I love the way music so aptly expresses so many things going on in life and love to use songs that help express issues much better than words ever can. It’s a light hearted way to remember a principle we’re trying to drive home for adjusters. Last week, our claim song of the week was Peter, Paul, and Mary’s song “Where have all the flowers gone” as our theme song for adjusters on “where have all the claim files gone ” here in this blog. This week we’ll talk about splishin’ and a splashin’ out on your new assignments and delving through the terms in many independent contracts. Here’s the link to the Splishin’ and a Splashin’ lyrics so you can follow along!
Every storm season brings out some of the best and the worst of adjusting firms and contracts. We hear of adjusters “takin’ a bath” on their fee payments over some of the contract issues and non payment issues going on with hopefully a small number of unscrupulous firms.
Here are links to two very good commentaries on contracts. The first here comes from a blog entry over on CADO made by a senior adjuster and this article by Donny Greer of Gulf States Training at the University of North Texas who shared this article with us over at ClaimSmentor with permission to post it in our blog :
Selection of a CAT Firm or CAT Claims Company
by: Donny Greer of GulfStates Insurance Training at University of North Texas
CAT Firms or CAT Claims Companies come in all shapes, sizes and flavors. Not to mention their expertise levels and experience in running a real business.
This type of business model structure brings out the best of people and unfortunately the worst.
Here’s what I am saying:
These types of firms are generally started and run by professionals who are truly educated and experienced in both business and the insurance field with an emphasis on claims processing. By and large, these firms are honest, forth-coming, and are personally chartered to “do-the-right-thing”. But as you know, each and every field has its wolves!
Firms that process claims for insurance carriers earn their keep by accepting under agreement a claims assignment report containing many claims, from ten to five hundred, maybe even into the thousands as is the case during a major storm. These claims could be auto, home, business and even in some cases casualty claims. These homeowner types of claims are then farmed out (contracted) to Independent Adjusters whom are then sent out on the adjustment path to glory. At least that is how it starts out.
When I/As (independent adjusters) take on these claims, they likewise do so under the control of a contract offered to them by the CAT Firm (firm). This is where things can first start to erode. First, you receive a call from some firm with whom you have earlier registered with. Next they ask you to go to the distant site. With all your excitement, you’re off and running. Now all seems well.
Soon on the site, you are usually required to attend a Storm Meeting held by the firm with the goal of orientating new adjusters. This meeting is quite beneficial as this is the place where all information is conveyed to the adjusters now on-site. Miss this meeting and you miss the boat on policies, procedures, introduction to storm support personnel and so on. Sometimes unscrupulous CAT firms purposely wait until you are at the storm site, and have incurred expenses before they present you with a contract to sign. Don’t sign, and you must go home. Could this be a contract signed under duress?
What? you Say!
Any contract is necessary for you and the firm you are working for, as it is the sole document that list out your agreement to provide services and spells out expectations of both parties. This is a good thing as Martha Stewart has Said a few times. The problem is not all firms are looking out for the adjuster’s best interest. Read on…
Most of the better firms out there are good, honest and looking out for the adjuster, and ask the adjuster to sign the agreement prior to deployment and before you the IA incur expense, but some, want you to bring in money for them, and under a very strict agreement written with mainly their interest in mind. These firms however, are only concerned with a fast buck, and a BIG BUCK at that.
Be aware of any contract wording BEFORE you leave your home for a storm. Do yourself a favor and read the contract they are asking you to sign, before you invest in doing business with a firm you don’t really know. Never wait until you have arrived in Ft. Lauderdale, entrenched in a hotel, in debt. for a new laptop computer, and then review a contract! Know before you GO!
In reading the contract, look for clauses where you are waiving your right to sue in court. Read carefully the section that covers the adjuster’s hold back portion (portion normally held back by the CAT firm until all claims have been paid and settled). Know this percentage BEFORE you travel and begin working. Holdback is normal and there is nothing wrong with this type of arrangement. Just be aware of how a contract might address such an issue.
Again: KNOW WHAT YOU ARE SIGNING AS BEST YOU CAN.
CAT firms bill the carrier based on the gross amount of say one of your claims. They publish to you a fee schedule showing how you earn a percent of the billing amount. The billing figure being an arbitrary figure listed on the fee schedule. Shown as a split, in some cases 40/60 with 40% for the firm and 60% for the adjuster. One question that comes to mind is what is this percent actually a percent of? It is a percent of what the firm says they are billing the carrier for the claim. Fact is, you don’t really know the true amount of the billing from the CAT company to the carrier, only what you are shown on the fee schedule. Your fee schedule only reflects your percentage of some listed amount published for the sake of the fee schedule’s completeness. You are only allowed to see and know what some limited number of these firms want you to see.
Keep this in mind when shopping for a firm to work for. A 40/60 split sounds good, but your 60% is 60% of what? You should know this answer before you get engaged with a firm and way before you travel on your dime to a storm site. You just might be working for pennies, not knowing it, and lining the pockets of some unworthy CAT Firm. Be wise to Check-It-Out. And beware of ads that solicit adjusters with talk of 70/30 and 80-20 etc., etc., etc. Without you knowing what this percentage works against, you might be actually working for less that other adjusters with splits of 40/60.
Speak with other adjusters on adjuster web sites that post experiences from other more experienced adjusters. Join some web site forums and ask other adjusters who the good companies are. Check with the Secretary of State’s office in the state the CAT firm resides to see if they are in good standing as a corporation.
The best way to check out a CAT firm is to ask seasoned adjusters on portal website forums. Trust what they tell you, its better information than no information at all.
Watch out for CAT firms! Most are good, but try not to get so absorbed in deployment, that you forget to tend to the basics of being a good business professional.
