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

David A. Paterson
Governor

Eric R. Dinallo
Superintendent

OGC Op. No. 08-08-08

The Office of General Counsel issued the following opinion on August 26, 2008, representing the position of the New York State Insurance Department.

Re: Public adjuster communicating with insurer represented by counsel

Questions Presented:

1. May a public adjuster make demands, on behalf of an insured, for payments from an insurer pursuant to a court-ordered award for “improvement and betterment fees” and lost rents?

2. May a public adjuster advise his client’s insurers of any breach of contract or violation of the Insurance Law?

3. Are there any specific laws or regulations that would prohibit a public adjuster from communicating directly with an insurer regarding a claim in litigation when the insurer is represented by counsel?

4. Are there any provisions in the Insurance Law or regulations promulgated thereunder that would prohibit a public adjuster from performing the duties described in Questions 1 and 2 once a claim is being litigated?

Conclusions:

1. Yes. Pursuant to N.Y. Insurance Law § 2101(g)(2) (McKinney 2006), a public adjuster may act or aid in any manner on behalf of the insured to negotiate or effectuate a settlement of a claim for loss or damage to property.

2. Yes. Nothing in the Insurance Law prohibits a public adjuster from informing an insurer that it is in breach of contract or violation of the Insurance Law.

3. The Insurance Department is unaware of any law or regulation that would prohibit a public adjuster from communicating directly with an insurer regarding a claim for which the insurer is being represented by counsel.

4. Nothing in the Insurance Law or regulations promulgated thereunder prohibits a public adjuster from attempting to settle a claim on his client’s behalf, or to inform the insurer that it is in breach of contract or violation of the Insurance Law.

Facts:

The inquirer is a public adjuster who represents an insured, ABC, Inc., (“ABC”). The inquirer states that in 2002, the inquirer’s client commenced an action against its insurer, XYZ Insurance Company (“XYZ”), for failure to appoint an impartial appraiser. The inquirer also states that on August 21, 2007, after a court-ordered appraisal, the court ordered XYZ to pay the insured $146,965.07 in tenants’ “improvements and betterments,” as well as $97,734 in lost rents. In return, XYZ appealed the lost rents award in excess of the policy limits but refused to pay the “improvements and betterments” award.

The inquirer indicates that, at the insured’s request, on September 6, 2007, the inquirer made a written demand to XYZ for the improvements and betterments award; when this demand was ignored, the inquirer made a second demand for payment of the judgment.

On April 2, 2008, the New York State Supreme Court upheld the award for lost rents, which XYZ intends to appeal. Further, the inquirer states that, immediately thereafter, the inquirer issued a third demand letter to XYZ for the betterments and improvements award, accusing the insurer of “bad faith practices” for failing to pay the judgment pursuant to New York Codes Rules and Regulations (“NYCRR”) tit. 11, § 216.6(f) (Regulation 64).

The inquirer also reports that the inquirer received a letter dated April 23, 2008, from John Doe, Esq., who represents XYZ, informing the inquirer that since XYZ is being represented by counsel, “contact with [his] client is forbidden under New York State Law.” The letter also expressed XYZ’s intent to pay the $146,965.07 betterments and improvements award, and dismissed as without merit the inquirer’s claim alleging bad faith settlement practices on XYZ’s part.

The inquirer asserts that the insured has requested that the inquirer make demands to XYZ to settle the claim, although the insured is being represented by counsel in this matter. The inquirer states that rather than the insured pay an attorney to make written settlement demands to XYZ, the inquirer has undertaken to do so because such services are already included in the inquirer’s fees, and that the inquirer routinely makes demands for payment on behalf of the inquirer’s clients. Further, the inquirer believes that it is the inquirer’s “legal duty” to notify insurers of their violation of the insurance regulations or breach of insuring agreements.

Therefore, the inquirer asks whether a public adjuster may make demands for payment after litigation on the matter commences; whether an adjuster may advise an insurer of its breach of a contract and/or violation of the insurance regulations; and whether there are any laws or regulations that would prohibit a public adjuster from engaging in such activities when the claim is in litigation and the insurer is represented by counsel.

Analysis:

Insurance Law § 2101(g)(2) is relevant to the queries and defines a “public adjuster” as follows:

“Public adjuster” means 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 . . . .

Insurance Law § 2101 neither authorizes nor prohibits the activities that the inquirer has undertaken as a public adjuster. Further, the Insurance Department’s Office of General Counsel (“OGC”) is unaware of any insurance law or regulation that prohibits a public adjuster from communicating with an insurer once it is represented by counsel.

For further information you may contact Senior Attorney Camielle A. Campbell at the New York City office.