The Office of General Counsel issued the following opinion on July 23, 2003 representing the position of the New York State Insurance Department.

Re: Public Adjuster Payment Authorization

Question Presented:

May a payment authorization sent by the insured to the insurer include language indicating the public adjuster has a lien, pursuant to a public adjuster’s compensation agreement, on additional amounts that may be payable by the insurer?


Such payment authorizations may only deal with subsequent payments on already settled claims and may not purport to confer a lien by the public adjuster on any subsequent payments from the insurer.


An insured sustained a loss and retained a public adjuster to negotiate with its insurer. After agreement was reached on the amount due, the insured, at the suggestion of the public adjuster, sent the insurer a communication, directing the insurer to pay the public adjuster 12½% of the loss. The directive included the following language:

This directive will remain in force as a lien on my/our insurance claim for any future amounts which may become due, owing and payable, including but not limited to any recoverable depreciation, subrogated amounts including deductibles for the claim number listed herein.

The insurer has contended that the above language is violative of Regulation 10, N.Y. Comp. Codes R. & Regs. tit. 11, § 25.6(a) (1995). It is the public adjuster’s contention that the above language is reasonable for the public adjuster’s protection should the insurer subsequently become obligated to pay additional sums to the insured.


Regulation 10, N.Y. Comp. Codes R. & Regs. tit. 11, § 25.7 (1995), provides:

No public adjuster shall charge any insured a fee in excess of 12.5 percent of the recovery for services rendered by the adjuster.

Regulation 10, N.Y. Comp. Codes R. & Regs. tit. 11, § 25.12 (1995), further provides:

When a claim is settled where the insured is represented by a public adjuster, upon the request of the insured, the insurer's check may be made payable to both the public adjuster and the insured or to the public adjuster named as a payee, but not in excess of the amount of the public adjuster's fee, as indicated in the written compensation agreement signed by the insured and filed with the insurer. The balance of the proceeds shall be made payable to the insured or loss payee, or both, whichever is appropriate.

Regulation 10, N.Y. Comp. Codes R. & Regs. tit. 11, § 25.6(a) provides:

A public adjuster may be compensated by an insured for or on account of services rendered to such insured by the public adjuster solely as provided for by a written compensation agreement obtained by the public adjuster which shall consist of substantively the same information and statements contained in Form 1 in section 25.13(a) of this Part.

Accordingly, language recognizing a lien of the public adjuster is not permitted in a compensation agreement.

N.Y. Comp. Codes R. & Regs. tit. 11, § 25.12 allows the insurer, as an accommodation to the insured, to make direct payment of any fee due the public adjuster from the insured for settled claims. Further, since the public adjuster is entitled to be compensated in the stated percentage of the full amount of the recovery secured, including, e.g. continuing progress payments, it might be convenient for the insured, for such settled claims, to direct the insurer to make such subsequent payments both to the insured and the public adjuster.

However, a continuing payment authorization dependent upon further services to be performed by the public adjuster would be contrary to the Department’s interpretation of Regulation 10. The payment authorization in question is unacceptable because it purports to confer a lien on the subsequent payments for the benefit of the public adjuster.

For further information you may contact Principal Attorney Alan Rachlin at the New York City office.