||The examples and perspective in this article may not represent a worldwide view of the subject. (August 2010)|
A public adjuster is an insurance claims adjuster who advocates for the policyholder in appraising and negotiating a claimant's insurance claim. Aside from attorneys and the broker of record, public adjusters licensed by state departments of insurance are the only type of claims adjuster that can legally represent the rights of an insured during an insurance claim process. A public adjuster will be most beneficial when it is clear that the insurer will pay the claim and the only issue is the proper identification and valuation of the loss. Most public adjusters charge a percentage of the settlement (with the percentage being lower for larger losses (over $250,000)), with the average charge being between 15% to 20%, although some states cap the fee. Primarily they appraise the damage, prepare an estimate and other claim documentation, read the policy of insurance to determine coverages, and negotiate with the insurance company's claims handler.
There are three classes of insurance claims adjusters: staff adjusters (employed by an insurance company or self-insured entity), independent adjusters (independent contractors hired by the insurance company) and public adjusters (employed by the policyholder). "Company" or "independent" adjusters can only legally represent the rights of an insurance company.
Outside the United States Adjusters are commonly called (or translated into English as) "insurance loss assessors" (or simply "loss assessors") and staff adjusters or independent adjusters are called or translated as "insurance loss adjusters" (or simply "loss adjusters"). However, there is a clear distinction between a loss adjuster, who works on behalf of an insurance company, and a loss assessor who works on behalf of a policy holder. 
Licensing and regulation
Currently, 44 states (and the District of Columbia) have in place some form of statutory and/or regulatory scheme which licenses public adjusters. The 5 states that do not are: Alabama, Alaska, Arkansas, South Dakota, and Wisconsin. In addition, it is important to note that on October 14, 2005, the National Association of Insurance Commissioners (NAIC) adopted the Public Adjuster Licensing Model Act (MDL-228), which governs the qualifications and procedures for the licensing of public adjusters. It defines a public adjuster as "any person who, for compensation or any other thing of value, acts on behalf of an insured", specifies the duties of and restrictions on public adjusters, including regulations for the following: examination, bond or letter of credit, continuing education, public adjuster fees, contracts, record retention, and standards of conduct. In addition, the model act states that public adjusters may only act or aid on the benefit of the insured in first-party claims.
Holding a license in one state only permits the licensed to practice in that state. Although the regulations vary from state to state, the model act states that a non-resident can obtain a license in another state if their home state allows non-residents to apply for a license on the same basis. This reciprocity agreement means that in many cases one can apply for a license in another state without having to pass that state's examination or pre-licensing education requirements. Generally, public adjusters only work with insurance claims related to property damages and the business losses that they trigger such as business income, builders' risk, mechanical and electrical breakdown, extra expense and expediting expense, and leasehold interest. Although it is uncommon for public adjusters to handle health insurance claims, in some states such as Florida they are legally authorized to handle claims in all lines of insurance except life and annuities.
The public adjuster's main responsibilities are to:
- Evaluate existing insurance policies in order to determine what coverage may be applicable to a claim
- Research, detail, and substantiate damage to buildings and contents and any additional expenses
- Evaluate business interruption losses and extra expense claims for businesses
- Determine values for settling covered damages
- Prepare, document and support the claim on behalf of the insured
- Negotiate a settlement with the insurance company on behalf of an insured
- Re-open a claim and negotiate for more money if a discrepancy is found after the claim has been settled
Typically a policyholder hires a public adjuster to document and expedite their claims, obtain a more satisfactory claim recovery, more quickly, and completely restore their residence or business operations, and insulate themselves from the stress of engaging in an adversarial role with a large corporation. However, the cost of hiring outside experts, no matter how well-earned, can be an added burden when they are borne entirely by the policyholder. The added burden can be alleviated by the work of a public adjuster. However, policy holders who are not properly indemnified by their insurance carriers may be left with little choice but to hire professional assistance to recover the claim payment to which they are entitled.
Public adjusters must be able to recognize claims that may be insubstantial and disputable and explain such problems to the client. The everyday meanings of terms like "collapse", "partial collapse" and "extent of physical damage" might be entirely different from their legal interpretations, requiring the adjuster to clarify such terms for the client. Regulations regarding the uses of these terms are constantly in a state of flux so it is important for public adjusters to have a firm grasp of the law including the division of legal responsibilities between insurance companies and policyholders.
Most public adjusters are paid based on a percentage of the total settlement. For example a Georgia company states their fee is between 5% and 10% based on the type and amount of the claim. Some public adjusters charge a flat percentage, while others use a regressive scale. For example, 25% of the first $100,000, 15% between $100,001 and $200,000, and 10% of any amount beyond that. Regardless of the fee structure, the fee may be offset by an increase in the settlement amount. Or the fee may simply be a percentage higher than the hourly rate an attorney would charge to provide the same services by a better qualified individual. In fact, there are legitimate concerns that public adjusters may be engaged in the unauthorized practice of law, frequently offering legal opinions and analysis as if they have law degrees when they do not. In many jurisdictions, the fee structure must be disclosed up front. The fees for a re-opened claim are higher due to the extra work involved. Some public adjusters won't handle small claims. It is important to note that results cannot be guaranteed and a public adjuster cannot obtain more than the policyholder is legitimately entitled.
Loss recovery insurance
Loss Recovery Insurance is an insurance policy add-on devised in 1986 by Malcolm Harvey, that pays for a public adjuster who acts on solely behalf of the policyholder in negotiating a claim. Insurers always have the benefit of staff or independent adjusters to act on their behalf, reducing the claim wherever possible. Loss recovery insurance helps level the playing field by providing the policyholder the funds to hire their own professional representation. Malcolm Harvey went on to found Lorega Limited, a Lloyds' Managing General Agency which sells Loss Recovery insurance to general insurance brokers throughout the United kingdom. Whilst cover is restricted to mainland UK, At the point of writing over 500 brokers within the British Isles now sell Loss Recovery Insurance.
When to contact
While it is not always clear when a policyholder may benefit from hiring a public adjuster, the most benefit is likely to be realized if they are engaged immediately in case of a loss. Shortly after the insurance company receives notice of a loss, an adjuster representing the insurance company will visit the policyholder to gather facts about how the loss occurred, the magnitude of the loss, and the possibility of subrogation. Incorrect, incomplete or inadequately expressed answers to the adjuster's questions may reduce the amount that can be claimed. A public adjuster engaged early in the process, before the fact-finding stage, will have more opportunity to help the policyholder receive a fair settlement for all losses legitimately covered under the insurance policy. However, any time during negotiations with the insurance company and even after a settlement has been received by an insured, a public adjuster may be able to negotiate for a higher amount.
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