{"id":286735,"date":"2018-09-26T06:30:22","date_gmt":"2018-09-26T13:30:22","guid":{"rendered":"http:\/\/zalma.com\/blog\/?p=286735"},"modified":"2018-09-26T06:30:22","modified_gmt":"2018-09-26T13:30:22","slug":"the-danger-of-retaining-an-unlicensed-and-dishonest-public-adjusters","status":"publish","type":"post","link":"http:\/\/zalma.com\/blog\/the-danger-of-retaining-an-unlicensed-and-dishonest-public-adjusters\/","title":{"rendered":"The Danger of Retaining an Unlicensed and Dishonest Public Adjusters"},"content":{"rendered":"

Public Adjuster’s Fraud Imputed to Insured<\/span><\/strong><\/h1>\n

Most public insurance adjusters are honorable professionals and members of the National Association of Public Insurance Adjusters (NAPIA). Unfortunately, it is not unusual that a person pretends to be a competent public adjuster and causes severe damage to the insurer and the insured the dishonest public adjuster sought to represent.<\/p>\n

In Reverse Now VII, LLC v. Oregon Mutual Insurance Company<\/em>, Case No. C16-209-MJP, United States District Court Western District Of Washington At Seattle (September 20, 2018) the danger faced by an insured who retains an unlicensed and dishonest public adjuster became clear and expensive.<\/p>\n

BACKGROUND<\/span><\/strong><\/h2>\n

This case arises out of an insurance claim filed by Reverse Now VII, LLC (“Reverse Now”) with its insurer, Oregon Mutual Insurance Company (“Oregon Mutual”) regarding the extent of coverage provided under its insurance policy (the “Policy”).<\/p>\n

Reverse Retains HMA and Mr. Moreland<\/span><\/strong><\/p>\n

In February 2014, an apartment complex owned by Reverse Now and insured by Oregon Mutual was damaged by fire. Oregon Mutual accepted coverage and retained independent adjuster John Colvard to investigate the scope of repairs and adjust the loss.<\/p>\n

In March 2014, Reverse Now retained public adjusters HMA Loss Consultants, Inc. (“HMA”) and Paul Moreland to represent it in its insurance claim. Oregon Mutual and Mr. Colvard were instructed to direct all further correspondence regarding the claim to HMA. Over the following months, Mr. Colvard and Mr. Moreland communicated concerning repairs to the apartment, and in particular, whether the exterior siding could be repaired or whether it required complete replacement.<\/p>\n

Mr. Moreland Selects Mr. Gower as an Impartial Appraiser<\/span><\/strong><\/p>\n

In December 2015, Mr. Moreland informed Mr. Colvard that Reverse Now intended to enter the appraisal process provided under the Policy.\u00a0 Reverse Now selected Randy Gower as its impartial appraiser. \u00a0Oregon Mutual selected Gary Halpin as its impartial appraiser. The appraisal panel found that Oregon Mutual owed an additional $188,544.23 for repairs. Oregon Mutual paid the balance shortly thereafter.<\/p>\n

While the appraisal was ongoing, Reverse Now sued Oregon Mutual asserting claims for breach of contract; bad faith; and violations of the Insurance Fair Conduct Act (“IFCA”) and the Washington Administrative Code.<\/p>\n

Mr. Moreland’s Alleged Misrepresentation and Concealment<\/span><\/strong><\/p>\n

In April 2018, Oregon Mutual learned that Mr. Moreland was not licensed as a public adjuster in the State of Washington during his representation of Reverse Now.\u00a0 Nevertheless, Mr. Moreland held himself out as a public adjuster and performed the responsibilities of a public adjuster on behalf of Reverse Now for more than two and a half years in violation of RCW 48.17.060. \u00a0A knowing violation of RCW 48.17.060 constitutes a Class B felony.<\/p>\n

Oregon Mutual also learned that Mr. Gower was not impartial, but instead had been “best friends” with Mr. Moreland for decades, that Mr. Gower and Mr. Moreland were former business partners, and that they often “worked the same claims together.”<\/p>\n

These facts were never disclosed but were instead discovered by Oregon Mutual in its review of deposition transcripts in several cases pending in state court.<\/p>\n

In May 2018, the Court granted Oregon Mutual leave to amend its answer to include affirmative defenses of misrepresentation and concealment, which it contends voided the Policy who then moved for summary judgment.<\/p>\n

