The Office of General Counsel issued the following informal opinion on February 13, 2001 and April 4, 2001, representing the position of the New York State Insurance Department.
RE: Insurance Adjusters and Appraisers
Questions Presented:
1. Are insurers authorized to employ in-house adjusters to determine damages for insured motor vehicles?
2. Are insureds entitled to choose the adjuster who will determine the damage?
3. Has the issue of whether or not an insured has the right to choose an adjuster or the employment of adjusters by insurance companies been addressed by the courts in New York? Are there any rulings on this issue?
4. What recourse has an insured or claimant that disagrees with an independent adjusters offer?
5. Are claims adjusters and specifically the adjusting of claims covered by statutes, regulations, circular bulletins or other regulatory arrangement by the Superintendent of Insurance?
6. Are automobile claims adjusters licensed?
7. What is the difference between an adjuster and an appraiser?
Conclusions:
1. Yes. An insurer is authorized to employ an in-house adjuster to determine damages for insured motor vehicles, but such person must be licensed as an independent adjuster.
2. An insured may retain the services of a public adjuster to represent the insured, but has no say in who represents the insurer.
3. Pursuant to N.Y. Ins. Law § 2101(g) (McKinney 2000), an "independent adjuster" is one who acts on behalf of an insurer, whereas a "public adjuster" is one who acts on behalf of an insured. Consequently, by the very definition of these terms, both insurers and insureds are authorized to retain the services of an insurance adjuster to negotiate and settle claims. However, public adjusters are not licensed to adjust certain kinds of insurance, including motor vehicle claims.
4. If an insurer fails to comply with the procedures set forth in Regulation 64, or engages in an unfair settlement practice that amounts to a general business practice, the insured or claimant may file a complaint with the Consumer Services Bureau and it will investigate the allegations of the complaint. Additionally, an aggrieved party may exercise the option of bringing a lawsuit to resolve the matter.
5. Yes. Adjusters and the adjusting of claims are covered by Sections 2101, 2102 and 2108 of the New York Insurance Law, N.Y. Comp. R. & Regs. tit. 11, § 25 (2000) (Regulation 10), N.Y. Comp. R. & Regs. tit. 11, § 26 (2000) (Regulation 25) and by the opinions of the Office of General Counsel. Recent opinions are posted on the Departments web site at http://www.ins.state.ny.us.
6. Yes. Automobile claims adjusters representing the insurer must be licensed as independent adjusters in accordance with N.Y. Ins. Law § 2108 (McKinney 2000). A designated representative of the insured does not have to be licensed as an adjuster, but may be the broker of record or a repair shop. If a repair shop, it must be registered in accordance with Article 12-A of the Vehicle and Traffic Law.
7. N.Y. Ins. Law § 2101 (McKinney 2000) defines an adjuster as one who investigates, negotiates and settles claims arising under insurance contracts. However, an appraiser is one who is selected or appointed to ascertain and state the true value of goods or real estate.
Facts:
No specific facts related to these questions were given.
Analysis:
Licensing of Insurance Adjusters
A. Independent Adjusters
N.Y. Ins. Law § 2101(g)(1) (McKinney 2000) defines the term "independent adjuster" as:
[A]ny person, firm, association or corporation who, or which, for money, commission or any other thing of value, acts in this state on behalf of an insurer in the work of investigating and adjusting claims arising under insurance contracts.
Although the Insurance Law does not specifically define the term "adjust", it means to settle or bring to a satisfactory state so that the parties will agree in the result. See Blacks Law Dictionary 27 (6th ed.1993).
Exempted from the definition of an independent adjuster are the officers, directors or regular salaried employees of an authorized insurer who adjust on behalf of the insurer, unless they are acting as auto body repair estimators as defined by N.Y. Ins. Law § 2101(j) (McKinney 2000). In such cases, auto body repair estimators must be licensed as independent adjusters, in accordance with N.Y. Ins. Law § 2108 (a)(3) (McKinney 2000).1 The employees of an authorized insurer who adjust, do so exclusively for that insurer, while independent adjusters may work for several different insurers.
Additionally, pursuant to N.Y. Comp. Codes R. & Regs. tit. 11, § 216.7 (b) (3) (2000) (Regulation 64), the person inspecting the damaged vehicle on behalf of the insurer must be licensed or authorized under Article 21 of the Insurance Law, to negotiate a loss with the insured.
B. Public Adjusters
N. Y. Ins. Law § 2101(g)(2) (McKinney 2000) defines the term "public adjuster" as:
[A]ny person, firm, association or corporation who, or which, for money, commission or any other thing of value, acts or aids in any manner on behalf of an insured in negotiating for, or effecting, the settlement of a claim or claims for loss or damage to property of the insured in this state . . .
