Public Adjusters

Shannon Howard-EldridgeHurricane Season for the Gulf Coast starts June 1. Although the experts have predicted a quiet year, it only takes one storm to make a difference to your home and business. Whether you are a property owner, claim handler or adjuster, it is likely that you will have some interaction with a public adjuster. Recent legislation has provided structure and standards applicable to public adjusters.

Louisiana law defines a “public adjuster” as an insurance adjuster who does not work for any insurance company, but works for the insured to assist in the investigation, appraisal, evaluation and reporting of the claim. A “company adjuster” is an adjuster who is an employee of an insurance company. An “independent adjuster” is an adjuster hired on a contract basis by an insurance company to represent the insurance company’s interests. Company adjusters and independent adjusters are paid by the insurance company. A public adjuster is paid by the insured.

To ensure loyalty to the insured who may retain a public adjuster, public adjusters are prohibited, while licensed as a public adjuster by the Louisiana Department of Insurance, to represent or act as a company adjuster or independent adjuster in Louisiana. A public adjuster may only provide services with a property damage claim for a first party insured against that insured’s insurer.

Public adjusting has only been regulated in Louisiana since Hurricane Katrina. Prior to that time, there were few public adjusters working in the State. However, it is now often the case that there are groups of persons who chase storms, such as Hurricane Isaac and Hurricane Sandy. With the intention of regulating public adjusting, and presumably to protect unsophisticated insureds, the Louisiana legislature passed regulations that govern licensing, contracts with insureds and practices of those working as public adjusters in this State.

Public Adjusters must meet certain standards of conduct including serving with objectivity and complete loyalty to the interests of the insured, to best serve the insured’s insurance claim interests. The public adjuster may not have a direct or indirect financial interest in any aspect of the claim, other than the compensation established in the written contract with the insured. The public adjuster must ensure that all contracts for his/her services are in writing and set forth all terms and conditions of the engagement.

The contract between an insured and a public adjuster must include details identifying the public adjuster (legible full name of the adjuster signing the contract, as specified by the Department of Insurance records; permanent home state business address and phone number; and license number). The document must be entitled “Public Adjuster Contract” and shall state details identifying the insured (name, address, insurance company, and policy number).  The loss must be described as well as the services that are to be provided to the insured. The public adjuster and the insured must sign and date the contract. A public adjuster must attest, in the contract, that he has satisfied the financial responsibility requirements of Louisiana. If applicable, the contract must acknowledge the existence of a mortgage and the mortgage holder’s right as an additional insured. A Public Adjusting Contract may not preclude the insured from pursuing civil or judicial remedies.

The public adjuster may charge the insured a reasonable fee. Most importantly, the Public Adjuster Contract must state “the full salary, fee, compensation, or other considerations the public adjuster is to receive for services.” No public adjuster may solicit for or enter into a contact or arrangement with an insured that provides for payment of a fee to the public adjuster that is contingent upon or calculated as a percentage of the amount of any claim or claims to be paid to or on behalf of an insured by the insurer. Any such contract is against public policy and is null and void. The law provides detailed provisions and limitations as to how a public adjuster should be compensated, with the obvious intention being to protect the insured from predatory or unprofessional practices.

A public adjuster may not act as an attorney or engage in the unauthorized practice of law by filing or recording on behalf of an insured client any complaint in any court of record or agency of the State of Louisiana. A public adjuster is prohibited from rendering legal advice to the insured, including but not limited to legal advice regarding the policy provisions or coverage issues. This is often an issue when counsel becomes involved to defend a claim against an insurer and the insured is being “represented” by a public adjuster who is giving advice to the insured on the claim and coverage issues.

As relates to litigated and non-litigated claims, it is good practice to review the applicable statutes on public adjusters and to check their licensing with the Louisiana Department of Insurance. Further, it would be wise to request a copy of the contract between the public adjuster and the insured and to confirm with the insured their intention to have the public adjuster assist in the claim process. As to this issue and other aspects of the claim process, it is imperative that an insurer keep an open line of communication with its insured. Licensing information and applicable statutes are available on the website for the Louisiana Department of Insurance.

Shannon Howard-Eldridge
June 11, 2014