Keeping Public Adjusters Professional



When insured’s are busy professionals they simply do not have the time or patience to deal with the details of a first party property claim. The public insurance adjuster exists to assist insureds in the presentation of a claim to the insurer. The public insurance adjuster is, in most states, licensed by the state insurance department. The insurer’s adjuster is often asked to deal with a public insurance adjuster. The contact between the public insurance adjuster and the insurer’s adjuster is often adversarial since the public insurance adjuster wishes to justify his or her contingency fee to the insured. Both should be working toward the same goal: the payment of proper and complete indemnity to the insured.

Public Adjusters claim they are, mostly with good cause, professionals who are employed exclusively by a policyholder who has sustained an insured first party property loss. The public adjuster handles every detail of the claim, working closely with the insured to provide the most equitable and prompt settlement possible. A public adjuster should inspect the loss site immediately, analyze the damages, assemble claim support data, review the insured’s coverage, determine current replacement costs and exclusively serve the client, not the insurance company while working ethically with the insurer’s adjuster.

The National Association of Public Insurance Adjusters (NAPIA) publishes a code of conduct which sets forth the ethical standards that all public insurance adjusters should follow. It provides:

The following Rules of Professional Conduct and Ethics are applicable to all members of the NAPIA:

  1. The members shall conduct themselves in a spirit of fairness and justice to their clients, the Insurance Companies, and the public.
  2. Members shall refrain from improper solicitation.
  3. No misrepresentation of any kind shall be made to an assured or to the Insurance Companies.
  4. Commission rates shall be fair and equitable, and strictly in accordance with the prevailing custom in the locality, and must, where laws or regulations of insurance departments exist, comply fully with such laws or regulations.
  5. Members shall conduct themselves so as to command respect and confidence. They shall work in harmony with one another, with their clients, and the Insurance Companies’ representatives, so as to foster a cordial and harmonious relationship with all branches of the insurance business, and with the general public.
  6. Members must be fitted, by knowledge and experience, for the work they undertake. They must not endanger the interests of the public adjusting profession, or risk injustice to assureds or to the Insurance Companies, by attempting to handle losses or claims for which they are not qualified, and for which they cannot find competent technical assistance.
  7. Members shall not engage in the unauthorized practice of law.
  8. Members shall not acquire any interest in salvaged property or participate in any way, directly or indirectly, in the reconstruction, repair or restoration of damaged property, except with the knowledge, consent and permission of the assured.
  9. Members shall be cooperative and assist one another in every possible way.
  10. Members shall not disseminate or use any form of agreement, advertising, or any printed matter that is harmful to the profession of public adjusting, or which does not comply with the rules and regulations of the Insurance Department of the state in which such member is professionally engaged, or which might subject public adjusting and public adjusters to criticism or disrespect.

An example of a public insurance adjuster and the lawyer who failed to follow the requirements set out by NAPIA. Both represented the same client, involved a claim that resulted from the 1994 Northridge, California earthquake. The earthquake caused billions of dollars in damages across Southern California. It drew lawyers and public adjusters seeking large fees like vultures flying over a dead antelope. As a result of the disaster, investigation by insurers was limited because of the extent of losses caused by the earthquake and the need to rapidly serve their needs. Many unnecessary and spurious suits were filed. Insurance fraud was rampant and insurers paid rather than fight because there was inadequate staff available to deal with fraud and governmental agencies threatened insurers with major fines if they did not pay quickly.

Some insurers, because of the lack of trained staff, denied claims that should not have been denied. The errors caused the state of California to pass a law allowing insureds to sue their insurers as late as 2002, four years after expiration of the statute of limitations and eight years after expiration of the private limitations of action provision of most policies. This change in the limitation period brought about many proper suits and some spurious actions.

Insurers are not the only entities who acted unethically. Some public insurers, acting alone or with the assistance of unscrupulous lawyers, violated the standards set by NAPIA and the covenant of good faith and fair dealing.

In U.S. v. Saada, 212 F.3d 210 (3rd Cir., 1999) the U.S. presented evidence at trial showed that, in 1990, appellants contacted Ezra Rishty for help in an insurance fraud scheme. Rishty was a public insurance adjuster in New York City who had conspired with various clients in over 200 fraudulent insurance schemes in the past. Rishty agreed to assist Isaac in filing a fraudulent insurance claim, and enlisted the help of Morris Beyda, a former employee who by then owned his own business.

In a not officially published opinion the California Court of Appeal dealt a serious blow to an attorney who filed an apparently malicious and unfounded lawsuit against Scottsdale Insurance Company (Scottsdale). The Court of Appeal decided that the attorney must stand trial on an action from an insurer for malicious prosecution because it was highly probable that the suit would be successful.

In bringing the action Scottsdale took an important step that will protect insurers against lawyers and public adjusters who use the courts as a bludgeon – whether proper or not – to force insurers to pay to avoid the costs of litigation. If they take the case to trial and prove the malice a punitive damages award against the lawyer and the public adjuster will go far to chill the proclivity of some lawyers to file suit without sufficient facts on the assumption that everything an insurer does is wrong and in bad faith.

