Louisiana policyholders have suffered through their share of destructive storms, hurricanes, and floods over the past five years. Many of these policyholders need the services of quality restoration contractors and great public insurance adjusters. Recently, Hurricane Ida has led to a number of public adjusters asking for advice about doing work in Louisiana. I tell public adjusters “do not do business as usual and do not have a contingent agreement.
• The law does not allow you to negotiate the claim: The definition of public adjuster does not include ‘negotiating for or effecting the settlement of a claim’ which are the words that allow you as public adjusters to represent your clients in most states. Instead, the law defines public adjusting as: ‘(a) Investigating, appraising, or evaluating and reporting to an insured in relation to a first-party claim.’ §22:1692
Note that the law says, ‘reporting to an insured,’ not an insurer. Negotiating settlements and directly contacting insurers to discuss and evaluate the merits of claims have been found to be the unauthorized practice of law. Are these provisions always enforced? No, not consistently. The coming storm will bring heightened scrutiny, though, so beware and think about every communication carefully.
• You cannot charge a percentage fee: The law provides that: ‘A public adjuster may charge the insured a reasonable fee. A public adjuster shall not solicit for or enter into any contract or arrangement between an insured and a public adjuster which provides for payment of a fee to the public adjuster which is contingent upon, or calculated as a percentage of, the amount of any claim or claims paid to or on behalf of an insured by the insurer and any such contract shall be against public policy and is null and void.’ §22:1703
In your contract, you can use an hourly rate or a flat fee for your services but remember that such fee must be ‘reasonable,’ which is decided on a case by case basis.
I know that some are simply not going to accept this and will try to come up with some scheme to work around laws regarding getting paid on a contingent basis. I suggest that public adjusters read the Louisiana Attorney General opinion regarding a public adjuster contract, which states:
A contingency fee is an amount, whether percentage or otherwise, that is based upon the successful outcome of the matter for which the service is rendered. This office views the proposed fee schedule to be tantamount to a contingency fee because the fee being offered as consideration is directly contingent upon the outcome of the funds recovered. In viewing the chart, it allows the public adjuster to earn a fee of $10,000 if the adjuster recovers up to $100,000, approximately 10%. Likewise, if the adjuster recovers up to $500,000, then the adjuster’s fee would amount to $50,000, again $10%. We view the schedule as having a percentage based correlation to the positive outcome of the case, in which, the public adjuster’s payment is 10% of the proceeds recovered.
In essence, the proposed fees schedule would require the public adjuster and insured to enter into a contract with the adjuster’s fee being contingent upon funds recovered or calculated as a percentage of the amount of the claim. Thus, this contingent-based fee schedule would be repugnant to La. R.S. 22:1210.103, which states that any such contract is against public policy and is null and void.
When the amount of the recovery impacts the amount earned, the fee to be paid is “contingent” on the results. Soffer warns about this by stating you can charge a reasonable flat fee or hourly fee for services. The hourly fee can be capped to an amount, but the cap cannot be tied to a recovery.
There is a case decided this year involving a public adjuster entering into an illegal 7.5% contingent fee arising from a Hurricane Isaac claim in 2012.1 The court noted that the fee had been changed to a flat fee before the initial partial payment:
A public adjuster is prohibited from entering into a contract with an insured, which provides for a fee that is contingent upon the amount of any claim paid on behalf of the insured by the insurer. La. R.S. 22: 1703(A). However, the record reflects that the parties later amended the contract to provide that WorldClaim would receive a $150,000.00 flat fee instead of a 7.5% contingency fee. Mr. Fusco testified that once he learned the fee was illegal in Louisiana, the parties amended the contract to reflect a flat fee. The initial contract between Renola and WorldClaim was entered into on September 4, 2012; however, at trial Mr. Fusco testified that the contingency fee was amended to a flat fee contract in 2013. Louisiana Citizens’ final payment to Renola occurred in 2014. Thus, the contract was converted well before the final payments were made to Renola. La. R.S. 22:1703(A) prohibits a public adjuster from entering into a contingency fee contract with a client that is contingent on ultimate recovery. We find that because the contract was converted, the contract between Renola and WorldClaim did not violate La. R.S. 22:1703(A). As such, the trial court did not abuse its discretion in denying Louisiana Citizens’ motion in limine.
What exactly public adjusters can do and say in discussions with insurance adjusters is confusing after I re-read Soffer’s blog post, then the insurance commissioner’s bulletin noted in my recent post, Louisiana Policyholders Deserve Good Faith Treatment – Insurance Companies Cannot Ignore Public Adjusters and Should Communicate with Policyholders. Some could read Soffer’s blog and the literal remarks by the insurance commissioner to mean that public adjusters are not to speak with the insurance companies, and insurance adjusters only have to speak with policyholders and not their public adjusters. The one thing that is clear is that public adjusters cannot negotiate the claim amount owed with the insurance company and that the contracts cannot be contingent in nature. Louisiana is not business as usual for public insurance adjusters who are used to practicing in states outside of Louisiana.
Thought For The Day
I had nothing to offer anybody except my own confusion.
1 PVCA Inc. v. Pacific West TD Fund, 313 So.3d 320 (La. App. 2021).