The Office of General Counsel issued the following informal opinion on November 18 2005, representing the position of the New York State Insurance Department.
Re: Public Adjuster's Fees
Question Presented:
If requested to by the insured, may an insurer make payment to a public adjuster prior to the final settlement of a claim?
Conclusion:
Yes. If the insurer makes a partial settlement or progress payment to an insured, and the insured so directs, the public adjuster may be paid a fee in accordance with the terms of the compensation agreement between the insured and the public adjuster.
Facts:
The insured suffered a loss and filed a $500,000 dollar claim with the insurer. The insured has contracted with a public adjuster to represent them with respect to the claim. The compensation agreement calls for the insured to pay the public adjuster a fee equal to 10% of the recovery.
The insurer agreed to issue a partial payment in the amount of $100,000 dollars and the insured requested in writing that the insurer issue two separate checks, one to the insured for $90,000 dollars and the other to the public adjuster for $10,000 dollars.
The insurer is maintaining that it will not act upon the insureds direction to pay until the loss is "completely settled". The insurer's position is based upon its interpretation of 11 NYCRR Part 25 (2004) (Regulation 10).
Analysis:
N.Y. Comp. Codes R. & Regs. tit. 11, § 25.12 (Reg. 10) provides:
When a claim is settled where the insured is represented by a public adjuster, upon the request of the insured, the insurer's check may be made payable to both the public adjuster and the insured or to the public adjuster named as a payee, but not in excess of the amount of the public adjuster's fee, as indicated in the written compensation agreement signed by the insured and filed with the insurer. The balance of the proceeds shall be payable to the insured or loss payee, or both, whichever is appropriate.
The provision quoted above allows the insurer, as an accommodation to the insured, to make direct payment of any fee due the public adjuster from the insured for settled claims. The public adjuster is entitled to be compensated in the stated percentage of the full amount of the recovery secured, including, e.g. continuing progress payments. Under the facts presented, the $100,000 dollar payment by the insurer would constitute a settlement, notwithstanding the fact that further payments may be made on the same claim. The insured's request to make payment of 10% of the proceeds to the public adjuster is permitted under the regulation.
At the time of the settlement, the insured may request that the public adjuster be named as a payee. The insurer must issue separate checks. One would be in the amount of the public adjuster's fee, computed in accordance with the written and filed compensation agreement, and made payable, in accordance with the insured's instructions, to either the public adjuster or to both the public adjuster and the insured. The second check would be for the balance of the proceeds and would be made payable to the insured or the loss payee, or both, whichever is appropriate. See Circular Letter 1993-17 (Copy attached).
Each time a payment is made by the insurer, the insured may direct payment of any fee due the public adjuster from the insured for settled claims. The direction is valid only with respect to that particular payment by the insurer. A continuing payment authorization dependent upon subsequent settlement payments would be contrary to the Department's interpretation of Regulation 10.
For further information one may contact Supervising Attorney Sam Wachtel at the New York City Office.