Meeting Invoice 597 is working its method by way of the California Legislature and will quickly grow to be regulation. 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 worth, 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 properly under that for disaster losses, corresponding 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.
Beneath present California regulation, public adjusters might cost a share primarily based on the overall 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 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 sources wanted to deal with the remainder of the declare.
AB 597 would remove that possibility. Take, for instance, a home-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. Beneath AB 597, nonetheless, the price could be capped at 15% of solely the extra restoration—simply $30,000. Whereas the invoice is well-intentioned, this transformation might have unintended penalties, doubtlessly discouraging adjusters from taking up advanced 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 value and energy required to pursue these claims might exceed the compensation accessible underneath the proposed cap.
In observe, the invoice might make it tougher—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 essentially the most cost-effective advocates for policyholders.
As Basic 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, common sense options. California ought to completely guard towards unfair charges, however these safeguards should replicate the precise dynamics of how insurance coverage claims are dealt with.
You’ll be able to observe the invoice’s progress right here: AB 597 Legislative Standing.