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. 08-09-15

The Office of General Counsel issued the following opinion on September 29, 2008, representing the position of the New York State Insurance Department.

Re: Public Adjuster Ownership of Construction Company

Question Presented:

May an individual licensed as a public adjuster and owner of a public adjusting company act as an owner and principal of a construction/renovation company at the same time?

Conclusion:

Yes, an individual licensed as a public adjuster and owner of a public adjusting company may act as an owner and principal of a construction/renovation company at the same time. However, the public adjuster must take care to comply with the New York Insurance Law in the conduct of his or her business as both a public adjuster and owner of a construction/renovation company.

Facts:

The inquiry is of a general nature, without reference to particular facts.

Analysis:

N.Y. Ins. Law § 2101(g)(2) (McKinney 2006) is relevant to the inquiry. That statute defines the term “public adjuster” and provides that:

“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, except that such term shall not include:

(A) any employee, agent or other representative of any authorized insurer who acts as such in the adjustment of any claim or any licensed insurance broker who acts as an adjuster for a client of such broker, without any compensation for such services as adjuster if such insurer's representative or such licensed insurance broker does not advertise or publicly solicit the adjustment of claims in such a way as is likely to mislead the public into believing that he is offering his services as a public adjuster;

(B) any licensed attorney at law of this state who acts or aids in adjusting insurance claims as an incident to the practice of his profession and who does not advertise himself as a public adjuster;

(C) any licensed insurance broker who acts as an adjuster with respect to any loss involving insurance contracts under which he was the broker of record in placing the insurance, whether or not designated in writing to act for the insured; or

(D) any other licensed insurance broker who has been designated to act for the insured in writing before a loss occurs.

Thus, the Insurance Law describes the functions of a public adjuster in negotiating the settlement of claims on behalf of an insured, and limits who may act as a public adjuster.

Additionally, N.Y. Comp. Codes R. & Regs. tit. 11, § 25.7 (2006) (Regulation 10) prescribes the maximum compensation a public adjuster may receive: “No public adjuster shall charge any insured a fee in excess of 12.5 percent of the recovery for services rendered by the adjuster.” Therefore, a public adjuster’s compensation is limited to a maximum of 12.5 percent of the settlement recovered from the insurance companies by the insured. See OGC Opinion 04-02-21 (February 20, 2004).

There is no prohibition in statute against a public adjuster also being the owner of a construction/renovation company. However, when the public adjuster also performs contracting or other work for the insured, there must be full disclosure of the relationship to prevent a potential conflict of interest and to make certain that the insured is properly informed. See OGC Opinion 07-06-25 (June 26, 2007).

Moreover, the public adjuster/construction company owner may not use contracts between the insured and the construction company to evade the 12.5 percent limitations on the adjuster’s fee set forth in 11 N.Y.C.R.R. § 25.7.

At all times, the public adjuster/construction company owner must take care to record transactions conducted in both capacities with the utmost transparency and specifity, so as to dispel any inference of impropriety. The public adjuster’s agreement therefore should be in writing, and separate and distinct from the construction/renovation agreements. The public adjuster/construction company owner also would be well-advised to thoroughly itemize fees for the construction company’s services in writing, so as to avoid the appearance of any overlap with adjuster’s fees and to ensure that the transaction is conducted at arm’s length.

The Department may subject the adjuster to disciplinary action under Insurance Law § 2110 for violating the law or engaging in conduct found to be fraudulent, dishonest or otherwise untrustworthy. And in bringing such a proceeding, the Department would not be limited to services that the public adjuster performed that were within the scope of his or her license.

For further information, you may contact Associate Attorney Sam Wachtel at the New York City office.