Meeting Invoice 597 is working its approach by means of the California Legislature and will quickly develop into legislation. If handed in its present type, the invoice would severely prohibit how public adjusters can cost their shoppers within the wake of catastrophic occasions—and it’s policyholders who pays the value, as many might lose entry to adjusters unwilling to tackle their claims.
AB 597 imposes a 15% cap on charges that public adjusters can cost for disaster-related residential and sure industrial claims. The cap itself isn’t the true downside—most adjusters already cost nicely under that for disaster losses, similar to these from the latest Los Angeles County wildfires. The difficulty lies in how the charge is calculated: solely on “new cash” paid by the insurer after the adjuster is retained.
Beneath present California legislation, public adjusters might cost a proportion based mostly on the full quantity in the end recovered. (California Insurance coverage Code § 15027.) That features quantities paid earlier than and after the contract is signed, so long as the policyholder isn’t left in a worse monetary place than if that they had dealt with the declare on their very own. This construction makes it economically possible for adjusters to step in mid-claim—usually after delays, underpayments, or denials—and nonetheless commit the time and assets wanted to deal with the remainder of the declare.
AB 597 would get rid of that possibility. Take, for instance, a home-owner with a $1 million insurance coverage declare who has already been paid $800,000 earlier than participating a public adjuster. If the adjuster recovers the remaining $200,000, present legislation permits them to cost a charge based mostly on the complete declare quantity. Beneath AB 597, nonetheless, the charge can be capped at 15% of solely the extra restoration—simply $30,000. Whereas the invoice is well-intentioned, this modification may have unintended penalties, doubtlessly discouraging adjusters from taking over advanced or partially paid claims. That is particularly regarding in rural or underserved communities, the place policyholders already battle to search out certified illustration and the place the potential value and energy required to pursue these claims might exceed the compensation out there below the proposed cap.
In observe, the invoice may make it more durable—not simpler—for owners to get the skilled assist they want after fires, floods, or earthquakes. Whereas AB 597 claims to guard customers, it dangers doing the other by doubtlessly lowering entry to certified, licensed adjusters—usually probably the most cost-effective advocates for policyholders.
As Common Counsel for the Pacific Coast Affiliation of Public Insurance coverage Adjusters (PCAPIA), I can attest that our board and members are actively participating with legislators to make sure that any reform—together with AB 597—balances shopper safety with sensible, common sense options. California ought to completely guard towards unfair charges, however these safeguards should mirror the precise dynamics of how insurance coverage claims are dealt with.
You’ll be able to comply with the invoice’s progress right here: AB 597 Legislative Standing.
