Section 25.3 is amended to make clear that a public adjuster may not solicit the adjustment of a loss between 6:00 p.m. and 8:00 a.m. through a contractor or any other individual or entity and to make technical amendments.

Section 25.4 is amended to require a public adjuster to notify the Department of Financial Services of a change in the public adjuster’s business or residence telephone number, fax number, or email address within 30 days of the change.

Section 25.5 is amended to add definitions of “business entity”, “within the second degree of consanguinity”, and “supplemental claim” and to make technical amendments.

Section 25.6 is amended to provide that pursuant to Insurance Law Section 2108(s)(2)(A), a public adjuster may not receive any compensation, either directly or indirectly, for a referral of the insured to an individual or entity for services, work, or repairs relating to any insurance claim for which the public adjuster represents the insured or has negotiated or effected a settlement, unless the compensation is prominently and clearly disclosed to the insured in a written compensation agreement. Pursuant to Insurance Law Section 2108(s)(2)(B), a public adjuster who has a financial or ownership interest, directly or indirectly, in an individual or entity that performs services, work, or repairs, or is the spouse of the individual having such an interest, may not refer the insured to the individual or entity unless the financial or ownership interest is prominently and clearly disclosed to the insured in the written compensation agreement. If a public adjuster refers an insured to such an individual or entity, then the written compensation agreement required by this section must be a separate document from any agreement or contract entered to perform services, work, or repairs. Every such agreement or contract must itemize all fees in writing and may not be used to circumvent or in any way increase the amount that the public adjuster may charge pursuant to Section 25.7.

Section 25.6 is further amended to state that pursuant to Insurance Law Section 2108(s)(2)(B), if a public adjuster refers an insured to an individual who is related to the public adjuster by blood or affinity within the second degree of consanguinity, or to an entity owned or controlled by such an individual, for services, work, or repairs relating to any insurance claim for which the public adjuster represents the insured or has negotiated or effected a settlement, then the public adjuster must disclose the relationship to the insured in the written compensation agreement. If a public adjuster refers an insured to an individual or entity described in Section 25.6(e) subsequent to the written compensation agreement being signed by the party to be charged, then the public adjuster may not receive any compensation unless the public adjuster obtains an acknowledged disclosure statement that is consistent with Form 2 in Section 25.13(b). The disclosure statement is limited to the disclosure of the referral fees, and the party to be charged who signed the original compensation agreement must acknowledge by signature the disclosure statement. The public adjuster must provide a copy of the signed disclosure statement to the insurer.

Section 25.6 also is amended to provide that a public adjuster may not require an insured to use any individual or entity for services, work, or repairs relating to any insurance claim for which the public adjuster represents or represented the insured or has negotiated or effected a settlement. If services rendered by an outside expert or consultant retained or employed by the public adjuster directly relate to the adjusting function of a public adjuster, then the public adjuster must include the fees for those services in the written compensation agreement and is subject to the maximum compensation set forth in Section 25.7.

Section 25.7 is amended to state that a public adjuster may not charge a fee in excess of 12.5 percent of the recovery for services rendered by the public adjuster, with respect to a claim, except a public adjuster may charge a fee of up to 20 percent on a supplemental claim if the aggregate fee charged is less than or equal to 12.5 percent of the full claim payment. The public adjuster must compute the fee based upon any monies paid by the insurer for any insurance claim for which the public adjuster represents the insured or has negotiated or effected a settlement, after the insured has retained the services of the public adjuster. Any compensation received by a public adjuster, either directly or indirectly, for a referral of an insured to an individual or entity for services, work, or repairs relating to any insurance claim for which the public adjuster represents or represented the insured or has negotiated or effected a settlement, is deemed to be compensation from the insured and, in combination with any other compensation received from the insured, may not exceed the maximum amount that the public adjuster may charge in accordance with this section. Notwithstanding Section 25.7(a) and (b) or Section 25.6(e)(4), a public adjuster may not receive any compensation, either directly or indirectly, for a referral described in Section 25.6(e)(2).

Section 25.9 is amended to make technical amendments and reletter subdivisions.

Section 25.10(b) is amended to make a technical amendment.

The title of Section 25.11 is amended to reference “files” and the text of Section 25.11 is amended to reference books, files, and records; communications. Section 25.11 also is amended to provide that when an insured is represented by a public adjuster, an insurer must include the public adjuster in any written or oral communications the insurer initiates with the insured unless the insured instructs the insurer otherwise in writing.