DISCUSSION<\/span><\/strong><\/h2>\n

Oregon Mutual’s Motion for Summary Judgment<\/span><\/strong><\/p>\n

In the interests of discouraging insurance fraud, courts in Washington state have long upheld policy provisions stating that misrepresentation, concealment, or fraud in the claims process will void coverage. Courts will enforce such provisions regardless of whether the misstatements prejudiced the insurance company, and an insured need only make one material misrepresentation to void all coverage under the entire policy.<\/p>\n

A misrepresentation is material if it involves a fact that is relevant to the claim or the investigation of a claim. While materiality is generally a mixed question of law and fact, it may be decided as a matter of law if reasonable minds could not differ on the question.<\/p>\n

Oregon Mutual contends that there is no dispute that Reverse Now misrepresented and concealed material facts concerning:<\/p>\n

    \n
  1. the extent of loss, and in particular, whether the exterior siding required partial or complete replacement;<\/li>\n
  2. Mr. Moreland’s lack of a valid public adjusters’ license; and<\/li>\n
  3. Mr. Gower’s lack of impartiality.<\/li>\n<\/ol>\n

    The Court concluded that summary judgment is appropriate as to claims where there can be no reasonable dispute that Mr. Moreland materially and knowingly misrepresented and concealed facts concerning his licensure and his pre-existing relationship with Mr. Gower, and that these misrepresentations can be imputed to Reverse Now.<\/p>\n

    Because the violation of RCW 48.17.060 constitutes a Class B felony indicates the legislature’s intent that public adjusters scrupulously comply with licensure requirements,\u00a0 Mr. Moreland’s failure to maintain a license\u2014and his failure to disclose that he was unlicensed\u2014are far from “irrelevant.”<\/p>\n

    Further, Mr. Moreland failed to disclose his long-term relationship with Mr. Gower, another fact that is undoubtedly material. The Policy requires the appointment of an impartial<\/em> appraiser and there can be no reasonable dispute that Mr. Gower was not impartial.<\/p>\n

    That Mr. Moreland’s misrepresentation and concealment is relevant to the claim or the investigation of a claim cannot reasonably be disputed. The Court concluded that the materiality requirement was satisfied.<\/p>\n

    Insured’s Knowledge of Misrepresentation and Concealment<\/span><\/strong><\/p>\n

    The Court also concluded that Mr. Moreland and Reverse Now knowingly misrepresented material information.<\/p>\n

    It is undisputed that Vance Kemege, the principal of Reverse Now, had knowledge of Mr. Moreland’s failure to maintain a valid public adjusters’ license in October 2016, yet failed to disclose this information to Oregon Mutual. Reverse Now conceded that Mr. Moreland acted as its agent in the adjustment of the claim. There can be no dispute that Mr. Moreland’s communications\u2014and lack thereof\u2014with Oregon Mutual fell within the scope of that authority. Reverse Now retained Mr. Moreland and HMA to represent him in his claim, and HMA’s letter to Oregon Mutual specifically instructs that “[a]ll verbal and\/or written communication should be directed to HMA.”<\/p>\n

    It is well-settled that an agent’s knowledge is imputed to his principal, and that a principal is liable for fraud or misrepresentations of his agent. If an agent has actual knowledge of a fact, the principal is charged with the legal consequences of having actual knowledge of the fact. If the agent has reason to know a fact, the principal is charged with the legal consequences of having reason to know the fact.<\/p>\n

    Although the issue of whether a misrepresentations by a public adjuster can be imputed to an insured appears to be a matter of first impression on the facts of this case, the Court concluded that they are. As a matter of public policy, an insured cannot be permitted to adopt a public adjuster’s acts when they benefit him, and disclaim them where they do not. By charging a principal with notice of material facts that an agent knows or has reason to know, imputation reduces incentives to deal through agents as a way to avoid the legal consequences of facts that a principal might prefer not to know.<\/p>\n

    The Court concluded that the knowledge requirement was satisfied, at least with regard to Mr. Moreland’s failure to appoint an impartial appraiser, and the court, therefore, granted Oregon Mutual’s Motion for Summary Judgment with respect to misrepresentation and concealment.<\/p>\n

    When an insured intentionally makes material misrepresentations regarding a claim for insurance coverage, any claim by the insured against the insurance company for bad faith\u00a0 must fail since the purpose would not be served by providing a windfall to an insured guilty of fraud. Reverse Now’s misrepresentation and concealment were dispositive as to both of these claims.<\/p>\n

