By Me Marie-Josée Belhumeur, LL.B., Syndic – This column is designed to help you reflect on the role your ethical obligations play in your professional practice.
Of the 3,078i claims adjusters practicing in Quebec, approximately thirty act as “public” claims adjusters. These adjusters are mandated by insureds who have suffered a loss to defend their interests before the insurance company. As the insured’s spokesperson, the public adjuster is thus called upon both to deal and to negotiate with the claims adjuster mandated by the insurer.
Public claims adjusters—who are duly certified by the Autorité des marchés financiers and overseen by the Chambre de l’assurance de dommages (ChAD)—are governed by the same ethical obligations as claims adjusters employed or mandated by an insurer. In addition, certain provisions of the Code of ethics of claims adjusters
and the Act respecting the distribution of financial products and services
(ARDFPS) apply specifically to them (see sidebar).
These ethical and legal obligations mainly relate to their remuneration and the cost of their services. First, adjusters must offer the insured a choice: remuneration based on an hourly rate or on a percentage of the compensation. They must also provide an overall estimate of the cost of their services. The obligation to keep the insured informed lasts throughout their mandate. For example, if the adjuster realizes at some point during the mandate that they will need more time than expected to work on the file, they must obtain the insured’s agreement before incurring further costs. Their remuneration must be fair and reasonable, in other words, justified by the circumstances and proportionate to the services rendered.
It should be noted that the adjuster can only request an advance on fees under exceptional circumstances and if it is reasonable to do so, given the circumstances (for example, if the adjuster can only reach a burned down cottage to adjust the claim by taking a helicopter). Furthermore, any monetary advance must be deposited in a separate account, since it has been paid for services not yet rendered.
Finally, under no circumstances may the adjuster withhold any property or money meant for the insured, even if the latter has not paid the adjuster’s fees.
WITHHOLDING COMPENSATION CHEQUES
In 2017, the Syndic’s Office of the ChAD investigated the conduct of a public claims adjusterii mandated by an insured whose apartment building had been damaged in a fire.
The investigation revealed that the public claims adjuster had refused to endorse a compensation cheque for $1,000,000 that had been jointly made out to his firm and the insured’s creditor. The money was to be used to finance the reconstruction of the building. The adjuster kept the cheque so long that it expired, and did not even notify the insured that he had received it. He also hid from the insured the fact that he had received a $20,000 compensation cheque covering the loss of rental income, and had even told the insured that he was still waiting for this cheque.
In the wake of these findings, the Syndic’s Office of the ChAD filed a formal complaint against the adjuster with the Discipline Committee. Of the seven charges in the complaint, three were related to the withholding of the compensation cheques. The remaining charges concerned negligence with respect to follow-up and record-keeping, as well as losing his cool during a discussion with the insured.
On August 2, 2018, after agreeing to the withdrawal of one charge, the ChAD’s Discipline Committee found the respondent guilty of the six remaining charges. Following joint submissions on sanction, the respondent was sentenced to pay a total of $16,500 in fines that varied from $2,000 to $4,000 per charge. Given the respondent’s situation, the fines were reduced to $14,000.
In its decision, the Discipline Committee stressed the objective seriousness of the offences, in particular those related to the compensation cheques.
THE IMPORTANCE OF THE CLAIMS ADJUSTER’S ROLE
Insureds who have suffered a loss may feel needy and vulnerable during the claim settlement process. They may thus decide to use the services of a public claims adjuster to help them obtain compensation and defend their interests before the insurer. Adjusters in whom insureds put their trust should always uphold high standards of professionalism, integrity and transparency when providing services.
Review of the provisions of the Code of Ethics that specifically affect claims adjusters mandated by the insured:
39. Claims adjusters who have been given a mandate must not require advances that are disproportionate to the nature and circumstances of the claim and the state of the parties. In addition, they must charge fair and reasonable remuneration, justified by the circumstances and proportionate to the services rendered. In setting remuneration, claims adjusters must take particular account of the following factors:
1° their experience;
2° the time devoted to the matter;
3° the difficulty of the problem submitted;
4° the importance of the matter;
5° the responsibility assumed;
6° the provision of unusual services or services requiring exceptional competence or speed;
7° the result obtained.
40. Claims adjusters must ensure that a client is informed of the approximate and foreseeable cost for their services.
41. Claims adjusters who have entered into a contract with a client providing for hourly remuneration must provide all explanations necessary for the client to understand the statement of remuneration and the terms and conditions of payment.
42. Claims adjusters may not charge interest on overdue accounts unless they have an agreement to that effect with the client. If there is such an agreement, the interest must be charged at a reasonable rate, which does not exceed the rate determined pursuant to section 28 of the Tax Administration Act (chapter A-6.002).
43. Upon completion of their mandate, claims adjusters must repay any part of an advance on their remuneration for which no work was performed.
44. Claims adjusters must not withhold a claimant’s money, securities, documents or property unless permitted under a legislative or regulatory provision.
Review of the provisions of the ARDFPS affecting them:
48. Claims adjusters who offer their services to a claimant must propose two contracts, one providing for hourly remuneration and the other providing for percentage remuneration. The client may choose the most suitable contract.
49. The contract is binding on the claimant only from the time the claimant receives a copy of the contract.
50. The claimant may rescind the contract within 10 days of receiving it by sending a notice by registered mail.
In such a case, the firm, the independent representative or the independent partnership may charge only the expenses incurred to prevent any further loss.
i. As of December 31, 2017. Annual Report of the Chambre de l’assurance de dommages.
ii. Chambre de l’assurance de dommages c. Jean Girard, 2018 CanLII 73078 (QC CDCHAD).