Section 25.12 is amended to state that when a claim is settled where the insured is represented by a public adjuster, the insurer must follow the direction of the insured, subject to the interests of any loss payee or mortgagee, as to who shall be named on the insurer’s check or checks by following the instructions in a direction to pay letter signed by the insured and filed with the insurer. The insurer may not accept the direction to pay letter unless the letter is signed by the first named insured with respect to commercial claims and all named insureds with respect to non-commercial claims, and the letter is consistent with Form 4 in Section 25.13(d).

Section 25.12 also is amended to provide that upon the written direction of the insured, the insurer must make its check 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 party to be charged and filed with the insurer, less any referral fee set forth in a disclosure statement made pursuant to Section 25.6(e)(4). If an insured does not submit a direction to pay letter to the insurer, then the insurer may not make any check payable to the public adjuster. Any payment made to a public adjuster may be only for those elements of the claim for which the public adjuster represents the insured. A direction to pay letter will be valid for any payment made pursuant to a claim unless revoked by the insured. A direction to pay letter is revocable by any named insured at any time prior to the insurer issuing a check. If an insured revokes a direction to pay letter, then the revocation must be in writing and signed by the insured. The insured must submit the revocation to the insurer and provide the public adjuster with a copy. A public adjuster may not condition doing business with an insured on the insured signing a direction to pay letter that directs the insurer to name the public adjuster on the check.

Section 25.12 is further amended to provide that any mediation, arbitration, or litigation proceeding involving a dispute regarding a loss in New York between an insured and a public adjuster initiated by a public adjuster must be filed and held in New York and will be subject to the laws of New York.

Section 25.13 is repealed and a new section 25.13 is added to set forth a public adjuster compensation agreement form, disclosure statement form, notice of cancellation form, and direction to pay form.

Financial Services Law Section 202 establishes the office of the Superintendent of Financial Services (“Superintendent”). Financial Services Law Section 302 and Insurance Law Section 301, in material part, authorize the Superintendent to effectuate any power accorded to the Superintendent by the Financial Services Law, Insurance Law, or any other law, and to prescribe regulations interpreting the Insurance Law.

Insurance Law Section 2101(g)(2) defines the term “public adjuster.”

Insurance Law Section 2108 sets forth the licensing requirements for and duties of public adjusters and provides that every public adjuster has an affirmative duty to act on behalf and in the best interests of the insured when negotiating for or effecting the settlement of an insurance claim for the insured or otherwise acting as a public adjuster. This section also prohibits a public adjuster from receiving compensation unless the adjuster obtains a written memorandum, signed by the party to be charged, that specifies the amount of the compensation. Section 2108 further prohibits a public adjuster from receiving any compensation for referring an insured to certain persons unless the public adjuster discloses the compensation in writing, and if the public adjuster has a financial or ownership interest in the person or is related to the person to the second degree of consanguinity, discloses in writing the relationship between the public adjuster and person.

Insurance Law Section 2110(a) sets forth the grounds on which the Superintendent may refuse to renew, may revoke, or may suspend a public adjuster’s license, including when the public adjuster has failed to act on behalf and in the best interests of the insured when negotiating for or effecting the settlement of an insurance claim for such insured or otherwise acting as a public adjuster, or has failed to make the disclosures required by Insurance Law Section 2108(s)(2).

Insurance Law Section 2134 requires any person licensed under Insurance Law Article 21 to inform the Superintendent of a change of address within 30 days of the change.

2. Legislative objectives: Insurance Law Section 2108 sets forth the licensing requirements for and duties of public adjusters. Chapter 546 of the Laws of 2013 amended Insurance Law Sections 2108 and 2110(a) to provide that every public adjuster has an affirmative duty to act on behalf and in the best interests of the insured when negotiating for or effecting the settlement of an insurance claim for the insured or otherwise acting as a public adjuster; prohibit a public adjuster from receiving any compensation for referring an insured to certain persons unless the public adjuster discloses in writing the compensation and certain relationships between the public adjuster and person if they exist; and clearly authorize the Superintendent to refuse to renew, revoke, or suspend a public adjuster’s license if the public adjuster has failed to act in the best interests of an insured.

This amendment to the rule implements and accords with the Legislature’s public policy objectives by reflecting the amendments made to the Insurance Law by Chapter 546. In addition, the Department of Financial Services (“DFS”) has not substantively amended this rule since 1986. Therefore, this amendment to the rule makes other changes to update the rule and to ensure that public adjusters act in the best interests of insureds.

