A question lawyers representing insureds often must answer when preparing for trial in a first-party property insurance claim is, “In what capacity can I use the public adjuster as a witness?” In Pennsylvania, the Court of Common Pleas for Lycoming County has stated that a public adjuster on a contingent fee may not testify as an expert.

The case, Everett Cash Mutual Inssurance Company v. Gibble,1 dealt with the carrier’s Motion to Preclude Expert Testimony. The insureds’ home suffered damage as a result of a soot being emitted from their furnace. The insureds filed a claim with their insurance carrier, who they allege improperly handled the claim and ultimately hired a public adjuster to assist them. The insureds’ contract with the public adjuster agreed to, “pay a contingent fee comprising a certain percentage ‘of the amount paid by the insurance companies in settlement of the loss and necessary expenses.’”2

The carrier made several supplemental payments, “including one which it offered as payment in full satisfaction of the claim, which payment [the insureds] refused to accept.” After the last payment was rejected, the carrier filed the case, “seeking a declaratory judgment that it had fulfilled all of its obligations under the insurance contract.” The insureds filed a counter-claim alleging breach of contract and bad faith. During litigation, the insureds, sought to introduce the testimony of their public adjuster as an expert witness. In response, the carrier filed the motion to exclude.

The carrier argued, “[the public adjuster] must be precluded from testifying as an expert in this case inasmuch as the contingent fee arrangement gives him a pecuniary interest in the outcome of the proceedings and to allow his testimony would be against public policy.” In making their assertions, the carrier cited, Belfonte v. Miller, where the Superior Court of Pennsylvania noted:

[T]he long established rule of law [was] that a special contract to pay more than the regular witness fees in ordinary cases is void for want of consideration and as being against public policy, and Section 552 of the Restatement of Contracts, which provides…: a bargain to pay an expert witness for testifying to his opinion a larger sum than the legal fees provided for other witnesses is illegal only if the agreed compensation is contingent on the outcome of the controversy.3

The insureds attempted to distinguish Belfonte, which dealt with a contingent fee agreement entered after litigation had been commenced from their public adjuster contract entered prior to the commencement of litigation. The trial court disagreed and cited In re Mushroom Transportation Co., Inc., Debtor, where the District Court for the Eastern District of Pennsylvania, “rejected an attempt at distinguishing the case before it from Belfonte on the grounds the litigation did not commence until sometime subsequent to the entry of the arrangement, ” finding it was likely litigation had at least been contemplated at the time the contract was signed.4

Last, the insureds argued that the public adjuster was, “acting as an expert in his role as a consultant, at the rate of $75 per hour, and only his work as a public adjuster is subject to the contingent fee agreement.” The court again disagreed with the insureds, and found the, “attempt to segregate [the public adjuster’s] work as an expert witness from his work as a public adjustor ’merely one of form.’” In making their determination, the court cited another case, Creative Dimensions in Management, Inc. v. Thomas Group, Inc., which stated:

Jurors, however, routinely take and assess the testimony of parties and person related to them who have a direct financial interest in the outcome of a case. With many witnesses and, of course, parties, interest is unavoidable. An expert however, whose only relevance is his expertise, should not have that expertise flawed.5

This decision was reaffirmed by the trial court on September 29, 2004, when the insurer’s Motion for Post Trial Relief was denied.6

This decision will keep public adjusters retained on a contingent fee basis from testifying as experts in Pennsylvania. However, public adjusters are still permitted to testify as fact witnesses and can provide invaluable testimony for their clients in that role.

As always, I’ll leave you with a (very mildly) related tune. Here is Pennsylvania’s own Hall & Oates with You Make My Dreams Come True:

1 Everett Cash Mutual Ins. Co. v. Gibble, et al., No. 01-01, 640, 2004 WL 5149339 (Pa.Com.Pl. May 14, 2004).
2 Id. at 1.
3 Id. at 2 citing Belfonte v. Miller, 243 A.2d 150, 153 (Pa. Super. 1968). (internal citations omitted).
4 Everett Cash Mutual Ins. Co., at 2 citing In re Mushroom Transportation Co., Inc., Debtor, 70 B.R. 416 (E.D. Pa. 1987).
5 Id. at 2 citing Creative Dimensions in Management, Inc. v. Thomas Group, Inc., 1999 U.S. Dist. LEXIS 2757 (E.D. Pa. 1999).
6 Everett Cash Mutual Ins. Co. v. Gibble, et al., 2004 WL 5149338 (Pa.Com.Pl. September 29, 2004).