Beware Public Adjusters – Danger Ahead in Louisiana!

Note: This guest blog post is by Holly Soffer, Esq., a policyholder attorney and General Counsel to the American Association of Public Insurance Adjusters.

Unfortunately, we are singing the same old song again in Louisiana, having to report new administrative actions filed against public adjusters for the unauthorized practice of law and licensing violations. The pursuit of these types of actions by the Louisiana Department of Insurance (LDI) has been dormant for a few years. As a result, some public adjusters have relaxed their concern about possible scrutiny by the LDI on their conduct. This is a mistake. Even armed with all the correct types of documents, however, one can still fall outside the law regarding conduct.

Recently, Commissioner Donelon published an Advisory Letter [Advisory Letter 2022-01] which recited the law regarding the definition of public adjusters and then commented at the bottom:

Finally, it is important to note that public adjusters may not undertake activities that otherwise constitute the practice of law, which include engaging the policyholder in a contingency based fee arrangement, rendering legal advice regarding policy provisions or coverage issues, advising insureds of issues and rights concerning the redress of legal wrongs under the insurance policies, and negotiating settlements and directly contacting insurers to discuss and evaluate the merits of the client’s insurance claims. (emphasis added)

The LDI, relying on the law and this Bulletin—which was specifically cited to me in a recent meeting with the Enforcement Division regarding an administrative action against a public adjuster—has been issuing fines and Cease and Desist Orders against public adjusters as part of administrative actions for the unauthorized practice of law, which actions then must be reported to other states.

I have argued to the LDI that their own law requires public adjusters to send a Notice Letter—which is a de facto communication with the insurer—but they made the distinction between that letter and a communication “to discuss and evaluate the merits of the client’s insurance claims.” There have been more than a few of these actions instituted in the last few weeks.

Further, as a part of these actions, public adjusters have been cited for having websites that mention the word negotiate or in any way purport to offer any services that would violate the law, such as representing the interests of insureds, presenting the claim to the carrier, or offering “no recovery, no fee.” This type of scrutiny is unexpected by many public adjusters.

Is your paperwork fully compliant? The LDI has been cracking down on unlicensed activity from public adjusting entities when only an individual is named as having a license. In addition, those insurance regulators are carefully and methodically reviewing files to uncover wrongful activity, scanning solicitations and promises on websites, and checking licensing credentials.

Possible Solutions? We will create a panel discussion soon to talk about these issues and strategies for navigating this minefield. In the meantime, please consider the following:

Immediately change your website to say that the troublesome services offered do not apply to Louisiana or place an asterisk next to those sections with a similar message.
When you do communicate with the insurer, start each communication with: “I have reported to the insured that ……. and he/she/it has asked me to forward such report to you as a courtesy,” or similar language if that is what your insured client has asked you to do. This may not be bulletproof, but for now is a better strategy than just sending an email, letter, or text message, which the LDI has raised as actionable misconduct. The commissioner’s bulletin was a warning.
On the licensing issue – if you only have an individual license in Louisiana and not a company one, either obtain a company license or don’t use your company email address, deposit money in your company account, or use the company letterhead. Using the company letterhead even once has recently resulted in an administrative action.

We can discuss other ideas at our panel discussion. So bring your questions and comments to the panel discussion!

And, in the spirit of a Merlin blog, I will leave you with a quotation:

When you come to the end of your rope, tie a knot and hang on.
– Franklin D. Roosevelt