3. Needs and benefits: Under Insurance Law Section 2108(p) and Insurance Regulation 10, a public adjuster is not entitled to any compensation that an insured pays to the public adjuster for services rendered unless it is based upon a written compensation agreement signed by the party to be charged. In addition, Regulation 10 prohibits a public adjuster from charging any insured a fee in excess of 12.5 percent of the recovery for services rendered by the adjuster. DFS, through Office of General Counsel (“OGC”) opinions issued by one of its two predecessor agencies, the New York State Insurance Department, has taken the position that compensation from a contractor to a public adjuster for a referral is a fee for services rendered by the public adjuster. OGC Opinion No. 07-06-25 (June 26, 2007). Although the insured pays the referral fee indirectly, the compensation for the referral must be included as part of the maximum 12.5 percent fee that the public adjuster is entitled to collect under Regulation 10 and must be disclosed in the written compensation agreement. Id. This position is grounded on the fact that under the common law, an agent has a duty of undivided loyalty to his or her principal. OGC Opinion No. 97-9 (NILS) (Jan. 28, 1997). In a relationship between a public adjuster and an insured, the public adjuster is the agent, and the insured is the public adjuster’s principal. Id. As a result, a public adjuster owes a duty of undivided loyalty to the insured that hired the adjuster. Id.

Chapter 546 of the Laws of 2013 codified DFS’s position by amending Insurance Law Section 2108 to state that every public adjuster has an affirmative duty to act on behalf and in the best interests of the insured, and to prohibit a public adjuster from receiving any compensation for referring an insured to certain persons unless the public adjuster discloses in writing the compensation, and if the public adjuster has a financial or ownership interest in the person or is related to the person to the second degree of consanguinity, discloses in writing the relationship between the public adjuster and person. This amendment to the rule reflects the changes made by Chapter 546.

Consistent with Chapter 546, the amendment also prohibits a public adjuster from receiving any compensation, either directly or indirectly, for a referral to an individual or entity when the public adjuster has a financial or ownership interest, directly or indirectly, in the individual or entity and the individual or entity performs services, work, or repairs, or when the public adjuster is the spouse of the individual having such an interest.

The amendment also authorizes a public adjuster to charge a fee of up to 20 percent on a supplemental claim if the aggregate fee charged is less than or equal to 12.5 percent of the full claim payment, and clarifies that an insurer must follow the wishes and intents of the insured, subject to the interests of any loss payee or mortgagee, as to who must be named on the insurer’s check.

4. Costs: This amendment to the rule may impose compliance costs on public adjusters because it requires each public adjuster to notify DFS of any change of telephone number, fax number, or email address within 30 days of the change, and also requires a public adjuster to fill out additional paperwork. However, any cost to a public adjuster should be negligible.

Regarding insurers and persons who perform services, work, or repairs (“contractors”), this amendment to the rule merely implements Chapter 546 by revising the rule to reflect the amendments made to the Insurance Law by Chapter 546. It also clarifies certain provisions of the rule. Therefore, this amendment to the rule should not impose any additional compliance costs on insurers or contractors.

DFS should not incur costs for the implementation and continuation of the amendments to this rule because Chapter 546 merely codified the long-standing position of DFS and DFS is amending the rule to reflect the changes to the Insurance Law made by Chapter 546.

This rule does not impose compliance costs on local governments.

5. Local government mandates: This rule does not impose any program, service, duty, or responsibility upon a county, city, town, village, school district, fire district, or other special district.

6. Paperwork: Pursuant to Chapter 546 of the Laws of 2013, this amendment to the rule prohibits a public adjuster from receiving any compensation for referring an insured to certain persons unless the public adjuster discloses the compensation in writing. In addition, if the public adjuster has a financial or ownership interest in the person or is related to the person to the second degree of consanguinity, then the public adjuster must disclose such interest or relationship in writing to the insured. In addition, this amendment requires each public adjuster to notify DFS of any change of telephone number, fax number, or email address within 30 days of the change.

7. Duplication: This rule does not duplicate, overlap, or conflict with any existing state or federal rules or other legal requirements.

8. Alternatives: DFS considered a request by a public adjuster trade association that the signed disclosure statement required by new Section 25.6(e)(4) be kept confidential and not disclosed to the insurer, a request by an insurer trade association that DFS not include in Section 25.7 of the rule language that permits a public adjuster to charge a fee of up to 20 percent on a supplemental claim if the aggregate fee charged is less than or equal to 12.5 percent of the full claim payment, and an insurer trade association’s suggestion that DFS amend Section 25.8 of the rule to state that an insured may cancel a public adjuster contract up to three business days after notice to the insurer.

DFS also considered amending Section 25.12 of the rule to require an insurer to issue two checks in the absence of a signed direction to pay letter from an insured: one check to the insured and public adjuster in the amount of the fee indicated in the written compensation agreement and the second check payable to the insured or any loss payee or mortgagee, or both, whichever is appropriate, for the balance of the payment. DFS further considered amending Section 25.12 to provide that a direction to pay made by an insured to an insurer is valid only with respect to a particular payment by the insurer.

