Public adjusters:  Advocates for policyholders

Buyers using loss experts to help maximize coverage for claims
By Mark A. Hofmann
From Business Insurance, Monday March 20, 2006, Spotlight Claims Management

  Following a loss, the daunting task of preparing a complicated insurance claim along with the absolute necessity of keeping one’s enterprise up and running can leave a business owner looking for all the help possible in dealing with an insurer.

      For some enterprises—often those that are too small to have full-time risk managers, brokers or risk management consultants—the response is to hire public adjusters.  A public adjuster acts as an advocate for the policyholder, preparing and presenting the claim to the insurer.  Of course, these services come at a cost—usually a percentage of the claim.

      Dick Burr, the president of the Potomac Falls, Va.-based National Assn. of Public Insurance Adjusters and the director of claims for Blue Bell, Pa.-based Young Adjustment Co., Inc., said that commercial clients turn to public adjusters because they believe themselves ill equipped to deal with insurers or because they lack the time to prepare the claims themselves.

      And preparing a claim is the policyholder’s responsibility, not the insurer’s, stressed another public adjuster.

      “Remember that the burden of proof is on the insured, so the client must first prepare a claim, and the benefit from utilizing a public adjuster is that a public adjuster usually pays much greater attention to detail in the formulation of a claim than the insured ever would on their own,” said Leslie Knox, president of Andrew K. Knox & Co. in Toms River, N.J., and first vp of NAPIA.  “The benefit of using a public adjuster is having a comprehensive, accurate, detailed claim that can be documented and fully supported.”

      “Adjustment is not negotiation; adjustment is the quantification and defense of the amount claimed, based upon clearly quantifiable damages,” Mr. Knox said.  “Adjustment is where we can identify and quantify the value down to the smallest degree, and based upon the facts, the loss is argued and settled—not based upon ‘what you want vs. what I want.”

      “If we’re looking at the policy in total, just like the insurance company is, we’re able to pull out the things in the policy that give you more than you thought you had,” said Mr. Burr.  “We look at it a little broader than they will.  There are all sorts of extra coverages that, a lot of times, just get lost.”

      “I’ve got a claim right now that is over 2,500 pages of just the building detail,” noted Mr. Knox.  “It’s for a 455-unit apartment complex in Gretna, La.  That’s just the physical damage.”

      One client of Young Adjustment said her employer turned to a public adjuster because the stress of trying to keep a business running in the aftermath of a hurricane left little room for dealing with the insurance claims process.  “We were hit with Hurricane Charley on Aug. 13, 2004,” recalled Diane Gorman, a practice administrator at Charlotte Heart & Vascular Institute in Port Charlotte, Fla.  “We were hit very hard; we were just decimated.  We were reeling, just trying to take care of their patients.”

      Ms. Gorman said that “we realized very early on” that dealing with insurance claims while trying to keep the practice running would be extremely difficult.  The six-physician practice has an administration team but no risk manager, she said.  “We felt that a public advocate might be the way to go.  They work with the insurance companies, and they know more than we would ever know,” Ms. Gorman said.

      Charlotte Heart & Vascular hired Young Adjustment, and the first claims checks began arriving within a couple months of the hurricane.  The claims process continues, Ms. Gorman said, and she added that the practice is “very happy” with the public adjuster.  “They treated us very well,” she said.

      “We definitely have represented large companies that have professional risk managers.  But if a company is big enough, they’ll usually have a staff of people too, and they won’t turn to public adjusters,” explained Mr. Burr.

      Mr. Knox agreed that a typical client “would not have a full-time risk manager, in most cases.”

      John Eager, senior director of claims for the Des Plaines, Ill.-based Property Casualty Insurers Assn. of America, said that “what happens is, in a larger business, many times they have a risk manager, and the risk manager will handle the claim with the insurer.” But smaller businesses don’t have full-time risk managers, and sometimes their claims disputes are handled through arbitration or mediation, he said.  “If it resolves your loss, then you’re fine.  If you still cannot resolve it, you always have the option of finding a third party,” which could be a public adjuster, he said.

      “From a FM Global standpoint, we don’t see public adjusters very often,” noted Michael Hagen, vp and chief adjuster for Johnston, R.I.-based Factory Mutual Insurance Co., which does business as FM Global.  “The client may have a risk manager; they may not.  Usually the reason they hire them is they have a staff shortage.  They feel like they don’t see claims very often; they will want someone to help them, anyone to help them,” he said.

      Mr. Hagen stressed that “It would be rare to have any antagonism” between insurer claims adjusters and public adjusters.  “FM Global adjusters will work with anybody who’s designated by the insured.  In every case, FM Global tries to develop a relationship with our clients that includes pre-loss meetings and training seminars.  After the loss happens, our adjusters get out there right away and advise the insured what they need to do immediately, and, ultimately, we get then information about what’s necessary in preparing the claim.  We think, for the most part, it’s unnecessary for an insured to have a public adjuster helping them.”

      “I don’t think there’s antagonism; there’s a level of respect,” said Bud Trice, vp at Crawford & Co. in Atlanta, an Independent adjuster that works for insurers and self-insureds.  The differences tend to arise in “gray areas, such as where it’s going to be X number of dollars to replace the roof or Y number of dollars,” said Mr. Trice.

      “The public adjuster generally will prepare his or her case and say, “This is what I believe the loss is.’ In some respects, the public adjuster does a lot of the legwork that the insurance company would otherwise have to do,” said Mr. Trice.  He acknowledged, though, that because the public adjuster operates on a contingency basis, there’s often a degree of “skepticism” about the claims presented.

      The contingent fee is “really what the market provides,” explained Mr. Burr.  Some states regulate fees; others do not, he said.  “It used to run about 10%,” but, for some larger commercial losses, the percentages can be driven down, he said.

      Public adjusters say that in 2005 insurers did not try to settle claims for less than usual even with the crush of last year’s record hurricane season.  Insurers were stretched extremely thin, though, because of the sheer volume of claims.

      “I don’t think they’re more conservative; they’re just having a very difficult time dealing with the magnitude of loss,” said Mr. Knox.  “The biggest challenge is the great number of claims that insurers are faced with adjusting and paying,” he said.  “It’s not unusual on commercial claims to have four, five or six adjusters already who have been assigned to the claim and then removed.”

      “One of the main problems is that companies are just not staffed like they used to be,” said Mr. Burr.

      “I think that, in the last decade, insurers have reduced claims staff in an effort to economize,” agreed Mr. Knox.