    ZALMA OPINION<\/span><\/strong><\/h1>\n

    The actions of the putative public adjuster and his close friend, pretending to be an impartial appraiser, deprived the insured of its right to the benefits of the policy. Adding expense and insult to the injury the court will require Reverse Now to repay Oregon Mutual the benefits it paid when it was unaware of the fraud. The insured, Reverse Now, made the mistake after receiving a favorable appraisal award to sue Oregon Mutual who then learned of the fraud. Not only did the fraud not pay it cost Reverse Now a great deal of money that it may only try to regain from its putative and dishonest public adjuster.<\/p>\n

    \n
    \n<\/div>\n
    \n

    \"\"\u00a9 2018 \u2013 Barry Zalma<\/p>\n

    This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.\u00a0 The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.<\/p>\n

    Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant\u00a0 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 50 years in the insurance business. He is available at http:\/\/www.zalma.com and zalma@zalma.com.<\/p>\n

    Mr. Zalma is the first recipient of the first annual Claims Magazine\/ACE Legend Award.<\/p>\n

    Books from Full Court Press<\/strong><\/h2>\n

    Insurance Law Deskbook:<\/strong> Learn the insurance basics that are essential to every civil practitioner. The Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, state appellate courts, and foreign courts that have molded the American insurance law, as well as vital explanatory chapters, historical context, form letters, and more.<\/p>\n

    California Insurance Law Deskbook<\/strong>: California has long led the way when it comes to insurance jurisprudence in the United States, and few know more about California insurance law than Barry Zalma. The California Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. Similar to Barry Zalma\u2019s general Insurance Law Deskbook, this title focuses on the state where the author has long resided and practiced as an expert in California law. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, and California appellate courts, as well as vital explanatory chapters and historical context.<\/p>\n

    Insurance Bad Faith and Punitive Damages Deskbook:<\/strong> Understand the relationship between insurance, the tort of bad faith, and why punitive damages are awarded to punish insurers. Previously, a person suing an insurance company in the United States could only recover contract damages, but when the tort of bad faith was created by the courts contract law was enormously affected, allowing insureds to sue insurers for both contract and tort damages, including punitive damages. Read a thoughtful analysis of how punitive damages apply in the United States to insurance bad faith suits, and why some states allow judges and juries to award punitive damages against insurers in civil litigation.<\/p>\n

    Mr. Zalma\u2019s books available as Kindle books or paperbacks at Amazon.com can be reached at http:\/\/zalma.com\/zalma-books\/<\/p>\n

    Mr. Zalma\u2019s reports can be found on Tumbler at https:\/\/www.tumblr.com\/search\/bzalma\u00a0 on Facebook at https:\/\/www.facebook.com\/barry.zalma and you can follow him on Twitter at https:\/\/twitter.com\/bzalma<\/p>\n

    Legal Disclaimer:<\/strong><\/h2>\n

    The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog.\u00a0The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.<\/p>\n<\/div>\n

     <\/p>\n

     <\/p>\n","protected":false},"excerpt":{"rendered":"