A complete discussion of the alternatives is posted on DFS’s website.

9. Federal standards: The rule does not exceed any minimum standards of the federal government for the same or similar subject areas.

10. Compliance schedule: A public adjuster and an insurer must comply with the rule 60 days after publication of the Notice of Adoption in the State Register.

1. Effect of rule: Insurance Law Section 2108 sets forth the licensing requirements for and duties of public adjusters. Chapter 546 of the Laws of 2013 amended Insurance Law Sections 2108 and 2110(a) to provide that every public adjuster has an affirmative duty to act on behalf and in the best interests of the insured when negotiating for or effecting the settlement of an insurance claim for the insured or otherwise acting as a public adjuster; prohibit a public adjuster from receiving any compensation for referring an insured to certain persons unless the public adjuster discloses in writing the compensation and certain relationships between the public adjuster and person if they exist; and clearly authorize the Superintendent to refuse to renew, revoke, or suspend a public adjuster’s license if the public adjuster has failed to act in the best interests of an insured.

This amendment to the rule reflects the amendments made to the Insurance Law by Chapter 546. It also makes other changes to update the rule and ensure that public adjusters act in the best interests of insureds, because the Department of Financial Services (“DFS”) has not substantively amended this rule since 1986. As such, this amendment to the rule should not affect local governments.

Industry has asserted that certain insurers subject to this amendment to the rule, in particular co-op insurers and mutual insurers, are small businesses. While this amendment to the rule makes changes to provisions that set forth how insurers pay losses and to whom, these changes largely clarify DFS’s position on this topic. There may be a cost to an insurer that is a small business but the cost is difficult to estimate and will vary depending upon the insurer’s size and the way in which and to whom it is currently making payments for losses. However, any cost to an insurer that may be a small business should be minimal.

There are approximately 689 public adjusters licensed by DFS, most of whom may be small businesses. A public adjuster that may be a small business may incur additional costs as a result of this amendment to the rule because this amendment requires each public adjuster to notify DFS of any change of telephone number, fax number, or email address within 30 days of the change, and also requires a public adjuster to fill out additional paperwork. The cost is difficult to estimate but should be negligible.

With respect to public adjusters and persons who perform services, work, or repairs (“contractors”) who or that may be small businesses, the prohibition against a public adjuster receiving any compensation for referring an insured to a contractor unless the public adjuster discloses in writing the compensation and certain relationships between the public adjuster and contractor if they exist, is required by law and not by this amendment to the rule.

2. Compliance requirements: A local government will not have to undertake any reporting, recordkeeping, or other affirmative acts to comply with this amendment to the rule because the amendment does not apply to any local government. An insurer and contractor also will not have to undertake any reporting, recordkeeping, or other affirmative acts to comply with this amendment to the rule because the amendment merely implements Chapter 546. However, a public adjuster that may be a small business may incur additional costs as a result of this amendment to the rule because this amendment requires each public adjuster to notify DFS of any change of telephone number, fax number, or email address within 30 days of the change, and also requires a public adjuster to fill out additional paperwork.

3. Professional services: A local government will not need any professional services to comply with this amendment to the rule because the amendment does not apply to any local government. A public adjuster, contractor, and an insurer that may be a small business should not need to retain professional services to comply with this amendment to the rule.

4. Compliance costs: A local government will not incur any costs to comply with this amendment to the rule because the amendment does not apply to any local government. A contractor also should not incur any costs to comply with this amendment to the rule because the amendment merely implements Chapter 546.

While this amendment to the rule makes changes to provisions that set forth how insurers pay losses and to whom, these changes largely clarify DFS’s position on this topic. There may be a cost to an insurer that is a small business but the cost is difficult to estimate and will vary depending upon the insurer’s size and the way in which and to whom it is currently making payments for losses. However, any cost to an insurer that may be a small business should be minimal.

A public adjuster that may be a small business may incur additional costs as a result of this amendment to the rule because this amendment requires each public adjuster to notify DFS of any change of telephone number, fax number, or email address within 30 days of the change, and also requires a public adjuster to fill out additional paperwork. However, the cost is difficult to estimate and should be negligible.

5. Economic and technological feasibility: There should not be any issues pertaining to the economic and technological feasibility of complying with this amendment to the rule with respect to a local government because this amendment does not apply to any local government. There also should not be any issues pertaining to the economic and technological feasibility of complying with this amendment to the rule with respect to public adjusters, contractors, or insurers.

