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The Ethical Obligations of a Claims Adjuster

What is a claims adjuster and what ethical obligations are they supposed to follow?

Claims adjusters work for insurance companies, as such they have an inherent conflict of interest when dealing with claimants. The adjuster is there to protect the interests of their employer. Often claimants believe that the insurance adjuster has their best interests in mind, but this is simply not the case. Claims adjusters job is to limit the amount of money they pay out on claims, to pay as little as possible on each and every claim so as to maximize the profitability of the insurance company.

As a lawyer, I have had many clients come to me over the years telling me the same story, that a claims adjuster contacted them after their accident and offered to give them a check the same day or the day after their accident. Often these checks are for minimal amounts like $300 and include full and final releases of all property damage and bodily injury claims against their insured. Should an adjuster be allowed to engage in this type of behavior? The Florida Administrative code would say the answer is a big NO.

Here is the language from Florida Administrative code Section 4(4)(l)

"An adjuster shall not attempt to negotiate with or obtain any statement from a claimant or witness at a time that the claimant or witness is, or would reasonably be expected to be, in shock or serious mental or emotional distress as a result of physical, mental, or emotional trauma associated with a loss. Further, the adjuster shall not conclude a settlement when such settlement would be disadvantageous or to the detriment of a claimant who is in the traumatic or distressed state described above".

Another common claims adjuster behavior that I see is for the adjuster to do everything they can to delay paying a claim. They often will say that they did not receive records sent to them by the lawyer, even though those records were sent certified mail and the lawyer has a return receipt as proof they were received. Adjusters also will claim that they are seeking prior medical records from the injured person, and despite being provided a signed medical release, six months later the adjuster will claim that they still don’t have the prior records.

This delay tactic is common and is in violation of Florida Administrative code Section 4(4)f), which states:  "An adjuster, upon undertaking the handling of a claim, shall act with dispatch and due diligence in achieving a proper disposition thereof."

Another common tactic is for adjusters to steer claimants away from hiring a lawyer and suggest that they would be better off just settling the claim. This conduct violates Florida Administrative Code section (4)(4)(k) which states:  "An adjuster shall not advise a claimant to refrain from seeking

legal advice, nor advise against the retention of counsel to protect the claimant's interest".

Perhaps the biggest problem that I see as a lawyer is claims adjusters denying claims or low balling the claim in such a manner as to effectively be denying the claim.  When you purchase liability insurance you have a reasonable expectation that your insurance will pay claims in the event that you are at fault in an accident.  When your insurance company does not pay the claim or makes such a low offer to settle that they effectively are denying the claim, you as the insured may find yourself being sued by the injured driver. So instead of protecting you, and paying the claim as you would expect you get a knock on the door from a process server, who then serves you with a lawsuit, which could have been avoided had the adjuster paid the claim. This type of adjuster behavior violates Florida Administrative Code section (4)(4)(c)  which states "An adjuster shall never approach investigations, adjustments, and settlements in a manner prejudicial to the insured".

Has your adjuster has violated these rules? Report violations to the Employee Assistance Office at 850-488-5201or 1-800-342-1741 and speak to an Insurance Analyst/Advisor. Be sure to request that they fill out an official RFA (Request For Assistance) . The official paperwork must be done before any official action be taken.

You can also request that they send the RFA on to the Bureau of Monitoring and Auditing.

Here is the complete Florida Administrative Code Section 4 (of 68 sections) for insurance. Included in it are 4-220.201 Ethical Requirements.

(1) Purpose. This rule sets forth the various ethical considerations and constraints for various classes of insurance adjusters.

(2) Definitions. The following definitions shall apply for purposes of this rule.

(a) "Adjuster," when used without further specification, refers to and includes all types and classes of insurance adjusters, (company, independent, and public), subject to Chapter 626, Florida Statutes, and regardless whether resident or nonresident, and whether permanent, temporary, or emergency licensees.

(b) "Client" refers to and includes both clients and potential clients; and means any person who consults with or hires an adjuster to provide adjusting services.

(c) "Department" refers to the Florida Department of Insurance.

(d) "Person" includes natural persons and legal entities.

(3) Violation. Violation of any provision of this rule shall constitute grounds for administrative action against the licensee, upon grounds, that include but are not limited to, that the violation demonstrates a lack of fitness to engage in the business of insurance. Additionally, a breach of any provision of this rule constitutes an unfair claims settlement practice.

(4) Code of Ethics.
The work of adjusting insurance claims engages the public trust. An adjuster must put the duty for fair and honest treatment of the claimant above the adjuster’s own interests, in every instance. The following are standards of conduct that define ethical behavior.

