Meeting Invoice 597 is working its method by means of the California Legislature and will quickly turn into regulation. If handed in its present kind, the invoice would severely prohibit how public adjusters can cost their purchasers 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 drawback—most adjusters already cost nicely under that for disaster losses, comparable to these from the current Los Angeles County wildfires. The problem lies in how the price is calculated: solely on “new cash” paid by the insurer after the adjuster is retained.
Underneath present California regulation, public adjusters might cost a proportion primarily based on the whole 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—typically after delays, underpayments, or denials—and nonetheless commit the time and sources wanted to deal with the remainder of the declare.
AB 597 would get rid of that choice. Take, for instance, a house owner with a $1 million insurance coverage declare who has already been paid $800,000 earlier than partaking a public adjuster. If the adjuster recovers the remaining $200,000, present regulation permits them to cost a price primarily based on the complete declare quantity. Underneath AB 597, nevertheless, the price could be capped at 15% of solely the extra restoration—simply $30,000. Whereas the invoice is well-intentioned, this alteration may have unintended penalties, doubtlessly discouraging adjusters from taking up complicated or partially paid claims. That is particularly regarding in rural or underserved communities, the place policyholders already wrestle to seek out certified illustration and the place the potential price and energy required to pursue these claims might exceed the compensation out there underneath the proposed cap.
In apply, 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 doubtlessly decreasing entry to certified, licensed adjusters—typically 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 partaking with legislators to make sure that any reform—together with AB 597—balances shopper safety with sensible, commonsense options. California ought to completely guard in opposition to unfair charges, however these safeguards should replicate the precise dynamics of how insurance coverage claims are dealt with.
You possibly can observe the invoice’s progress right here: AB 597 Legislative Standing.
