or speaking for the insured.
Contractors are intercepting insurance proceeds.
Excerpted from Ohio Insurance Department publication on UPPA
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
21 UPPA
Enforcement Actions in the States — Kansas
Attorney General brought civil action against roofing contractor under the Kansas Consumer Protection Act for alleged fraud arising from hail damage
Insurer advised insured to contact roofer, independent adjuster negotiated with roofer, and consumer signed over proceeds of insurance claim settlement to the roofer
Roof repairs were never completed
Petition only included typical consumer-related claims, such as forgery and fraud, rather than insurance-related claims as well including UPPA, insurance fraud or other insurance law violations as it predated a new roofers law implemented in July, 2013
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
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Enforcement Actions in the States — Illinois
Classic “storm-chaser” scenario where contractor serves to expedite insurance claims settlement with insurer, requires up front payment for services and then either doesn’t do work or does so in inferior manner
UPPA is a critical part of the fraud: it is the pathway to the money that turns out to be the key to the consumer fraud
Challenge is that insurers are pressed to settle claims quickly, especially in event of catastrophes, which drives independent adjusters to expedite settlement discussions with any representative of the homeowner, and most times it turns out to be a contractor
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
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Enforcement Opportunities
Enforcement Bulletins: As in Texas, Oklahoma, Minnesota, North Carolina, and Arizona, states can issue enforcement bulletins to all licensees—sharing with other law enforcement as well—that raises awareness to the problem of UPPA and provides specific recitation of the laws pertaining to public adjusting.
Market Monitoring: Especially websites and advertising both during regular periods and during catastrophes, is essential
Cat Response Emergency PA Licenses: States, by including public adjuster licensing in emergency licensing and PAs in disaster area access protocols, can reduce the incidence of contractor UPPA perpetration in post-disaster recovery period
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
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Enforcement Opportunities
Development of independent adjuster licensing laws and continuing education programs would help address issue of UPPA if only to alert IA community of prevalence of the problem
Sometimes unlicensed also means untrained or uninformed, especially about UPPA, so improved regulatory oversight of IAs could improve the situation
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
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Enforcement Opportunities
Expansion of use and publicizing of cease and desist letters: while of limited value as compared to more assertive law enforcement, C&Ds can be “early warning signs” to UPPA community that regulators are aware and monitoring marketplace and publication/tracking of C&Ds take use of these tools to a new level
Interagency Task Force: given limitations of authority of insurance regulators to enforce laws against non-licensed entities, commissioners can join forces with attorneys general, federal prosecutors (on an interstate commerce theory) to bring more serious general business practice fraud and other charges for major perpetrators
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
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Enforcement Opportunities
Model Legislation/Amendments to Model Act #228
Require that all PAs identify that they are licensed to manage claims, and require all non-PAs to acknowledge that they are not licensed as PAs.
Require insurance companies and independent adjusters to request identification of any party purporting to represent insured consumer
Inclusion of UPPA in definition of insurance fraud Create public adjuster councils in each state, such as that in Texas,
to educate and inform regulators on the incidence of UPPA, and discuss other issues of interest to PAs.
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
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Enforcement Opportunities
2014 Charge to Market Regulation and Consumer Affairs (D) Committee: NAPIA requests (D) Committee to focus on improved monitoring and enforcement of independent and public adjusters in the marketplace, and discussion of improved surveillance opportunities or methodologies for rooting out and preventing UPPA
TF of NAIC focused on UPPA and other enforcement-related issues: Anti-fraud WG, MAWG, Producer Licensing, Cat WG, including Roundtable presentation or public hearing on the problem of UPPA, can be the execution on this charge
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
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Summary of Enforcement Opportunities
Model Act revisions designating UPPA as insurance fraud, requiring confirmation of party’s authority to settle claims
Issuance of departmental bulletins advising of perils of UPPA and need for market surveillance
Development of CD tracking database
Creation of public adjuster advisory councils
Include public adjusters in emergency licensing protocols during disasters
Interagency task forces with insurance regulators, AGs and other prosecutors
Greater enforcement focus in various working groups of NAIC through development of TF and inclusion in D committee 2014 charge
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
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QUESTIONS
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
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Contacts
David Barrack, Executive Director Brian Goodman, General Counsel
NAPIAPessin Katz
21165 Whitfield Place 901 Dulaney Valley Road
Suite 105Suite 400
Potomac Falls, VA 20165 Towson, MD 21204
[email protected]@pklaw.com
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
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Contacts
Gregory V. Serio Art Jansen, Jr., Texas, President
NAPIA/NAIC Liaison Karl Denison, Maryland, President-elect
Park Strategies, LLC Ron Reitz, California, Imm. Past President
101 Park Avenue Scott DeLuise, Colorado, First Vice President
New York, NY 10178
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS
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About NAPIA
The National Association of Public Insurance Adjusters is the oldest and largest association of its kind in the United States serving the public adjuster profession and striving for excellence in the practice of public adjusting. Its members are experts in public adjusting who have joined together for the express purpose of professional education, obtaining certification and promoting a rigid code of professional conduct and ethics.