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National Fire Adjustment Co., Inc. v. Cioppa

United States District Court, D. Maine

January 8, 2019




         The Plaintiff, National Fire Adjustment Company, Inc., seeks a declaratory judgment stating that the Defendant, Eric Cioppa, cannot enforce 24-A M.R.S. § 1476, which requires that public adjusters adhere to a 36-hour waiting period before soliciting business from Maine citizens or offering a contract for public adjustment services. According to Plaintiff, the statute violates Plaintiff's first amendment speech rights. The parties request a judgment on a stipulated record.


         National Fire Adjustment Company, Inc. (“Plaintiff” or “NFA”) provides licensed public insurance adjustment services for clients who have suffered property damage in the State of Maine. Stip. Facts ¶ 14. NFA holds an active resident adjuster license from the State of Maine's Department of Professional and Financial Regulation, Bureau of Insurance. Id. ¶ 15.

         It is the nature of NFA's business to enter into contracts with property owners after the property owners suffer a loss insured by an insurance company. When a property owner retains NFA's services, NFA's employees provide loss-adjustments services to the property owner, which services, ideally, will provide the property owner with a method for adjusting (placing a value on) the insured loss that is more favorable to the property owner than the method used by adjusters employed or contracted by the property owner's insurance company. By providing this service, NFA's adjusters (sometimes called “public adjusters”) help ensure that property owners settle coverage claims with their insurance companies for fair value. Id. ¶ 6. In return for their services, public adjusters charge a fee to the policyholder. The fee is usually a percentage of the overall damage recovery paid by the insurance company. Id.

         Since 1997, through the Maine Insurance Code, the State of Maine has restricted the ability of public adjusters to solicit business within a 36-hour window following a loss. In its current form, [1] the so-called “36-Hour Rule” reads as follows:

1. Solicitation. An adjuster seeking to provide adjusting services to an insured for a fee to be paid by the insured may not solicit or offer an adjustment services contract to any person for at least 36 hours after an accident or occurrence as a result of which the person might have a potential claim.

24-A M.R.S. § 1476(1).[2]

         When it reviewed the merits of the proposed legislation, and in the course of deliberations that resulted in amendments to the 36-Hour Rule, the Legislature did not consider or rely on any factual findings of fraudulent, misleading, intrusive, or otherwise concerning communications by public adjusters. Stip. R. ¶ 43.

         Defendant Eric Cioppa is the Superintendent of the Maine Bureau of Insurance. Id. ¶ 24. The Maine Bureau of Insurance is one of five agencies within the State of Maine's Department of Professional and Financial Regulation. Id. ¶ 25. The Maine Bureau of Insurance regulates the State's insurance industry, including by licensing insurance adjusters and imposing discipline for violations of the State's insurance laws. Id. ¶ 26. In addition to other duties, Superintendent Cioppa is charged with protecting consumers from misleading or fraudulent business activities. Id. ¶ 27.

         Adjusters in Maine must be licensed and are governed by a comprehensive state regulatory scheme to protect the public from misleading or fraudulent business activities. Id. ¶¶ 28-29. Among other tools in his enforcement arsenal, Superintendent Cioppa is authorized to revoke, suspend, place on probation, or otherwise limit the licensure of adjusters, and to impose civil penalties and restitution orders, for violations of any law enforced or rule adopted by the Superintendent. Id. ¶¶ 29-33.

         Superintendent Cioppa has imposed discipline on public adjusters, including suspensions from practice and civil penalties, for violations of the 36-Hour Rule. Id. ¶ 46. For example, in October 2012, Superintendent Cioppa suspended a public adjuster's license for 30 days and ordered him to pay a $500 civil penalty because he had violated the 36-Hour Rule. The adjuster left two telephone messages concerning his services for property owners who experienced a fire-related loss. Id. ¶ 47.

         NFA has two employees who work as adjusters in Maine, both of whom are duly-licensed. Id. ¶ 17. Superintendent Cioppa is not aware of any evidence that NRA's Maine-based adjusters have engaged in any false or misleading statements in their communications with clients regarding NFA's public insurance adjustment services. Id. ¶ 23. NFA has instructed its adjusters in Maine to adhere to the 36-Hour Rule. Id. ¶ 48. NFA's public adjusters in Maine are presently adhering to the 36-Hour Rule to avoid discipline by the Superintendent. Id. ¶ 49. NFA's public adjusters in Maine have created time-keeping and alert systems to ensure that they wait the full 36 hours after a fire before contacting a property owner. Id. ¶ 50.

         In addition to the foregoing stipulated facts, the parties have stipulated to the following facts concerning the impact of the 36-Hour Rule on public insurance adjustment services. Accordingly, the Court accepts it as established that the first 36 hours after a fire are a critical time for public adjusters to communicate with potential clients about their services; that the first 36 hours after a fire can be stressful, hectic, and traumatic for property owners who have suffered damage; that property owners may relocate to temporary housing immediately after a fire loss, so that there may be a very short period of time for a public adjuster to locate and communicate with the policyholder; that property owners may agree to cleaning or tear-down services immediately after suffering a property loss, impeding the ability of public adjuster to assess the value of the loss; and that, by logical extension, NFA public adjusters' adherence to the 36-Hour Rule is causing NFA's public adjusters to lose business on an ongoing basis. Id. ¶¶ 7-12, 51.

         Performing public insurance adjusting services for policyholders in accordance with Maine law is a lawful business activity and is not inherently misleading. Id. ¶ 13.


         Plaintiff argues the 36-Hour Rule violates the First Amendment because it is a “content- and speaker-based restriction on speech [that] is presumptively unconstitutional viewpoint discrimination.” Pl.'s Mot. for Disposition of Liability Issues by Judgment on a Stip. R. at 2, ECF No. 21 (“Pl.'s Mot.”); see also Complaint ¶¶ 4-5. In the alternative, Plaintiff argues the Rule imposes burdens that either do not advance the State's interest or sweep more broadly than necessary to achieve the stated interest. Pl.'s Mot. at 2; Complaint ¶ 44. Defendant argues the 36-Hour Rule directly advances a substantial governmental interest and is no more burdensome than is necessary to serve that interest. Defendant's Mem. of Law for Disposition on a Stip. R. at 7 (“Def.'s Mem.”).

         The First Amendment, made applicable to the States by the Fourteenth Amendment, prohibits the States from, among other things, abridging the freedom of speech. Janus v. Am. Fed'n of State, Cnty, and Mum. Emp., 138 S.Ct. 2448, 2463 (2018). Persons subjected to a deprivation of their speech rights may, pursuant to 42 U.S.C. ยง 1983, bring an action in federal court to obtain declaratory or ...

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