Many people affected by Hurricane Harvey have likely been approached by a public adjuster regarding how they can help with your claim. Given the overwhelming nature of the disaster, it is not uncommon for folks to feel lost and desperate for someone to help them through the process.
However, given the limited nature of available insurance and the significant amount of money it will cost to rebuild, it is imperative that you conserve every dollar you have in order to try to rebuild and replace that which was lost. In fact, if you are inclined to hire a public adjuster (or lawyer for that matter), we would advise you to seriously consider holding off until after you meet with your adjuster and receive your initial offer and after you believe you have negotiated as much as possible.
Public adjusters usually charge 10% of the recovery. You don’t need to pay this fee until you determine if you really need help. Moreover, in my opinion, a public adjuster (or lawyer) should only charge a fee on the the additional money they were able to help you get above the last offer made by the insurance company.
By way of example, if you hire a public adjuster before getting the initial offer or POL from your insurance company then the fee will be on the entire amount. So if the insurance company was going to give you $250,000.00 for your structure and $100,000.00 for your contents (the maximum amount of flood coverage) regardless of the public adjuster’s services then you are throwing away $35,000.00 (the public adjusters’ fee).
While I think it is prudent to consult with someone familiar with the claims process like a lawyer or public adjuster to make sure that you are not leaving money on the table, you should make sure that whomever you hire is not going to take a fee off of the initial offer or the last offer you negotiated before hiring such individual. When making this decision, here is some general information on the claims process and about public adjusters.
What is a public adjuster?
Texas law defines a “Public insurance adjuster” as:
(A) a person who, for direct, indirect, or any other compensation:
- (i) acts on behalf of an insured in negotiating for or effecting the settlement of a claim or claims for loss or damage under any policy of insurance covering real or personal property; or
- (ii) on behalf of any other public insurance adjuster, investigates, settles, or adjusts or advises or assists an insured with a claim or claims for loss or damage under any policy of insurance covering real or personal property; or
(B) a person who advertises, solicits business, or holds himself or herself out to the public as an adjuster of claims for loss or damage under any policy of insurance covering real or personal property.
In layman’s terms, it is a person or company who helps individuals with their insurance claims.
Are there laws and regulations in Texas that regulate public adjusters?
Yes. The following are some of the more relevant statutes and regulations:
If you find that your public adjuster violated the laws below or the statutes found here, then you have a right to void your contract. Texas law states: “(a) Any contract for services regulated by this chapter that is entered into by an insured with a person who is in violation of Section 4102.051 may be voided at the option of the insured. (b) If a contract is voided under this section, the insured is not liable for the payment of any past services rendered, or future services to be rendered, by the violating person under that contract or otherwise.”
Texas law sates:
(a) A person may not act as a public insurance adjuster in this state or hold himself or herself out to be a public insurance adjuster in this state unless the person holds a license issued by the commissioner under Section 4102.053 or 4102.054.
If the person or company you hired to help you doesn’t have license issued by the State of Texas, then person or company is not legally allowed to assist you with your claim for a fee. Meaning, you have no obligation to pay such individual or company. Moreover, given the importance of the claim, you do not want to work with someone that is not legally operating. You can check here to see if your public adjuster has a license, which can also be found on TDI’s website.
Written Contract for Services Required
Texas law states:
Sec. 4102.103.. (a) A license holder may not, directly or indirectly, act within this state as a public insurance adjuster without having first entered into a contract, in writing, on a form approved by the commissioner, executed in duplicate by the license holder and the insured or the insured’s duly authorized representative. A license holder may not use any form of contract that is not approved by the commissioner.
(b) The contract must contain a provision allowing the client to rescind the contract by written notice to the license holder within 72 hours of signature, and must include a prominently displayed notice in 12-point boldface type that states “WE REPRESENT THE INSURED ONLY.” The commissioner by rule may require additional prominently displayed notice requirements in the contract as the commissioner considers necessary.
This rule is important. Any agreement with a public adjuster must be in writing and you have 72 hours to cancel. In fact, the Texas Department of Insurance requires that a public adjuster’s contract uses:
- TDI’s standard language contract, the Public Insurance Adjuster Contract (TDI Form FIN535); or
- Any other contract, after it has been filed and approved with the TDI.
If your contract is not the standard contract or one that has been approved by TDI, then you have a strong argument that your contract is voidable.
Conflicts of Interest Prohibited
Texas Law states:
(a) A license holder may not:
- participate directly or indirectly in the reconstruction, repair, or restoration of damaged property that is the subject of a claim adjusted by the license holder; or
- engage in any other activities that may reasonably be construed as presenting a conflict of interest, including soliciting or accepting any remuneration from, having a financial interest in, or deriving any direct or indirect financial benefit from, any salvage firm, repair firm, construction firm, or other firm that obtains business in connection with any claim the license holder has a contract or agreement to adjust.
(b) A license holder may not, without the knowledge and consent of the insured in writing, acquire an interest in salvaged property that is the subject of a claim adjusted by the license holder.
This speaks for its self. The job of the public adjuster is to help you with the claim not make money off of the repairs to your home.
Misrepresentation Prohibited and Certain Representations Prohibited
Texas Law states:
A license holder may not use any misrepresentation to solicit a contract or agreement to adjust a claim.
A license holder may not use any letterhead, advertisement, or other printed matter, or use any other means, to represent that the license holder is an instrumentality of the federal government, of a state, or of a political subdivision of a state.
This is a big concern because there are so many folks trying to get your business. Something that I hear on a regular basis is that a public adjuster is a preferred FEMA adjuster that can get you all of the policy limits. There is no such thing as a “preferred FEMA” adjuster. If someone will lie to you in order to get your business, why would you want to trust that person with such an important job.