(a) An adjuster shall disclose all financial interest in any direct or indirect aspect of an adjusting transaction. For example: an adjuster shall not directly or indirectly refer or steer any claimant needing repairs or other services in connection with a loss to any person with whom the adjuster has an undisclosed financial interest, or which person will or is reasonably anticipated to provide the adjuster any direct or indirect compensation for the referral or for any resulting business.

(b) An adjuster shall treat all claimants equally. An adjuster shall not provide favored treatment to any claimant. An adjuster shall adjust all claims strictly in accordance with the insurance contract.

(c) An adjuster shall never approach investigations, adjustments, and settlements in a manner prejudicial to the insured.

(d) An adjuster shall make truthful and unbiased reports of the facts after making a complete investigation.

(e) An adjuster shall handle every adjustment and settlement with honesty and integrity and allow a fair adjustment or settlement to all parties without any remuneration to himself except that to which he is legally entitled.

(f) An adjuster, upon undertaking the handling of a claim, shall act with dispatch and due diligence in achieving a proper disposition thereof.

(g) An adjuster shall promptly report to the Department any conduct by any licensed insurance representative of this state, which conduct violates any insurance law or Department rule or order.

(h) An adjuster shall exercise extraordinary care when dealing with elderly clients, to assure that they are not disadvantaged in their claims transactions by failing memory or impaired cognitive processes.

(i) An adjuster shall not negotiate or effect settlement directly or indirectly with any third-party claimant represented by an attorney, if said adjuster has knowledge of such representation, except with the consent of the attorney. For purposes of this subsection, the term "third-party claimant" does not include the insured or the insured’s resident relatives.

(j) An adjuster is permitted to interview any witness, or prospective witness, without the consent of opposing counsel or party. In doing so, however, the adjuster shall scrupulously avoid any suggestion calculated to induce a witness to suppress or deviate from the truth, or in any degree affect their appearance or testimony at the trial or on the witness stand. If any witness making or giving a signed or recorded statement so requests, the witness shall be given a copy thereof.

(k) An adjuster shall not advise a claimant to refrain from seeking legal advice, nor advise against the retention of counsel to protect the claimant’s interest.

(l) An adjuster shall not attempt to negotiate with or obtain any statement from a claimant or witness at a time that the claimant or witness is, or would reasonably be expected to be, in shock or serious mental or emotional distress as a result of physical, mental, or emotional trauma associated with a loss. Further, the adjuster shall not conclude a settlement when such settlement would be disadvantageous or to the detriment of a claimant who is in the traumatic or distressed state described above.

(m) An adjuster shall not knowingly fail to advise a claimant of their claim rights in accordance with the terms and conditions of the contract and of the applicable laws of this state. An adjuster shall exercise care not to engage in the unlicensed practice of law as prescribed by the Florida Bar.

(n) A company or independent adjuster shall not draft, unless approved in writing in advance by the insurer and such written communication can be demonstrated to the Department, special releases called for by the unusual circumstances of any settlement or otherwise draft any form of release. Except as provided above, a company or independent adjuster is only permitted to fill in the blanks in a release form approved by the insurer they represent.

(5) Public Adjusters, Other Ethical Constraints. In addition to considerations set out above for adjusters, the following ethical considerations are specific to public adjusters.

(a) A public adjuster shall advise the insured and claimant in advance of their right to choice of counsel to represent the insured or claimant, and that such choice is to be made solely by the insured or claimant.

(b) The public adjuster shall notify the insured or claimant in advance of the name and location of any proposed contractor, architect, engineer, or similar professional, before any bid or proposal by any of these persons may be used by the public adjuster in estimating the loss or negotiating settlement, and the insured or claimant may exercise veto power of any of these persons in which case that person shall not be used in estimating costs.

(c) The public adjuster shall ensure that if a contractor, architect, engineer, or other licensed professional is used in formulating estimates or otherwise participates in the adjustment of the claim, the professional must be licensed by the Florida Department of Business and Professional Regulation.

(d) A public adjuster shall not prevent, or attempt to dissuade or prevent, a claimant from speaking privately with the insurer, company or independent adjuster, attorney, or any other person, regarding the settlement of the claim.

(e) A public adjuster shall not acquire any interest in salvaged property, except with the written consent and permission of the insured.

(f) A public adjuster shall not accept referrals of business from any person with whom the public adjuster may conduct business where there is any form or manner of agreement to compensate the person, whether directly or indirectly, for referring business to the public adjuster. Except as between licensed public adjusters, or licensed public adjusters and members of the Florida Bar, no public adjuster may compensate any person, whether directly or indirectly, for the principal purpose of referring business to the public adjuster.