Public Adjuster Fee Cap to be Introduced in New Jersey
New York Public Adjusters Association Newsletter
A Bill imposing a cap on the amount a public adjuster in the state of New Jersey may charge policyholders for certain claims assistance is well underway in the state legislature.
Although there are currently competing proposals in the works, both ultimately advance a very similar objective in terms of limiting the amount a public adjuster may charge an insured for work performed on a claim. These bills were introduced as a result of reports of price gouging which occurred in the wake of Superstorm Sandy. Reported fees by a few PAs were as high as 30-40%. This led to warnings by Governor Christie and the leadership of DOBI that anyone charging excessive fees in relation to work performed will be punished. The terrible media publicity which embarrassed the industry at the worst possible time was brought about by just one or two firms, but the negative impact was clear.
One proposal, initially sponsored by New Jersey Assembly Speaker Pro Tempore Jerry Green, would prevent public adjusters from charging or accepting compensation totaling over 10% of an insurer’s payment for a claim stemming from a catastrophic loss. For a loss to be characterized this way, an event must be identified as such by the President, Federal Emergency Management Agency, Governor, Department of Law and Public Safety, or other authorized federal, state or local agency. Qualifying disasters or emergencies would include flooding, earthquakes, hurricanes and other storms. The NJPAA with the support of the National Association of Public Insurance Adjusters took a different approach which provided for a more reasonable fee cap of 12.5% with 20% allowed on supplemental claims, but our Bill would apply to all claims, not just declared catastrophes. The Board of Directors of the NJPAA (our sister organization) weighed in after careful consideration and concluded that price gouging was a serious and anti consumer practice inconsistent with our Code of Conduct. It was also concluded that a 10% cap was too low and unfair to the industry, and limiting the law to only declared catastrophe claims would fail to regulate price gouging by unscrupulous adjusters on all other claims.
This led the NJPAA to draft its own proposal which immediately won the support of NAPIA, Assemblyman Green and Senator Nia Gill, as well as the insurance industry. Due to political pressure and a fear that a loss of Republican support for our version might imperil either Bill, Assemblyman Green had a last minute change of heart and switched back to his original proposal. Our version is pending in the Senate, and the Green Bill is pending in the Assembly.
We are actively advocating on behalf of our Bill. One lesson from these events is that all of the Association’s good work to enhance the professionalism and reputation of the industry can be reversed by the bad acts of a few.
Unsurprisingly, the response from the offending public adjusters has been described as “overwhelmingly negative.” Some residents have recounted charges of up to 40 and 50% of their insurance recovery by the public adjusters hired to assist with their claims, conduct arguably permitted prior to the introduction of this Bill. The only existing guidelines on the issue were set by the New Jersey Department of Banking and Insurance, and require only that fees are reasonable and accompanied by a written explanation.
Neither Bill will apply to Sandy related claims, and the effective date of any Bill will not be known until signed into law. We will keep you informed.
SENATE, No. 2472 STATE OF NEW JERSEY 215th LEGISLATURE INTRODUCED JANUARY 14, 2013
Sponsored by: Senator NIA H. GILL District 34 (Essex and Passaic)
SYNOPSIS Establishes compensation limits for licensed public adjusters during certain emergencies.
CURRENT VERSION OF TEXT As introduced.
AN ACT concerning licensed public adjusters and amending P.L.1993, c.66. BE IT ENACTED by the Senate and General Assembly of the State of New Jersey: 1. Section 13 of P.L.1993, c.66 (C.17:22B-13) is amended to read as follows:. No individual, firm, association or corporation licensed under this act shall: a. solicit the adjustment of a loss or damage occurring in this State from an insured, whether by personal interview, by telephone, or by any other method, between the hours of six p.m. and eight a.m. during the 24 hours after the loss has occurred; b. enter into any agreement, oral or written, with an insured to negotiate or settle claims for loss or damage occurring in this State between the hours of six p.m. and eight a.m. during the 24 hours after the loss has occurred; c. have any right to compensation from any insured for or on account of services rendered to an insured as a public adjuster unless the right to compensation is based upon a written memorandum, signed by the party to be charged and by the adjuster, and specifying or clearly defining the services to be rendered and the amount or extent of the compensation on a form and with such language as the commissioner may prescribe; d. induce cancellation of a duly executed written memorandum between an insured and a public adjuster; e. make any misrepresentation of facts or advise any person on questions of law in connection with the transaction of business as an adjuster; [or] f. receive, accept or hold any moneys towards the settlement of a claim for loss or damage on behalf of an insured unless the public adjuster deposits the moneys in an interest bearing escrow account in a banking institution or savings and loan association in this State insured by an agency of the federal government. Any funds held in escrow together with interest accumulated thereon shall be the property of the insured until disbursement thereof pursuant to a written memorandum, signed by the insured and by the adjuster, specifying or clearly defining the services rendered and the amount of any compensation to be paid therefrom. In the event of the insolvency or bankruptcy of a public adjuster, the claim of an insured for any settlement moneys received, accepted or held by the adjuster shall constitute a statutory trust; or g. for a period of one year after the designation of a catastrophic loss occurrence, charge, agree to, or accept any compensation for any claim that is the result of the designated occurrence in excess of 10 percent of the amount of insurance claim payments made by the insurer. For purposes of this subsection, “catastrophic loss occurrence” means the same as defined in paragraph (4) of subsection b. of section 11 of P.L.1993, c.66 (C.17:22B-11). (cf: P.L.2010, c.116, s.3) 2. This act shall take effect on the 30th day following enactment. STATEMENT This bill provides that no individual, firm, association or corporation licensed under the “Public Adjusters’ Licensing Act” shall charge, agree to, or accept any compensation in excess of 10 percent of the amount of insurance claim payments made by the insurer for claims based on events that are the result of a catastrophic loss occurrence. This compensation level shall apply to such claims made for a period of one year from the occasion of the designation of the catastrophic loss occurrence. As defined in this bill, “catastrophic loss occurrence” means an occurrence designated by the President of the United States or the Federal Emergency Management Agency, or the Governor of New Jersey or the State Office of Emergency Management in the Division of State Police in the Department of Law and Public Safety, or any other authorized federal, State or local agency, as an emergency or a disaster and includes, but is not limited to, a flood, hurricane, storm or earthquake.