Ten months after Hurricane Harvey and many folks still have not reached a settlement with their insurance company. On the other hand, others have reached a “full settlement” and don’t even know that they were shortchanged by the insurance company. Without the help of a qualified licensed professional, there is no way for them to know. Yes, I’m talking about a licensed public adjuster. Desperate times call for professional help and Harvey definitely caused an extremely desperate situation for many.
So many in the greater Houston area were devastated by the floods that Hurricane Harvey brought. However, the devastation doesn’t end there. It has been unrelieved as many property owners continue to battle with the insurance companies to pay what they are owed. Some may have simply settled thinking they were paid correctly. Many in the business would advise against seeking the professional help of a licensed public adjuster to handle your insurance claim, incorrect in their belief that the insurance companies will just get out their checkbook and pay when it comes to a catastrophe of this magnitude. This simply isn’t true.
Let’s discuss exactly what a public adjuster is and what they do to help you with your property damage insurance claim, especially when there is a significant catastrophe.
What does a public adjuster charge to handle your claim? Texas law allows a maximum fee of 10% for a licensed public adjuster to handle your insurance claim. This means that the public adjuster can charge you 10% of the insurance proceeds on your claim. Some might think this is crazy and that you need this money to make the repairs and replace what you have lost. It is true that every penny is valuable when trying to restore your property to pre-loss condition. However, you most likely will not receive an estimate from your insurance company’s adjuster anywhere near what you need to recover. Most likely, that estimate will use bottom dollar values instead of considering any upgrades and most times will omit things completely. With the level of contamination the flood waters from Harvey contained, there are things that the lay person just doesn’t know, like the waters actually got under your tile flooring and caused damage and contamination. These need to be pulled up and replaced, not just re-grouted. A qualified public adjuster who is familiar with handling flood claims will know the ins and outs of what to look for that the property owner does not and quite frankly the insurance adjuster is not going to. Another issue in properties flooded by Harvey was the backer board (product between the studs and bricks) was damaged because the flood waters remained in the property for an extended period of time and most types of backer board are porous. Without a public adjuster, the property owners were most certainly not compensated for replacement of backer board because this would mean removing brick to access it. This opens up an entire can of worms for the insurance company. However, these are just a couple examples of how the insurance company can and does shortchange the policyholder.
Some in the business may believe that you should at least wait to get an initial offer from your insurance company before consulting with a professional on your side. That is something to possibly consider. However, what if by waiting you cost yourself time and leave that money in the pocket of the insurance company. Example, say you have policy limits on your contents of $100,000 and the insurance company has actually offered you $80,000 so you have $20,000 still left on the table. A public adjuster charges you a fee based on what stage your claim is in when they get involved. By getting involved at this stage, the public adjuster is going to want a much larger percentage of the increase they are going for (not to exceed 10% of the total settlement). In other words, it is not worth the public adjuster’s time to try to clean up the mess and figure out the difference to get you paid the additional $20,000 for just a 10% fee ($2,000). However, if you are not able to find a public adjuster to take on your supplemental claim simply because it is just not worth their time, guess what – you have left $20,000 in the insurance company’s pocket simply because you didn’t hire a public adjuster to handle your claim when their maximum fee would have been $10,000. You just shorted yourself $10,000.
Another example of what actually happened in one Houston area neighborhood which flooded in April 2016 and then flooded again in August 2017 at the hands of Harvey involves next door neighbors. Neighbor A hired a public adjuster to handle their 2016 flood claim and hired the same public adjuster when Harvey hit in 2017. Neighbor A received a $132,562.92 structure settlement for the 2016 claim and in 2017 received a structure settlement of $139,274.14. Neighbor B (who lives right next door to Neighbor A in a very similar house) did not hire a public adjuster to handle their 2016 flood claim and received a structure settlement of only $44,203.19 without the assistance of a public adjuster. Following Harvey in 2017, Neighbor B decided to hire the same public adjuster as Neighbor A and the public adjuster settled the claim for Neighbor B in the amount of $101,210.91. If you do the math, even after Neighbor B pays the public adjuster a 10% fee, the settlement results after deducting the fee far exceed what was paid in 2016 because the property owner simply didn’t know what to fight for or how.
What is a public adjuster?
A public adjuster is a person who acts on behalf of the policyholder documenting, estimating, and negotiating a property damage insurance claim. There are only two professions in Texas who can legally represent the policyholder – a licensed public adjuster or an attorney. Public adjusters are licensed and regulated by the Department of Insurance and are required to be tested and maintain a number of continuing education hours to retain their license. They must also be bonded. Simply put, they are licensed to assist property owners in the handling and negotiating of their insurance claims.
Are public adjusters regulated?
The Texas Department of Insurance oversees the licensing and renewal of public adjusters in Texas. You can find the rules that govern Texas public adjusters at http://www.tdi.texas.gov/rules/2004/0618A-059.html
Are public adjusters required to have a license?
Yes, in Texas a person is required to hold a valid public adjuster license in order to represent themselves to be a public adjuster and to handle the settlement of an insurance claim. It is illegal in Texas for someone who is not a licensed public adjuster to represent a policyholder in such capacity. You can verify licensing in Texas at https://txapps.texas.gov/NASApp/tdi/TdiARManager.
Entering into contract with public adjuster
A Texas public adjuster must first enter in a written contract with a policyholder to represent their interest in an insurance claim. The contract must set forth the terms of the agreement in writing and the contract form also requires the approval of the Texas Department of Insurance. The contract is required to contain language allowing the policyholder to change their mind and cancel the contract if done so within the first 72 hours after being signed. It must also state that the public adjuster represents only the insured and not the interest of any insurance company.
You can find the required language of a public adjuster contract at http://www.tdi.texas.gov/bulletins/2008/cc46.html
Can a public adjuster also participate in making repairs?
No, this is a direct conflict of interest and is prohibit by Texas law. A public adjuster may not represent an insured in negotiation of their insurance claim and directly or indirectly participate in the repairs to said property. A public adjuster may not even hold a financial interest in another company or business who will gain from making the repairs or restoration on a property that they represent as public adjuster.
The purpose of a public adjuster is to assist the policyholder in documenting and settling a property damage insurance claim. This absolutely does not include participating (even at arms-length) in the repair process.
If you have questions about public adjusters or the handling of an insurance claim, contact one of the various state or national associations of public adjusters for more information.