Public adjusters cannot double as appraisers in claims disputes if their total fees exceed the statutory cap, a Florida appeals court decided Wednesday in what may be seen as another win in property insurers’ long battle against tactics allegedly employed by some public adjusters.
The decision in Monarch Claims Consultants vs. Fleming and Universal Property & Casualty Insurance underscores a 2018 Florida appeals court opinion and a 2023 ruling from the Florida Supreme Court, which found that public adjusters cannot act as appraisers in the same claim if the policy requires a “disinterested” appraiser.
The Wednesday opinion, by the 1st District Court of Appeals, may have been influenced by widespread stories of some public adjusters coming into distressed areas after hurricanes and signing up homeowners – but failing to follow through on claims, said Charles “Chip” George, of Coral Gables, one of the homeowners’ attorneys in the case.
“You had a carpetbagger running up there and signing up people, then not doing any of the work he’d promised to do,” George said Wednesday.
The case stemmed from Hurricane Michael, which hit the Florida Panhandle in 2018. Cliff and Jane Fleming’s home in Panama City, Florida, suffered significant damage and they hired Monarch Claims Consultants, of Miami, as their public adjusting firm. The contract provided that the homeowners would also appoint Monarch as an appraiser if the loss amount was disputed and went to appraisal.
After a year, though, the Flemings terminated the service agreement because they said Monarch had made no progress on the claim, the court explained. The couple settled with their insurance company, Universal Property & Casualty. Monarch claimed it was entitled to a fee from the settlement. The Flemings filed suit, seeking a declaration from the Bay County Circuit Court that the contract with Monarch was invalid because it violated Florida law.
Florida statutes limit public adjusters’ fees, for up to a year after a declared state of emergency, to 10% of the insurance award or settlement, not including attorney fees. Outside of declared emergency periods, public adjusters may charge no more than 20%.
The adjusting firm sought to have the Flemings’ suit moved to Miami-Dade, per one section of the service agreement. But the trial court agreed with the Flemings’ attorney that the entire contract was invalid because an appraisal fee plus the adjuster fee would put the firm’s compensation at double the statutory limit.
The contract “was absurd on its face,” George said. “It was taking advantage of people who were in dire straits and needed help.”
Monarch appealed, but the 1st District Court of Appeals upheld the trial judge.
“The trial court cannot enforce a venue selection clause when there was never a valid contract to begin with,” reads the opinion, written by Appeals Court Judge Rachel Nordby.
Monarch’s attorneys, Jessica and Henry Marinello, argued that the contract with the homeowners was a “two-purpose contract,” and the fee-limit statute applies only to the public adjuster fees.
“But Monarch’s argument fails to give full effect to the text of the statute,” the court wrote.
A key point in the decision, George said, is that the court found that although Monarch had not yet seen any compensation from the contract, just the plan to double-dip on the fee is contrary to the fee limitations law.
“Even if the added ten percent fee counts as an ‘appraiser fee’ instead of a ‘public adjuster fee’ as Monarch suggests, the contract would still violate the statute. The Flemings’ promise to appoint Monarch as their appraiser, on its own, is a ‘thing of value’ that exceeds the ten percent cap,” the appeals court noted.
The decision was supported by a 2018 opinion by Florida’s 3rd District Court of Appeals, known as Gables Insurance Recovery vs. Citizens Property Insurance Corp. In that case, the court found that a homeowner hired a public adjuster and agreed to the statutory cap on fees. But in a second contract, the policyholder assigned benefits to the adjuster, granting another 20% of the insurance recovery.
The courts found that even as an assignee of benefits, the firm still was considered a public adjuster, and the AOB contract had to be voided. “Section 626.854 says that a public adjuster may not even ‘agree to’ compensation in excess of the” statutory cap, the court said.
The opinion may be seen as another blow against public adjusters, who have been vilified by insurance carriers and by state officials for, in some cases, allegedly inflating damage estimates, conspiring with repair contractors and with trial attorneys, and interfering with insurers’ own adjustment efforts. After Hurricane Ian hit southwest Florida in 2022, Florida’s chief financial officer said adjusters had “swarmed” the devastated area and he called for new regulations.
Six months later, the Florida Legislature placed additional limits on public adjusting firms. House Bill 1185, signed into law in May, prohibits public adjusters from contracting with anyone other than the named insured without the insured’s written consent.
If the public adjuster does contract with a third party, the third party must pay the fee. The bill also allows policyholders to cancel a public adjuster contract within 30 days of the loss if the loss was caused by a declared emergency, or within 10 days of signing the contract.
The issue of public adjusters serving as appraisers was complicated this year when the Florida Department of Financial Services argued in a high-profile disciplinary case that appraisers fall under the statutory definition of public adjusters, subject to insurance statutes and the adjusters’ code of ethics.
The Windstorm Insurance Network, which provides training for appraisers, said that could throw a wrench into the appraisal process, since many engineers who work as appraisers are not licensed as adjusters. The network petitioned DFS to clarify if it meant appraisers had to be licensed adjusters, and if current training courses were in compliance.
Citizens Property Insurance officials asked to intervene and argued that the law is clear: Appraisers must be licensed adjusters.
In May, DFS officials denied the Windstorm petition as being too broad. It left the license question unresolved.
In the underlying case, against public adjuster Scott David Thomas, an administrative law judge and DFS found that Thomas had engaged in aggressive, bullying behavior in blocking Citizens’ own adjusters. His adjuster’s license was ordered suspended for two years and he was fined $5,000. Florida’s 4th District Court of Appeals in June barred the suspension from taking effect while Thomas’ appeal is pending.
In the Monarch case decision, the adjuster firm’s attorneys could not be reached for comment Wednesday. But George, the homeowner’s lawyer, suggested that after years of tinkering with the law to try and tamp down some public adjusters’ actions, perhaps tougher measures are needed.
“There really needs to be some criminal violations for even writing contracts like that,” in which adjusters are also hired as appraisers, George said.
Correction/Update: This article has been updated to show that an appeals court has stayed Scott David Thomas’ license suspension.
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