The Unscrupulous Public Adjuster


Criminal Acts by Public Adjusters

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Although they are considered professional claims people they will are not allowed to impinge on the work of the legal profession. Insurance company adjusters and independent insurance adjusters working for insurance companies can deal with insurance coverage issues but a PA may not.

In one case, a public adjuster placed an insured in a position to pay damages to the insurer. In Chubb & Son Inc. v. Consoli, 283 A.D. 2d 297, 726 N.Y.S. 2d 398 (N.Y. App. Div. 05/22/2001), a public adjuster was involved in a scheme with one of Chubb’s adjusters to intentionally inflate a claim and then pay Chubb’s adjuster to approve the claim. The insureds’ public adjuster was later convicted on charges of mail and tax fraud and Chubb’s representative was found guilty of defrauding Chubb.

The court, recognizing that a PA acts as an agent for the insured and that there exists the well settled rule that a principal, even if innocent, is liable for acts of fraud that are within the scope of an agent’s actual or apparent authority, the court concluded that the insured was liable to Chubb and the claim was forfeited.

The court concluded:

[A] principal who has expressly or impliedly appointed another person to make proof of loss under an insurance policy is barred from recovery, under a policy which provides that it shall be void for fraud or false swearing of the insured after the loss, where the agent is guilty of fraud or false swearing in or in connection with the proof of loss…

even though the insured is ignorant of the misrepresentation and innocent of any intent to deceive or defraud, and [even when] the act of the agent is to the detriment rather than the benefit of the insured.

Illinois, by statute, licenses public adjusters and requires:

Section 3118.65 Resident License

  1. a) Each public adjuster shall complete 24 hours of continuing education prior to requesting a renewal of the public adjuster license. Three of the 24 hours of continuing education must consist of classroom ethics instruction. The public adjuster should complete the continuing education no later than 30 days prior to the license extension date to allow time for the continuing education provider to submit proof of completion to the Department. [IL Admin. Code 50.3118.65 Resident License (Illinois Administrative Rules (2019 Edition))]

Indiana has refused to accept PAs at all. In Professional Adjusters, Inc. v. Tandon, 433 N.E. 2d 779 (1982), the Supreme Court of Indiana found that the statute providing for licensing of certified PAs who could then undertake negotiation of settlements between insureds and insurers was an uncon-stitutional violation of the separation of powers clause, in that it permitted practice of law by persons not required to be admitted to the bar and not subject to discipline by the Supreme Court.

The core element of practicing law is the giving of legal advice to a client. Merely entering into such relationship constitutes the practice of law in Indiana. [Professional Adjusters, Inc. v. Tandon (1982), Ind., 433 N.E.2d 779; In re Perrello (1979), 270 Ind. 390, 386 N.E.2d 174].

The public adjuster was hired by a client to give legal advice. He undertook the proffered employment, proceeded to examine the case, and gave advice as to what legal steps should be pursued. The exercise of such judgment on behalf of a client constitutes the practice of law and is restricted to persons who have qualified and been admitted to the Bar. By entering into the relationship and by giving legal advice, the public adjuster, a non-attorney, has engaged in the unauthorized practice of law. [State ex rel. Disciplinary Com’n of Supreme Court of Indiana v. Owen, 486 N.E.2d 1012 (Ind., 1986)]


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

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He is available at and [email protected]. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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