Public Adjusters: Know Your Legal Bounds

Colorado residents understand the importance of having property insurance to safeguard their property in unexpected circumstances. However, they don’t just pay for peace of mind; they expect their insurance plan to work for them when they face property loss or damage. 

As a public adjuster, you’ve probably worked with clients who’ve not only been devastated by wildfire and water damage but also by their own insurance companies resisting covering their claims. 

You may feel compelled to take a more aggressive approach with an uncooperative insurance company, but I strongly caution you to tread lightly. I want to talk briefly about how easy it can be for someone in your position to cross a legal line and put their livelihood in jeopardy. 

The Unauthorized Practice of Law

As a public adjuster, you represent clients, interpret their insurance policies, and negotiate on their behalf regarding what is owed under the contractual policy. These are all activities that ordinarily would be considered the “practice of law.”

Since the nature of your industry is law-adjacent in many ways, I can see how it would be easy for a public adjuster to inadvertently cross over into practicing law. After all, you know the law. Your goal is to recover as much as possible for your client, and hold low-balling insurance companies accountable. But you could end up in legal hot water if you aren’t careful.

What the Unauthorized Practice of Law Looks Like

The unauthorized practice of law in Colorado can take many forms and thus can be violated in different ways. 

During negotiations, it may be tempting to use legal statutes and case law to prove that the insurance provider is acting in bad faith. But be careful not to engage in any of the following actions:  

• Citing state statutes that define and regulate insurance claim adjustments
• Citing state laws that define and regulate insurance claim adjustments
• Arguing with the insurance company over a dispute that has arisen involving the client

Otherwise, your client’s insurance company may have grounds to report you to state regulatory enforcement. Colo. R. Civ. P. 232.2

How Your License Can Be Affected

I’ve spoken with public adjusters who have received letters from attorneys hired by insurance companies threatening to file a misconduct complaint with Colorado’s Department of Regulatory Agencies (DORA) Division of Insurance. These cease-and-desist letters are often aggressive, crammed with legal jargon, and full of accusations like the unlawful practice of law.

The Colorado insurance commissioner can deny, suspend, revoke, or otherwise penalize your license if you have been found to have acted unethically, incompetently, or irresponsibly. Colo. Rev. Stat. § 10-2-801(1) ; 10-3-904

If you receive a cease and desist letter, I encourage you to have an attorney review its demands and advise you of next steps. 

How to Help Your Client & Protect Yourself

If you suspect your client’s insurance company has likely violated Colorado’s bad faith statute, advocating on their behalf may exceed the bounds of what your license permits.

Instead, you should advise them to seek legal representation if you believe their case is going beyond simply paying what is owed by the insurance contract.  

While you can’t legally practice law, you can recommend your client speak with an attorney. If your client hires my team, not only can we go after the benefits they’re entitled to under the contract that’s in dispute, it’s more likely that we can get two times that amount, as well as damages and attorney fees. 

Have a Bad Faith Attorney On Speed Dial

If your client’s insurance company is acting in bad faith, put your client in touch with Robinson & Henry. The first step is to call 303-688-0944 to begin a case assessment.