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 February 20, 2004, representing the position of the New York State Insurance Department.

RE: Payment of Fees to Public Adjusters

Questions Presented:

1. Pursuant to N.Y. Comp. Codes R. & Regs. tit. 11, §§ 25.1-25.13 (Regulation 10), must a public adjuster include a fee in a retainer agreement for services rendered by an outside expert?

2. If an insured obtains a settlement based upon the replacement cost of the property and the insurer pays the insured the actual cash value of the property, with the remainder subject to holdback, may a public adjuster’s fee be computed based upon the replacement cost value of the property, rather than the actual cash value of the insured’s recovery?

Conclusions:

1. If the services rendered by the outside expert directly relate to the adjusting function of the public adjuster, then the fees for such services may not be separately billed to the insured but must be included in the public adjuster retainer agreement and, consequently, would be subject to the 12.5% fee limitation.

2. The public adjuster’s fee must be computed based upon the actual cash value of the insured’s recovery, until such time as the insured makes the required repairs or replaces the property.

Facts:

No specific fact pattern was provided. The inquirer asked whether a public adjuster may include reimbursable expenses for outside experts in its retainer agreement. We assume that reimbursable expenses are expenses associated with utilizing the services of outside experts. The inquirer also stated that when an insured obtains a settlement on the replacement cost value of the property, the insurance company will only pay the actual cash value upon settlement, with the remainder subject to holdback. We assume that this means that the insurer will pay the full replacement cost when the insured makes the required repairs or replaces the property.

Analysis:

In regard to the inquirer’s first question, N.Y. Comp. Codes R. & Regs. tit. 11, §§ 25.7 (Regulation 10), "No public adjuster shall charge any insured a fee in excess of 12.5 percent of the recovery for services rendered by the adjuster." Thus, a public adjuster may not charge a fee in a retainer agreement that exceeds 12.5 percent of the insured’s recovery, for services rendered by the public adjuster. This provision governs fees charged by a public adjuster for services that are within the scope of its license. If the services rendered by an outside expert directly relate to the adjusting function of the public adjuster, then the fees for such services may not be separately billed to the insured but must be included in the public adjuster retainer agreement and, consequently, would be subject to the 12.5 % fee limitation.

In regard to the inquirer’s second question, as previously mentioned, Section 25.7 of the Regulation prohibits a public adjuster from charging any insured a fee in excess of 12.5 percent of the recovery. The Department has interpreted this language to mean that the public adjuster’s fee must be based upon the amount that the insured actually recovered from the insurer. Consequently, the public adjuster’s fee must be computed based upon the actual cash value of the insured’s recovery, until such time as the insured makes the required repairs or replaces the property, and thereby collects the full replacement cost.

For further information you may contact Senior Attorney Pascale Joasil at the New York City Office.