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Senate committee advances AB 597 to curb certain public-adjuster practices after catastrophic disasters
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Summary
Assemblymember John Harabitian told the Senate Insurance Committee that AB 597 targets unfair fee practices by some public adjusters following catastrophic disasters, aiming to prevent adjusters from charging contingency fees on insurer payments made before the adjuster was retained.
Assemblymember John Harabitian told the Senate Insurance Committee that AB 597 targets unfair fee practices by some public adjusters following catastrophic disasters, noting the bill is intended to protect disaster survivors from being charged for money insurers already paid before an adjuster was retained. "A public adjuster is a licensed professional that helps policyholders, file and collect on their claims in certain instances," Harabitian said, and he described problems where adjusters charged contingency fees on payments that were already in policyholders’ bank accounts before the adjuster did any work.
Josephine Figueroa, deputy commissioner and legislative director for the California Department of Insurance, said the department sponsors the bill and that it would protect consumers by prohibiting adjusters from considering payments received by the consumer prior to entering into a contract with a public adjuster in a declared emergency or catastrophic disaster. "AB 597 ensures funds go to where they are needed most to the consumer by prohibiting the consideration of payments received by the consumer prior to entering into a contract with a public adjuster after an emergency or catastrophic disaster," Figueroa told the committee.
The bill also would give consumers the right to rescind a public-adjuster contract if the adjuster solicited the client during a prohibited period (for example, while emergency conditions exist or during specified hours), and would require greater contract transparency about which claims and coverages the adjuster will handle.
Public-adjuster organizations largely negotiated with the author and reported reaching a neutral position after amendments. Joe Lang of the Pacific Coast Association of Public Adjusters told the committee his organization reached neutrality following extensive discussions with the author and staff. Several public adjusters and industry representatives testified in support or neutral; some private adjusters raised objections.
Greg Clifford, president and CEO of Sunpoint Public Adjusters, testified in opposition. Clifford said the amended bill could have the unintended effect of making it uneconomic for some public adjusters to represent certain claims, because insurers sometimes make substantial initial payments that leave less money for contingency fees on subsequent recoveries. "It allows the insurance company to present a certain amount of money upfront without any basis for that ... and it prohibits that insured from being able to hire somebody because there's just not enough money left there to bring in the experts to fight the insurance company," Clifford said.
Committee members debated whether limiting fees on "old money" could discourage representation in complex reopen or overage claims and discussed why the committee removed a fee cap so that adjusters could still negotiate contingency rates appropriate to particular reopen-file economics. The author and industry representatives said the bill does not cap fees; rather it clarifies that fees are contingent on "new money" obtained after the adjuster is retained in catastrophic disaster claims and provides contract transparency and a right to rescind when prohibited solicitation occurs.
After discussion, the committee voted to pass AB 597 as amended to the Committee on Appropriations. Recorded aye votes on the roll call included Senators Rubio, Nilu, Becker, Caballero, Jones and Padilla; the committee recorded the motion "Do pass as amended to Appropriations Committee".
Scope and limits: Harabitian and the department said the bill applies only in declared catastrophic disasters or emergencies and does not establish a statewide fee cap; it instead focuses on contract clarity, the right to rescind certain contracts, and prohibiting consideration of pre-contract payments when calculating adjuster fees in the covered circumstances. Opponents argued the change could make some complex claims (reopen or overage claims) harder to pursue if initial insurer payments substantially reduce immediately available funds for expert work.
Next steps: AB 597 advances to the Appropriations Committee. The author and stakeholders indicated they will continue to negotiate language as the bill moves forward.