6. Minimizing adverse impact: There will not be an adverse impact on a local government because this amendment to the rule does not apply to any local government. However, there may be an adverse impact on a public adjuster, contractor, or insurer that may be a small business, but any adverse impact should be minimal because the amendment implements Chapter 546 and codifies the long-standing position of DFS on certain topics. DFS considered the approaches suggested in State Administrative Procedure Act (“SAPA”) Section 202-b(1) for minimizing adverse impacts but did not find them applicable.

7. Small business and local government participation: DFS complied with SAPA Section 202-b(6) by conducting informal outreach on this amendment to the rule in 2014 to insurer and public adjuster trade organizations that represent public adjusters and insurers who or that may be small businesses, and by meeting with representatives of a public adjuster trade organization on a few occasions. DFS also posted the amendment to the rule on its website in November 2020 for informal outreach to insurer, public adjuster, and contractor trade organizations and met with representatives of a public adjuster trade organization in February 2021. Insurers, public adjusters, and contractors who or that may be small businesses will have a further opportunity to participate in the rule making process when this amendment to the rule is published in the State Register and posted on the website of DFS.

1. Types and estimated numbers of rural areas: Public adjusters, insurers, and persons who perform services, work, or repairs (“contractors”) affected by this amendment to the rule operate in every county in this state, including rural areas as defined by State Administrative Procedure Act Section 102(10).

2. Reporting, recordkeeping and other compliance requirements; and professional services: This amendment to the rule imposes additional reporting, recordkeeping, and other compliance requirements by requiring each public adjuster, including public adjusters in rural areas, to notify the New York State Department of Financial Services (“DFS”) of any change of telephone number, fax number, or email address within 30 days of the change.

With respect to insurers and contractors, this amendment to the rule merely implements Chapter 546 of the Laws of 2013, which amended Insurance Law Section 2108 to state that every public adjuster has an affirmative duty to act on behalf and in the best interests of the insured, and to prohibit a public adjuster from receiving any compensation for referring an insured to certain persons unless the public adjuster discloses the compensation in writing, and if the public adjuster has a financial or ownership interest in the person or is related to the person to the second degree of consanguinity, discloses in writing the relationship between the public adjuster and the person. This amendment also clarifies certain provisions of the rule. Therefore, this amendment to the rule should not impose any additional reporting, recordkeeping, or other compliance costs on insurers or contractors, including insurers and contractors in rural areas.

A public adjuster, insurer, or contractor in a rural area should not need to retain professional services to comply with this rule.

3. Costs: This amendment to the rule may impose compliance costs on public adjusters because it requires each public adjuster, including public adjusters in rural areas, to notify DFS of any change of telephone number, fax number, or email address within 30 days of the change. However, any cost to a public adjuster should be negligible.

With respect to insurers and contractors, this amendment to the rule merely implements Chapter 546 by revising the rule to reflect the amendments made to the Insurance Law by Chapter 546. It also clarifies certain provisions of the rule. Therefore, this amendment should not impose compliance costs on insurers or contractors, including insurers and contractors in rural areas.

4. Minimizing adverse impact: This amendment to the rule uniformly affects public adjusters, insurers, and contractors who or that are located in both rural and non-rural areas of New York State. This amendment to the rule should not have an adverse impact on rural areas.

5. Rural area participation: Insurers and public adjusters in rural areas had an opportunity to participate in the rule making process when DFS conducted informal outreach in 2014 to insurer and public adjuster trade organizations on this amendment to the rule, and when DFS met with representatives of a public adjuster trade organization on a few occasions. DFS also posted the amendment to the rule on its website in November 2020 for informal outreach to insurer, public adjuster, and contractor trade organizations and met with representatives of a public adjuster trade organization in February 2021. Insurers, public adjusters, and contractors will have a further opportunity to participate in the rule making process when this amendment to the rule is published in the State Register and posted on the website of DFS.

This amendment to the rule should not adversely impact jobs or employment opportunities in New York State. This amendment merely implements Chapter 546 of the Laws of 2013, which amended Insurance Law Section 2108 to state that every public adjuster has an affirmative duty to act on behalf and in the best interests of the insured when negotiating for or effecting the settlement of an insurance claim for the insured or otherwise acting as a public adjuster. It also amended Section 2108 to prohibit a public adjuster from receiving any compensation for referring an insured to certain persons unless the public adjuster discloses in writing the compensation and certain relationships between the public adjuster and person if they exist. In addition, this amendment to the rule makes other changes to update and clarify the rule and to ensure that public adjusters act in the best interests of insureds.