The Perils of Negotiating Insurance Claim Issues With Contractors.

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The Perils of Negotiating Insurance Claim Issues
With Contractors.
What gives your humble correspondent the audacity
to advise such an august body of professionals
as Arizona Bar members of the perils of
negotiating with contractors? Simply put, when
contractors adjust insurance claims and/or act as
advocates for the people with whom they have
been retained to use their hammer and saw, it is
a problem for all of us. Almost half of the
cases in which I served as an expert witness in
the past year involved contractors representing
homeowners or business owners and adjusting
claims without a license. One case even involved
a lawsuit against a contractor for participating
in the unauthorized practice of law. Obviously I
work with many attorneys including some who work
for insurers and some who do not. Many have told
me contractors have been involved in cases they
are defending or prosecuting. Contractors are
not often members of the bar (a prominent
remediation contractor in the Valley is) and
certainly very few contractors are licensed as
adjusters. Inasmuch as the Arizona State Bar
Committee on the Rules of Professional Conduct
has taken the position that attorneys must not
assist non-lawyers in the unauthorized practice
of law, there is a professional reason not to
negotiate with contractors. Rule 5.5 (b) of the
American Bar Association tells us emphatically
that an attorney shall not assist a person who
is not a member of the bar in the performance or
activity that constitutes the unauthorized
practice of law. Negotiating with a contractor
involves negotiating
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with someone who is not licensed to represent a
claimant. While it is appropriate and even
necessary for an attorney to negotiate with
adjusters (ADOI Circular Letter 2000-11), there
is no authority for an attorney to negotiate with
contractors. Indeed, the Arizona Department of
Insurance has clearly presented this message It
is not unusual for a property owners contractor
to discuss the details of building damage with
the insurance companys adjuster, particularly
when there is extensive or complex damage. Often
the contractors expertise is essential to
identify precisely what was damaged, the extent
of the damage, and the cost to repair it
however, contractors cannot negotiate the
settlement of the insurance claim with the
insurance company representatives on behalf of
the property owner, unless they have an
adjusters license. Contractors who do obtain an
adjusters license represent the single most
divisive issue in the regional and national
trade associations of public adjusters throughout
the country. Serving as president of the Rocky
Mountain Association of Public Insurance
Adjusters and on the board of the National
Association of Public Insurance Adjusters, I can
address this issue first hand. Both associations
have taken the position that contractor
adjusters represent too great a conflict of
interest to be a member of either
association. Everyone needs to discover what
they want to do when they grow up. If someone
wants to be a contractor that is a laudable
career. So is being an adjuster. So is being an
attorney. It is just too great a conflict to be a
contractor and to be allowed to negotiate for
his or her client in the role of adjuster or
attorney. The contractor can negotiate for
himself but it is inappropriate for the
contractor to negotiate for others. As adjusters
and attorneys, we should not encourage this
practice. The above blog post was published in
the July 2015 issue of ATTORNEY AT LAW MAGAZINE.
It was authored by Dave Young who has had a
number of his articles published in this
magazine.