The action began in 1994 after the Northridge earthquake when Regency Royale Homeowners Association (Regency) claimed it sustained damage. Five months later, Regency submitted an application to Scottsdale for earthquake insurance and represented that it was insured through Homestead Insurance Company and had sustained no losses during the previous five years. Scottsdale relied on those representations in issuing a policy to Regency providing coverage from July 1, 1994 to July 1, 1995. On December 26, 2001, Regency’s public insurance adjuster, Kapilow & Son (Kapilow), requested that Scottsdale assign an adjuster to investigate Regency’s claim of earthquake damage under the policy. On December 31, 2001, Stephen Zelig, the lawyer for Regency, filed suit in Los Angeles Superior Court against Scottsdale and others, entitled Waldman et al. v. Golden Bear et al., case No. BC265308 (Waldman).

The complaint was filed under the statute that revived time-barred Northridge earthquake insurance claims provided that the insured had contacted his, her or its insurer prior to January 1, 2000 and the lawsuit was filed prior to January 1, 2002. Zelig was provided the Regency file from Kapilow with insufficient time prior to the filing deadline under the revival statute to undertake an independent investigation of whether Scottsdale was the proper insurer.

Zelig claimed he relied on Kapilow’s representation that Scottsdale insured Regency for the earthquake risk in filing the complaint. Kapilow likewise had not independently investigated whether Scottsdale was the proper insurer. In January 2002, Scottsdale informed Kapilow that Regency’s policy did not provide coverage until six months after the Northridge earthquake and that Homestead Insurance was likely the proper insurer. Scottsdale also advised that Regency had not initiated a claim prior to January 1, 2000 as required under the revival statute. Regardless, Zelig served the Waldman complaint on Scottsdale on July 8, 2002.

In October 2002 Scottsdale responded to Regency’s request for documents in part by producing the declarations page of the insurance policy it had issued to Regency for inception six months after the earthquake. In November 2002, Kapilow informed Zelig’s office that Farmers and State Farm carried coverage on the Regency property at the time of the earthquake. Scottsdale had additional communications with Zelig in April and July asserting it had not insured the risk of the earthquake.

After Scottsdale filed its motion for summary judgment, new counsel, associated in on behalf of Regency, acknowledged that Scottsdale was not the proper insurer. The new lawyer dismissed Scottsdale without prejudice before the summary judgment hearing. Scottsdale incurred in excess of $30,000 in attorney fees in the evaluation and defense of the Waldman action. The trial court concluded that the voluntary dismissal without prejudice in the prior action was a favorable termination of the lawsuit in favor of Scottsdale.

The reasons underlying the voluntary dismissal must be reviewed in each case. The focus is on whether the termination reflected on the merits of the case. The court concluded that evidence that reflects “the opinion of the prosecuting party that, if pursued, the action would result in a decision in favor of the defendant is evidence of a favorable termination. [Minasian v. Sapse (1978) 80 Cal.App.3d 823, 827] Coupled with the evidence tending to show that Scottsdale was not the proper insurer, the dismissal showed that the case against Scottsdale had no merit. The court found such information damning and was satisfied that a “favorable termination” – an element that must be proved to proceed with a malicious prosecution action – was demonstrated by Scottsdale. The court found that Zelig waived his argument about no probable cause or malice by providing no facts or law to back his contentions on appeal.

The essence of allegations of Scottsdale’s suit is malicious prosecution. The suit also claimed that Zelig and Kapilow conspired to commit a malicious prosecution that resulted in damage to Scottsdale.

The court found the allegations were sufficient to state a cause of action against Zelig. Zelig, Kapilow and their client were looking at a probable judgment for $30,000 in attorney’s fees and as much as nine times that amount in punitive damages.

Scottsdale properly took an aggressive stand against a lawyer and public adjuster who it believed blatantly abused the process of the court and maliciously forced Scottsdale to defend a lawsuit that could not possibly succeed. That it gave Zelig and Kapilow the opportunity to avoid the suit by informing them of the true nature of the policy, its effective dates and that it would be impossible for it to respond with indemnity to a claim for damages occurring before the policy came into effect, was kind. Kindness was returned with aggression.

Scottsdale’s reasonable conduct and attempt to resolve the situation in a non-confrontational manner was rewarded by abuse and a refusal by Zelig to be confused with facts. The Court of Appeal was neither confused nor cowed. The results of the trial would have been interesting but the defendants settled. Another appeal resulted when the settlement amount was not paid to Scottsdale.

Adapted from Insurance Fraud – Volume I by Barry Zalma, Volume One available as a Kindle book and a paperback.

© 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 52 years in the insurance business. He is available at and

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.

Go to the podcast Zalma On Insurance at;  Follow Mr. Zalma on Twitter at; Go to Barry Zalma videos at at; Go to Barry Zalma on YouTube-; Go to the Insurance Claims Library – Read posts from Barry Zalma at; and the last two issues of ZIFL at  podcast now available at

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