Meeting Invoice 597 is working its means by the California Legislature and will quickly turn into legislation. If handed in its present kind, the invoice would severely prohibit how public adjusters can cost their shoppers within the wake of catastrophic occasions—and it’s policyholders who can pay the value, as many could 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 business claims. The cap itself isn’t the true downside—most adjusters already cost nicely under that for disaster losses, reminiscent of 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 could cost a proportion based mostly on the entire quantity finally 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 they’d 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 eradicate that choice. Take, for instance, a house 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, nevertheless, the charge could be capped at 15% of solely the extra restoration—simply $30,000. Whereas the invoice is well-intentioned, this transformation may have unintended penalties, probably 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 seek out certified illustration and the place the potential price and energy required to pursue these claims could exceed the compensation accessible underneath the proposed cap.
In follow, the invoice may make it tougher—not simpler—for householders 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 probably lowering entry to certified, licensed adjusters—usually probably the most cost-effective advocates for policyholders.
As Normal 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 client safety with sensible, commonsense options. California ought to completely guard in opposition to 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.
