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Oklahoma Commissioner Urges Adjusters to Cap Fees, Insurers to Delay Policy Non-renewals in Wake of Tornados

Source: BestWeek - Thomas Harman

Posted on 19 Jun 2013 by Neilson

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Oklahoma tornadoThe Oklahoma insurance department has asked insurers to delay policy nonrenewals for two months and has asked publically licensed adjusters to cap their post-award fees at 10%, in cases where policyholders have been affected by the tornadoes that struck the state in recent weeks.

Oklahoma Insurance Department Commissioner John Doak issued a bulletin to all state-licensed property/casualty insurers and insurance producers, asking them to keep customers on their current policies for 60 days after repairs are completed in order to give policyholders time to make repairs and obtain new insurance coverage. Because of the thousands of property claims in Oklahoma, insurers are now reassessing risk and issuing nonrenewal notices, Doak's office said.

"Due to the backlog of work that contractors and repair shops are currently experiencing, many repairs won't be completed before the policy expires. That results in open and pending claims that prevent the policyholder from obtaining replacement coverage," the department said. "We want to prevent that." Affected homeowners cannot have a surcharge placed against weather-related claims and insurers cannot cancel, increase or refuse to renew homeowners' policy premiums that have been in place for more than 45 days, solely because the insured filed a first claim against the policy, the department said. The provisions were part of a new Consumer Bill of Rights law passed by Oklahoma lawmakers earlier this year.

Doak also issued a separate bulletin to all state-licensed public adjusters asking them not to charge beyond 10% of the total claim settlement. Oklahoma storm victims need alternatives and assistance, he said in a written statement. But they also need to keep as much of their insurance claim as possible.

Since the initial tornadoes hit on May 19, the department received inquiries about the use of public adjusters in negotiating property insurance claims. Those adjusters must be licensed by the department before representing property owners and collecting fees after claims are paid. The services provided by public adjusters can be extremely valuable, Doak said. But they need to understand that higher fees are not acceptable and that all fees need to be clearly discussed up-front.

Oklahoma will monitor the fees public adjusters charge going forward, the agency said. Department spokesperson Kerry Collins told Bests News Service that the agency has no authority to enforce the cap, but that such requests of adjusters are often made following natural disasters.

Specifically, the department wants adjusters working in the state to show proof of their state license to prospective customers; to not require payment before representing clients; and to cap fees at 10% of the total gross claim settlement figure. The statement said public adjusters should act responsibly toward property owners who have been affected by the recent storms, which caused many to claim losses that exceed policy limits or that are ineligible for coverage.

Those affected by disasters in Oklahoma or elsewhere should be treated appropriately, said Brian Goodman, general counsel at the National Association of Public Insurance Adjusters. I think in a situation like that, most members of our association would certainly abide by [Doak's] suggestion and we don't see any problem with that, he said. Historically, Goodman said, the record shows many more problems with insurers in such situations than public adjusters.

States such as Mississippi and New York already have mandated adjusters fees following stated natural disasters. For instance, Mississippi has a 10% fee cap and New York's is set at 12.5%. There are others with caps, Goodman said, but the majority of states still lack adjusters fee caps.

Not every state is agreeing to keep caps in place. Beginning July 1, public adjusters handling claims within Florida for Citizens Property Insurance Corp. will receive more than 10% in commissions after lawmakers moved to repeal a 10% cap. The legislation, SB 1770, allowed adjusters to receive more than 10% for initial hurricane claims made in the first year and 20% for all subsequent claims. Citizens said there had been indications that the 10% cap was driving policyholders to seek legal aid and move more cases into litigation.

In 2012, the Supreme Court of Florida struck down a 48-hour ban on public adjusters soliciting business after claims-producing events and catastrophes, ruling that the ban was unconstitutional because it regulated commercial speech. Insurance groups opposed the ruling.