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—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
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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.”
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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.”
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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
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UPPA
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.
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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
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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
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UPPA
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
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UPPA
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
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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
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UPPA
 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
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UPPA
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
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UPPA
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.
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UPPA
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
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UPPA
 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.”
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UPPA
 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
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UPPA
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
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UPPA
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
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UPPA
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
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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
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UPPA
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
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UPPA
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
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UPPA
 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
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UPPA
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
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UPPA
 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.
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UPPA
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
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UPPA
 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
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UPPA
QUESTIONS
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UPPA
Contacts
David Barrack, Executive Director
Brian Goodman, General Counsel
NAPIA
Pessin Katz
21165 Whitfield Place
901 Dulaney Valley Road
Suite 105
Suite 400
Potomac Falls, VA 20165
Towson, MD 21204
david@napia.com
bgoodman@pklaw.com
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UPPA
 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
gserio@parkstrategies.com
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UPPA
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.
NATIONAL ASSOCIATION OF PUBLIC INSURANCE ADJUSTERS