New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Gregory V. Serio
Superintendent

The Office of General Counsel issued the following opinion on July 2, 2003 representing the position of the New York State Insurance Department.

RE: Loss of Rental Income Claims and Public Adjusters

Questions Presented:

1. May an insurer insist upon tax returns as the only acceptable documentation to establish loss of rental income?

2. May a public adjuster collect a fee for adjusting a claim for the loss of rental income under a homeowner’s policy?

Conclusions:

1. This is not addressed in the New York Insurance Law or the Regulations promulgated pursuant thereto. It is a question of fact that will have to be determined by the Court.

2. Yes, provided that the public adjuster rendered services with respect to the adjustment of the rental income loss portion of a claim that he or she is authorized to adjust, a fee for such services may be included in the fee agreement. See N.Y. Ins. Law §§ 1113(a) (McKinney Supp. 2003), 2101(g)(2) (McKinney 2000), N.Y. Comp. Codes R. & Regs. tit. 11, § 25.7 (1995) (Reg. 10).

Facts:

No facts were presented. The inquiry is general in nature.

Analysis:

The propriety of an insurer’s insistence on tax returns as the only acceptable documentation to establish loss of rental income is not addressed in the New York Insurance Law or the Regulations promulgated pursuant thereto. Whether an insurer may properly insist upon tax returns as the only acceptable documentation is a factual determination. For instance, the court in Lebron v. Allstate Insurance Company, 179 A.D.2d 623, 578 N.Y.S.2d 239 (2nd Dept. 1992) denied an insurer’s motion for summary judgment based on its claim that the plaintiff breached the "cooperation clause" of the subject policy by not allowing Allstate to obtain the plaintiff’s income tax returns. The court held that, in such a case, there is a genuine issue of material fact as to whether the insured breached the "cooperation clause" of the policy, which would have to be resolved at trial.

N.Y. Ins. Law § 2101(g)(2) (McKinney 2000) provides:

any person, firm, association or corporation who, or which, for money, commission or any other thing of value, acts or aids in any manner on behalf of an insured in negotiating for, or effecting, the settlement of a claim or claims for loss or damage to property of the insured in this state caused by, or resulting from, any of the risks as enumerated in paragraphs four, five, six, seven, eight, nine and ten and subparagraphs (B) and (C) of paragraph twenty of subsection (a) of section one thousand one hundred thirteen of this chapter, not including loss or damage to persons under subparagraph (B) of paragraph twenty of subsection (a) of such section or who, or which, advertises for, or solicits employment as an adjuster of such claims, and shall also include any person who, for money, commission or any other thing of value, solicits, investigates, or adjusts such claims on behalf of any such public adjuster, except that such term shall not include: . . . .

A public adjuster may adjust property damage claims for loss or damage to property caused by or resulting from any of the risks specified in the above-enumerated paragraphs of N.Y. Ins. Law § 1113(a). Moreover, because N.Y. Ins. Law § 1113(a) provides in relevant part that "The power to do any kind of insurance against loss of or damage to property shall include the power to insure all lawful interests in such property and to insure against loss of use and occupancy, rents and profits resulting therefrom", a public adjuster who is adjusting a property damage claim that falls within one of the enumerated paragraphs in N.Y. Ins. Law § 1113(a) may also adjust the loss of rental income portion of such claim. Pursuant to N.Y. Comp. Codes R. & Regs. tit. 11, § 25.7, a public adjuster may charge an insured a fee up to 12.5 percent of the recovery for services rendered by the adjuster. Thus, provided that the public adjuster rendered services with respect to the adjustment of the rental income loss portion of a claim that he or she is authorized to adjust, a fee for such services may be included in the fee agreement.

For further information you may contact Supervising Attorney Joan Siegel at the New York City Office.