Meeting Invoice 597 is working its method via the California Legislature and will quickly change into regulation. If handed in its present type, the invoice would severely prohibit how public adjusters can cost their purchasers within the wake of catastrophic occasions—and it’s policyholders who can pay 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 properly beneath that for disaster losses, comparable to these from the latest Los Angeles County wildfires. The problem lies in how the charge is calculated: solely on “new cash” paid by the insurer after the adjuster is retained.
Underneath present California regulation, public adjusters might cost a share based mostly 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—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 remove that possibility. 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 charge based mostly on the total declare quantity. Underneath 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, 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 might exceed the compensation obtainable below the proposed cap.
In apply, the invoice may make it more durable—not simpler—for householders to get the skilled assist they want after fires, floods, or earthquakes. Whereas AB 597 claims to guard shoppers, it dangers doing the alternative by probably lowering entry to certified, licensed adjusters—typically essentially 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 client 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 may comply with the invoice’s progress right here: AB 597 Legislative Standing.
