uppa: a persistent problem for policyholders, regulators and insurers

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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

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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. UPPA —Unauthorized Practice of Public Adjusting. UPPA—What is It? - PowerPoint PPT Presentation


UPPA: A Persistent Problem for Policyholders, Regulators and Insurers

UPPA: A Persistent Problem for Policyholders, Regulators and InsurersA Presentation to the Market Actions (D) Working Group of the National Association of Insurance CommissionersTuesday, December 17, 2013 Washington, DC1UPPAUnauthorized Practice of Public AdjustingUPPAWhat 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 regulationNATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS2UPPAFrom 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.


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 Adjustersbusted! 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 ADJUSTERS4UPPACase 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 activitiesNATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS5UPPACase 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 lossprepare 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 adjustingNo mention of being licensed as a public adjuster; relies on Angies List and BBB logos to show legitimacy.NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS6UPPAUPPAWhy 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 insuredsFor 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 environmentNATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS7UPPAUPPAWhy 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 cracksNATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS8UPPANAPIAS 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 appropriateNAPIA 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 settlementNATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS9UPPANAPIAs 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 TexasNAPIA 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 consumers interest and integrity of the insurance marketplaceNAPIA has also promoted and supported licensing of all public adjusters, continuing education of PAs and other initiatives to improve professionalism of those licensed as PAsNATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS10UPPAEnforcement 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 UPPAEnforcement by insurance regulators is generally limited to cease-and-desist orders for an unauthorized practice of insurance, and perhaps insurance fraud violations in certain instancesMost states surveyed, though, find the C&D to be an ineffective deterrent and too little an outcome for too much work in tracking UPPA casesNATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS11UPPAEnforcement Actions in the States

The Problem with C&Ds

Limited civil impact, and no criminal penaltiesNo central repository of C&Ds issuedTransient and multiple identity contractors evade most implications of C&Ds or multiple offenders NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS12UPPAEnforcement 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 prosecutionsCivil fines and even practice prohibitions generally do not prevent perpetrators from moving to another state as there is no database tracking contractorsNATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS13UPPAEnforcement 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 consumers hands.


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 Carolinas focus on the licensing status of those holding themselves out as public adjusters, whether contractors or PAs from other states, is appreciatedNATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS15UPPAEnforcement Actions in the States--Texas

Commissioners 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. Departments 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 ADJUSTERS16UPPAEnforcement Actions in the StatesTexas

Texas is to be commended for having the most progressive platform of public adjuster regulation and enforcementLaw prohibiting PAs from having financial interest in contractorsModel act implementationAdvisory council including PAs, independent adjusters and insurershuge advantage having PAs on the councilTDI officialNATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS17UPPAEnforcement Action in the States--Ohio

Special mention is needed also for Ohios aggressive pursuit of contractors generally and when they serve as insurance claims adjustersAn 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 adjusterOhios 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


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 claimContractors are charging consumers a set fee to file, negotiate and/or settle their claim -- Ohio Insurance Department


Contractors are requiring consumers to sign a power of attorney relative to their insurance claimContractors are filing claims on the consumers behalfContractors representing and/or speaking for the insured.Contractors are intercepting insurance proceeds.Excerpted from Ohio Insurance Department publication on UPPANATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS20UPPAEnforcement 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 damageInsurer advised insured to contact roofer, independent adjuster negotiated with roofer, and consumer signed over proceeds of insurance claim settlement to the rooferRoof repairs were never completedPetition 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, 2013NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS21UPPAEnforcement 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 doesnt do work or does so in inferior mannerUPPA is a critical part of the fraud: it is the pathway to the money that turns out to be the key to the consumer fraudChallenge 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


Enforcement Bulletins: As in Texas, Oklahoma, Minnesota, North Carolina, and Arizona, states can issue enforcement bulletins to all licenseessharing with other law enforcement as wellthat 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 essentialCat 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 periodNATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS23UPPAEnforcement 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 problemSometimes unlicensed also means untrained or uninformed, especially about UPPA, so improved regulatory oversight of IAs could improve the situationNATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS24UPPAEnforcement 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 levelInteragency 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


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 consumerInclusion of UPPA in definition of insurance fraudCreate 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.


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 UPPATF 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


Model Act revisions designating UPPA as insurance fraud, requiring confirmation of partys authority to settle claimsIssuance of departmental bulletins advising of perils of UPPA and need for market surveillanceDevelopment of CD tracking databaseCreation of public adjuster advisory councilsInclude public adjusters in emergency licensing protocols during disastersInteragency task forces with insurance regulators, AGs and other prosecutorsGreater enforcement focus in various working groups of NAIC through development of TF and inclusion in D committee 2014 charge


David Barrack, Executive DirectorBrian Goodman, General CounselNAPIAPessin Katz21165 Whitfield Place901 Dulaney Valley RoadSuite 105Suite 400Potomac Falls, VA 20165Towson, MD [email protected]@pklaw.com NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS30UPPAContacts

Gregory V. SerioArt Jansen, Jr., Texas, PresidentNAPIA/NAIC LiaisonKarl Denison, Maryland, President-elect Park Strategies, LLCRon Reitz, California, Imm. Past President101 Park AvenueScott DeLuise, Colorado, First Vice PresidentNew York, NY [email protected] NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS31UPPAAbout 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.NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS32