Insurance Journal, William Rabb, December 27, 2022
Florida officials have taken strong action against two of the insurance industry’s most-detested adversaries, disbarring a notorious plaintiffs’ attorney who filed thousands of frivolous claims lawsuits, and moving to revoke the license of a public adjuster that obstructed insurers in multiple claims.
The actions against attorney Scot Strems and adjuster Scott David Thomas come two weeks after the Florida Legislature approved Senate Bill 2A, a sweeping insurance reform measure, and will likely be seen as high points for a year that had witnessed six insurer insolvencies and mounting litigation losses. Florida-based insurers have complained that some lawyers and public adjusters that have gamed the system in recent years, costing carriers millions of dollars in legal expenses.
“I believe the significant developments should deter similar actions moving forward, but the historic reforms contained in SB 2A are ultimately where the rubber meets the road when it comes to halting abusive practices,” said Kevin Comerer, a Florida insurance lobbyist and consultant.
Adjuster Could Lose License
First, the adjuster disciplinary action. Florida’s Department of Financial Services on Dec. 16 formally asked an administrative judge to revoke the license of Scott David Thomas, owner of Indemnity Public Adjusters, based in south Florida. The department’s attorneys outlined nine counts charging that Thomas had violated Florida laws by repeatedly harassing insurance company adjusters and engineers, sometimes threatening them with violence and thwarting their inspections.
His actions against Citizens’ Property Insurance Corp., Tower Hill Insurance, Lloyd’s of London and QBE Specialty Insurance resulted in claims being denied altogether or delayed for months, DFS said in the proposed order filed with the Florida Department of Administrative Hearings.
Thomas’ strategy may have been to wear down insurers so that they would forget about their own property inspections and accept his fee-paid adjustment reports.
“Respondent’s repeated hostile behavior is designed to make the process inhospitable to the insurer in the hopes of securing a better claim for his client,” the DFS proposed recommended order reads.
“We agree with the recommendation. None of what he did benefitted the customer at all,” said Michael Peltier, communications director for Citizens.
Thomas’ obstruction led to added expenses for the insurers, Peltier and DFS said. In one example, Thomas agreed to an inspection of a home damaged in Hurricane Irma in 2017, but failed to tell Citizens that a tarp was covering the roof, the DFS filing noted. To have the tarp removed, a Thomas employee quoted a price of $7,500. A Citizens adjuster later obtained a price of $2,000 from a contractor – still high for any tarp removal.
“All of that cost gets rolled into premiums,” Peltier noted.
At other times, Thomas insisted only on Saturday inspections by insurance companies, even though homeowners were available during the week or had agreed to a weekday visit from the insurer, DFS said. Often, he demanded documentation from insurer inspectors, including proof of workers’ compensation insurance.
In one examination under oath, Thomas was so belligerent to a court reporter that a new reporter had to be assigned to finish the session, the DFS order explained. At that same meeting, Thomas allegedly tried to keep a document he was asked to review, then lamented that the insurer’s attorney had accused him of stealing.
At an inspection, Thomas reportedly made threatening statements to an appraiser: “I was in the Marine Corps in Iraq for 12 years and I love to fight,” DFS quotes Thomas as saying.
He also failed to give a physical address for his business in papers filed with the department, the filing notes.
Thomas’ attorney, Matthew Ladd, said Tuesday that his client has done nothing wrong and his actions have held insurers accountable, resulting in full claims payments to homeowners. Ladd filed his own proposed order to be considered by the DOAH judge. In it, he argues that Thomas asked for proof of insurance by roof inspectors in order to protect the homeowners, in case the inspector fell and was injured.
“The Department has failed to meet its burden to clearly and convincing show that the Respondent’s conduct prevented the insurance companies from reasonably acting to allow inspections,” Ladd wrote in his proposed order. He said DFS should dismiss its complaint against Thomas.
Florida property insurance officials have said for the past few years that Thomas’ actions may be considered extreme, but that some other public adjusters have engaged in underhanded tactics to inflate damage amounts and to block insurers’ access to insureds’ properties. Florida’s chief financial officer also railed about the “swarming” numbers of PAs that descended on southwest Florida just days after Hurricane Ian slammed the area in late September, and called for new limits on their fees.
At the special session Dec. 12-14, Florida lawmakers did not address concerns about public adjusters. But several said that with SB 2A ending one-way attorney fees and assignment-of-benefit agreements, plaintiffs’ lawyers will now have less incentive to team up with public adjusters on claims.
DFS filed its initial complaint against Thomas in March of this year after hearing from several insurance companies. Thomas responded and a hearing was held in August. Florida law provides that a DOAH judge can suspend an adjuster’s license for six months per allegation. But because the total penalty in Thomas’ case would come to more than four years – more than the maximum suspension time of 24 months – DFS urged the judge to revoke the license altogether.
The judge may also impose fines of up to $5,000 per count. He could render a decision in as little as 30 days. DOAH decisions can be appealed to a Florida District Court of Appeals.
Although the insurer complaints about Thomas began as long ago as 2019, Citizens officials are not critical of the pace of the DFS investigation. “They’re doing what they can. It takes a lot to investigate these types of things,” Peltier said.
In an action that insurers had been hoping for over the past two years, the Florida Supreme Court on Dec. 22 blocked Coral Gables claimants’ attorney Scot Strems from practicing law in the state. The court overrode a referee’s recommendation of a two-year suspension and it also ordered Strems to pay more than $45,000 in costs incurred by the Florida Bar in prosecuting the investigation.
One insurance defense attorney said the disbarment shows the perils that claimants’ lawyers face when they try to engage in the “mass lawsuit filing” model that Strems and a few other law firms had taken to an extreme level. An insurance industry consultant blogged that Strems’ punishment marks the “collapse of an evil empire.”
Strems in 2020 became the poster child for what many in the Florida insurance industry said was the root of the Florida property insurance problem: plaintiffs’ attorneys filing large numbers of unnecessary claims lawsuits, leading to an explosion in litigation costs for carriers.
After the Florida Bar filed its complaint against Strems in 2020, he was suspended from practice following a referee’s report. Strems appealed to the Supreme Court, as did the Bar, which urged permanent disbarment. Numerous insurance interests had filed complaints about Strems and his law firm, charging that in many cases, his firm filed multiple suits on the same claim.
Last week, the high court, which has often come down harder than a referee has recommended on lawyer discipline, landed on disbarment – but not permanently.
“Although he has certainly engaged in ethically questionable behavior, he has not demonstrated that he is not amenable to rehabilitation,” the justices wrote. “Permanent disbarment is warranted only where an attorney’s conduct indicates he or she engages in a persistent course of unrepentant and egregious misconduct and is beyond redemption.”
The court’s 37-page order shows that Strems’ violations involved far more than “the unfettered pursuit of frivolous lawsuits.” He also submitted false or misleading affidavits in two cases in which he negotiated settlements. In one case, Strems attached a purported email chain between him and opposing counsel. But he failed to include seven emails from the other lawyer that directly conflicted with Strems’ assertions in the affidavit, the court explained.
In another case, Strems’ firm represented an 84-year-old homeowner who had filed a claim after a hurricane. The woman agreed to an attorney fee of 30% of the settlement, or whatever the court awarded in fees. After Strems negotiated a $45,000 settlement, though, his firm took half of that as a fee.
In answer to the Bar’s complaint against him, Strems in 2020 denied most of the charges. In a statement to Insurance Journal Tuesday, Strems’ attorney, Benedict Kuehne, said that Strems is deeply disappointed with the disbarment decision.
“For his entire career, Scot dedicated his professional endeavors to helping wronged homeowners pursue their legitimate grievances against insurance companies that refused to pay for damages to their homes,” Kuehne said. “He has never intentionally or purposely violated Bar rules. The referee, after considering all the evidence and the absence of any prior difficulties with bar rules, deemed a modest suspension as the appropriate resolution.”
Strems’ actions not only cost insurance companies, but also hurt his own clients, the court found. Between 2016 and 2018, many of his suits were dismissed because Strems and his associates missed court deadlines and “willfully” violated procedural rules, the court noted. One trial court judge said that the firm engaged in “blatant obstruction of justice” and practiced delaying tactics in virtually every case.
As his firm took on more and more insurance claims cases, Strems repeatedly failed to manage the growing workload or hire enough attorneys. That resulted in a number of court sanctions against the firm, often on a weekly basis
“Strems’ focus on bringing in new cases rather than implementing sufficient measures to handle SLF’s volume of cases demonstrates his selfish motive,” the high court noted.
On one matter, the Supreme Court let Strems off the hook. The referee had recommended discipline after an associate attorney in Strems’ firm failed to discuss a settlement offer with the client. While the court had held Strems accountable for his firm’s actions in other instances, in this one it said that he was not responsible for another lawyer’s violations.
In the end, that did not impact the severity of the court’s order. Considering the cumulative violations, the justices said that disbarment was needed and will achieve the three purposes of attorney discipline spelled out in Bar rules: It will protect the public from unethical conduct; will punish misconduct and encourage rehabilitation by the lawyer; and will deter others from engaging in similar misdeeds.
Strems closed his law firm in 2020 but some of the lawyers with the firm formed another one. He now intends to ask the Supreme Court to reconsider the severity of the sanctions, “based on his long track record of doing the right thing under often difficult circumstances,” Kuehne said. “His prior unblemished career should merit an opportunity to prove his value to the profession and the public.”
One insurance defense attorney wasn’t so sure.
“It’s refreshing to see the state’s ethics laws and regulations being enforced in the P&C industry,” said Tiffany Rothenberg, with Kelley Kronenberg law firm. “Imposing consequences on bad actors is necessary for deterrence, which in turn, protects Florida homeowners and fosters a more palatable environment for insurers to operate in the state — an all-round benefit.
Strems faced other legal actions over his tactics. In May, he settled a lawsuit brought by Citizens Property Insurance, charging that his law firm had engaged in fraud and racketeering, had filed multiple claims at the same time, and provided false invoices and inflated costs. The settlement amount, $1 million, was far less than Citizens had initially demanded.