Any truly good company would have no problem at all allowing you time to review a contract prior to deployment, and any truly good company would invite any questions you may have about their structure, their officers, and how long they have been in business.
One more time: MOST ARE GOOD AND HONEST.
Donny Greer of GulfStates Insurance Training at University of North Texas
Our Blog continued below:
Don’t go out their “reelin’ with the feelin’ and a movin’ and a groovin’ with your excitement at obtaining placement on a roster or receiving new assignments without getting this most important document finalized.
Already this year we are hearing from adjusters receiving independent contracts faxed or emailed to them that contain “blanks” in the contract forms for important things such as fee splits, holdbacks, etc. We have reports from one group of adjusters attending recent seminars for carrier certifications that could not find one person in the adjusting firm office or at the conference that even knew who signed contracts for their firm nor could the adjusters get copies back signed by an AUTHORIZED person with the adjusting firm. The firm had no idea where they were filed and they were not with the adjuster’s personnel records they sent in. We have other adjusters being told ” that’s ok on the blanks- we’ll fill those in later”. Now what does that tell you? Hello????????
One of the concerning contract terms in many of this year’s contracts concerns fines assessed back to the adjuster. We haven’t seen any yet that spelled out what exactly those fines were or the dollar amounts involved although I’ve heard there are some out there with specifics. The Citizens FL RFP manual for the adjusting firms does outline the many $1,000 fines to be assessed to adjusting firms yet the companion independent contracts the selected vendors have that we have viewed only indicated “any fines assessed will be passed on to the adjuster” type clauses. You need to have specifics in writing.
How about the non compete clauses? We saw one firm’s contract last year that didn’t allow adjusters to work for any other adjusting firm in the Southeast USA for 2 years! You need to check with your attorney regarding the validity of such non compete clauses in your state. I see many postings from adjusters giving advice about those “not holding up” in court. We’ll see. I’m monitoring the development of a suit file right now over in Alabama that was recently filed in June and we’ll link to it as things develop beyond the initial complaint and answers as well as searching for other cases involving adjusters and adjusting firms. We welcome any links if you are aware of any others.Don’t believe that the firms won’t enforce them! They are there for a reason and you need to abide by these contract agreements you sign.
We are looking for a good employment contract attorney willing to volunteer some time to look at a few of the examples of contracts we have to provide some general advice to adjusters if you know of anyone interested. We’ll post their advice and links to their services both here on our blog and in the ClaimSmentor forums. We are seeing simple contracts about 2 pages long to hearing reports of some in excess of 18 pages long. BE CAREFUL about what you are signing.
We recommend you seriously consider these terms in contracts and consider running all contracts by your attorney. I am not an advocate of “forum advice” posts being your sole venue of information on something so important as an independent contract. In my never ceasing quest to get insurance carriers and state insurance departments to help protect adjusters, I’d like to suggest if they aren’t doing so that carriers exam the independent contracts that adjusting firms give to their adjusters. It is not enough that the carrier sign a contract with the adjusting firm outlining their expectations but they should get involved in making sure that independents are not being taken advantage of in the independent contracts with the adjusters. Is it the “employee” versus “independent issue” keeping them from doing so? If so, state Insurance Departments need to establish acceptable standards for acceptable terms adjusting firms can use and have a published area on all state insurance department sites that list adjusting firms and their complaint ratios just as they do for consumers to determine what a carrier’s complaint ratio is before buying an insurance policy. I have a real problem with the fact a carrier has first hand knowledge of firms they have fired for poor claim service yet where do they publish that information for other carriers to avoid using them or for adjusters protection in accepting assignments for such a firm? They would fear being sued I’m sure but if the Department of Insurance required this they’d have to report it. I cannot stress enough we need to improve the communication gaps in the independent adjusting community for the protection and preservation of our careers.
Effective dates, Hold Harmless terms, Fee Schedules, Fee Splits, Payment terms (before or after carrier pays?), Witholding provisions(how much they withhold as well as how long), Non Compete Clauses, Venue (City/State/Court?)for where any disputes are handled, Other provisions such as Arbitration of Disputes, Fines to be assessed to you, information on who provides the Errors and Omissions Coverage, and many other important terms.. Seek your attorney’s advice BEFORE signing such provisions if you are in doubt.
We have many adjusters who sign contracts but then do not ask for a copy of the contract back after an AUTHORIZED person with the firm has signed it. We had a large group of over 30 adjusters working for one firm in 05 who could not pursue legal action for non payment on over 90 days of work as they had never gotten back a signed copy of their contracts showing any agreements between them and the adjusting firm. ASK for a copy of the Independent contract up front before you leave home as Donny points out above. If the vendor tells you they will sign them at the induction center, make sure you have two original copies with you and sign both and request they sign both and take one with you and keep it in a safe place in case you need it later. This will help you avoid running into those situations where the “gathering” place has no facilities or staff to give you a copy on the spot.
Don’t assume because it is a large well established adjusting firm that you are safe signing their contracts. We have reports from several adjusters that contracts they assigned with a large vendor signed for Katrina duty contained 60% fee split agreements yet the payments received were 40% and they were then told that the 60% only applied to experienced adjusters. I’m curious if this would hold up in court since the fill in the blank could be twisted on the 60/40..is that 60 to you or 60 to the adjusting firm….we don’t know if it’s not specified in the contract right? Folks, that is not what their contract said. Make sure the fee split does apply to YOU and not termed “in general fee splits are….”.
Go movin’ and a groovin’ this storm season with the comfort of knowing you are protected if you encounter one of the tough situations with a non paying adjusting firm. Splishin’ and a Splashin’ just isn’t the way to handle business contracts professionally! Put those “dancin’ shoes on” AFTER you have properly prepared for accepting new assignments! We hope you will pass the word on to other new adjusters so they don’t go “takin’ a bath” this season!