Section 2101 delineates the kinds of insurance that a public adjuster can adjust on behalf of insureds. Motor vehicle claims are not included in the kinds of insurance enumerated by this section. In regard to those kinds of insurance not enumerated, no license is required under the Insurance Law. However, such person may be engaging in the practice of law or as a private investigator, for which licensing is required. We offer no opinion as to when such licensing is required.
Regulation 64 also allows an insured to designate a representative, such as a repair shop, to negotiate the cost of the repair of the motor vehicle. Where the repair shop is located in New York, it must be registered pursuant to the provisions of the Motor Vehicle Repair Shop Registration Act (Article 12-A of the Vehicle and Traffic Law). The insureds broker of record may also be a designated representative. See N.Y. Comp. Codes R. & Regs. tit. 11, § 216.7(a)(2) (2000).
Reviewing an Independent Adjusters Offer
N.Y. Comp Codes R. & Regs. tit. 11, § 216.7 (b) (2000) (Regulation 64) provides in pertinent part as follows:
(14) (i) If after negotiations an agreed price cannot be reached, the insurer must furnish the insured with a Notice of Rights letter contained in section 216.12. . .
(ii) The insurer must furnish the insured or the designated representative, at the express request of either, with the name and address of a New York State registered motor vehicle repairer, properly equipped to complete the repairs on the damaged motor vehicle . . . who will repair the damaged motor vehicle at the insurers estimated cost of repair. . .
(15) If the insureds motor vehicle is repaired at a repair shop recommended by the insurer, for a sum estimated by the insurer as the reasonable cost to repair the vehicle, the insurer [must] select a repair shop that issues written guarantees that any work performed in repairing damaged motor vehicles meets generally accepted standards for safe and proper repairs. . .
Thus, if an insurer fails to comply with the procedures set forth in Regulation 64, or engages in an unfair settlement practice that amounts to a general business practice, the insured or claimant may file a complaint with the Consumer Services Bureau and it will investigate the allegations of the complaint.
Additionally, an aggrieved party may exercise the option of bringing a lawsuit to resolve the matter.
In situations where the insured is making a claim under his or her own property insurance policy, the insured may sue the insurer under the contract of insurance, or the parties may agree to submit to arbitration all controversies or disputes arising under the insurance policy. Typically, this agreement appears in the form of an arbitration clause in the insurance policy itself. The insurance policy may contain an appraisal clause which specifies that where the insured and the insurer disagree as to the amount of the loss, the matter will be submitted for an appraisal. See, eg., N.Y. Ins. Law § 3404 (McKinney 2000). Significantly, arbitration differs from an appraisal in that arbitration disposes of the entire controversy between the parties, whereas an appraisal is limited to deciding the collateral matter of the value of the loss.
However, where the insured has purchased liability insurance, the third party claimant generally has no recourse directly against the insurer, but only against the insured.
Controversies arising out of motor-vehicle no-fault claims, which involve non-serious injuries, are subject to special rules, including arbitration.
Adjusters v. Appraisers
With respect to the distinction between appraisers and adjusters, an adjuster is a person who acts on behalf of an insurance company or an insured in the adjusting or settlement of claims. See N.Y. Ins. Law §2101 (McKinney 2000). An appraiser is a person selected or appointed by competent authority or an interested party to ascertain and state the true value of goods or real estate. See Blacks Law Dictionary 67 (6th ed.1993).
Thus, the line of demarcation between an appraiser and an adjuster is quite definite, since merely performing an appraisal does not amount to the negotiating, investigating and adjusting of claims. However, the function of an adjuster may encompass the appraisal of claims.2
The above opinion is informal and not binding on any court. For further information, you may contact Attorney Pascale Joasil at the New York City Office.
1 N.Y. Ins. Law Section 2101(j) states as follows:
any officer, director or regular salaried employee of an authorized insurer or of any adjustment bureau or association owned and maintained by insurers, who writes, or who directly supervises the writing of, any motor vehicle body repair estimate in this state, on behalf of such insurer in the work of diagnosing or estimating motor vehicle repair costs or procedures relative to appraising, investigating or adjusting claims for motor vehicle body repair work pursuant to an insurance contract. See N.Y. Ins. Law § 2101 (j) (McKinney 2000).
2 See N.Y. Ins. Law § 2101 (j) (McKinney 2000) (illustrating that the definition of an auto body repair estimator encompasses the function of appraising claims).