    Public Adjuster’s Fraud Imputed to Insured Most public insurance adjusters are honorable professionals and members of the National Association of Public Insurance Adjusters (NAPIA). Unfortunately, it is not unusual that a person pretends to be a competent public adjuster and … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[1],"tags":[],"class_list":["post-286735","post","type-post","status-publish","format-standard","hentry","category-insurance"],"jetpack_publicize_connections":[],"views":"","jetpack_shortlink":"https:\/\/wp.me\/p2Itjv-1cAL","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":289321,"url":"http:\/\/zalma.com\/blog\/zalmas-insurance-fraud-letter-october-15-2019\/","url_meta":{"origin":286735,"position":0},"title":"Zalma’s Insurance Fraud Letter – October 15, 2019","author":"Barry Zalma","date":"October 15, 2019","format":false,"excerpt":"Insurance is the Only Crime Where the Victim Is Required to Pay for Investigation & Prosecution of the Criminal or No Investigation Will Be Done \u00a0Zalma's Insurance Fraud Letter, Volume 23, No. 20 Some of the articles you can read in this issue of ZIFL follow: Most states require insurers\u2026","rel":"","context":"In "Zalma on Insurance"","block_context":{"text":"Zalma on Insurance","link":"http:\/\/zalma.com\/blog\/category\/insurance\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/mlsvc01-prod.s3.amazonaws.com\/441217c5501\/eff321d2-638f-4ef4-84d1-fe0791852bb1.jpg?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":290123,"url":"http:\/\/zalma.com\/blog\/iow-says-unlicensed-public-adjusters-are-danger-to-public\/","url_meta":{"origin":286735,"position":1},"title":"Iowa Says Unlicensed Public Adjusters are Danger to Public","author":"Barry Zalma","date":"February 27, 2020","format":false,"excerpt":"Iowa Refuses to Enforce an Assignment of Benefits Insurers and policyholders faced with catastrophes, hail storms, windstorms, earthquakes, etc. are inundated with claims by roofers and contractors who take an assignment of benefits from an insured, act as a public adjuster, and insist on negotiating claims with an insurer as\u2026","rel":"","context":"In "Zalma on Insurance"","block_context":{"text":"Zalma on Insurance","link":"http:\/\/zalma.com\/blog\/category\/insurance\/"},"img":{"alt_text":"","src":"https:\/\/i1.wp.com\/zalma.com\/blog\/wp-content\/uploads\/BZ-logo-clean.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":302437,"url":"http:\/\/zalma.com\/blog\/adjuster-only-owes-a-duty-to-the-insurer\/","url_meta":{"origin":286735,"position":2},"title":"Adjuster Only Owes a Duty to the Insurer","author":"Barry Zalma","date":"October 1, 2024","format":false,"excerpt":"Independent Adjuster Owes no Duty to Insured Absent Fraud Post 4902 See the full video at https:\/\/rumble.com\/v5h1bht-adjuster-only-owes-a-duty-to-the-insurer.html\u00a0 and at https:\/\/youtu.be\/PB6ytWvq3vg Defendant Applied Building Sciences, Inc. (\u201cApplied\u201d) moved the USDC to dismiss claims of negligence, intentional misrepresentation, and conspiracy brought by Plaintiff Hermes Health Alliance, LLC (\u201cHermes\u201d). In Hermes Health Alliance,\u2026","rel":"","context":"In "Zalma on Insurance"","block_context":{"text":"Zalma on Insurance","link":"http:\/\/zalma.com\/blog\/category\/insurance\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/zalma.com\/blog\/wp-content\/uploads\/2024\/10\/adjuster-duty-300x169.png?resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/zalma.com\/blog\/wp-content\/uploads\/2024\/10\/adjuster-duty-300x169.png?resize=350%2C200 1x, https:\/\/i0.wp.com\/zalma.com\/blog\/wp-content\/uploads\/2024\/10\/adjuster-duty-300x169.png?resize=525%2C300 1.5x"},"classes":[]},{"id":304580,"url":"http:\/\/zalma.com\/blog\/the-public-insurance-adjuster-part-1\/","url_meta":{"origin":286735,"position":3},"title":"The Public Insurance Adjuster – Part 1","author":"Barry Zalma","date":"September 12, 2025","format":false,"excerpt":"An Adjuster Who Only Represents the Policyholder in Presenting Claims to the Insurer An Excellence in Claims Handling Article for Substack Excellence in Claims Handling Article on the Duties and Obligations of the Public Insurance Adjuster You\u2019re reading from the free part of Excellence in Claims Handling. 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Interstate Fire & Casualty Company, et al, \u00a0No. 25-cv-5312\u2026","rel":"","context":"In "Zalma on Insurance"","block_context":{"text":"Zalma on Insurance","link":"http:\/\/zalma.com\/blog\/category\/insurance\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/zalma.com\/blog\/wp-content\/uploads\/2026\/03\/PUBLICADJUSTER-1-300x169.png?resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/zalma.com\/blog\/wp-content\/uploads\/2026\/03\/PUBLICADJUSTER-1-300x169.png?resize=350%2C200 1x, https:\/\/i0.wp.com\/zalma.com\/blog\/wp-content\/uploads\/2026\/03\/PUBLICADJUSTER-1-300x169.png?resize=525%2C300 1.5x"},"classes":[]},{"id":303274,"url":"http:\/\/zalma.com\/blog\/the-duties-obligations-of-the-property-adjuster\/","url_meta":{"origin":286735,"position":5},"title":"The Duties & Obligations of the Property Adjuster","author":"Barry Zalma","date":"February 28, 2025","format":false,"excerpt":"What Is a First Party Property Adjuster? 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