BILL NUMBER:S5775

TITLE OF BILL:  An act to amend the insurance law, in relation to public
adjusters and payment of property/casualty claims

PURPOSE:  The purpose of this bill is to clearly establish conflict of
interest standards, in statute, so that public adjusters have an affir-
mative duty to act on behalf of and in the best interests of the insured
who have retained such adjuster when settling or negotiating an insur-
ance claim for such insured. In addition, such adjuster or their close
family relatives, cannot have a financial interest in any business that
he or she recommends to an insured for the performance of services, work
or repairs associated with the insurance claim that is being negotiated,
unless such financial interest is clearly disclosed and acknowledged by
the insured in writing.

SUMMARY OF PROVISIONS:

Section 1: Amends Insurance Law section 2108 to add a new subsection
(s). This new subsection places on the public adjuster an affirmative
duty to act on behalf of and in the best interests of the insured when
settling or negotiating an insurance claim for such insured.

This new subsection prohibits a public adjuster from receiving any
compensation, either directly or indirectly, in consideration of the
referral or recommendation to an insured that such insured use another
              

individual or firm to perform services, work or repairs relating to any
insurance claim settled or negotiated by such public adjuster. Provided
however, that such public adjuster may receive such compensation, if
such arrangement is clearly disclosed to the insured and acknowledged by
such insured in a signed writing.

In addition, every public adjuster shall not receive any additional fee
or compensation, either directly or indirectly, other than what was
stated in the compensation agreement as it relates to the kinds of
compensation that a public adjuster may receive with regard to referrals
or performing services, work or repairs by companies owned by such
adjuster, or his or her spouse or close blood relatives.  Under this
provision, an adjuster or his close family may not receive any form of
compensation, from any individual or entity in which such adjuster
recommends or suggests to an insured for the performance of services,
work or repairs related to an insurance claim that such adjuster is
involved with, unless the public adjuster discloses that relationship to
the insured in a writing that is signed by the insured. The blood
relationships covered under this bill are of blood or affinity to the
second degree of consanguinity, (i.e. cousins or more distantly related
family members).

Section 2: Amends Insurance Law section 2110 (a) to authorize the Super-
intendent to suspend or revoke the license of a public adjuster for
failing to act in the best interests of the insured or for failing to

disclose any conflict of interest that such public adjuster may have as
provided for under this bill.

JUSTIFICATION:  Under current statutory law, there is not a strict
conflict of interest standard incorporated in the law to ensure that
public adjusters act in the best interests of their insured in which
they are negotiating an insurance claim. Further, under current law,
some unscrupulous public adjusters are acting in their own best finan-
cial interests and not in the best interest of their clients by refer-
ring such clients to businesses that they have a direct or indirect
financial stake in (or which are owned by their close family relatives)
to perform services, work or repairs related to an insurance claim.

This has lead to a blurring of the lines where certain public adjusters
are acting in their own best financial interests and not in the best
interest of the individuals who have retained them to obtain the best
offer possible to settle an insurance claim. Further, as these improper
transactions occur, the Department maintains that they may not be
completely able to curtail this activity or suspend or revoke the
licenses of those public adjusters that are not acting in their
insured's best interest.  This bill establishes a heightened standard of
conduct for public adjusters and clearly authorizes the Department to
suspend or revoke a license of a public adjuster that violates such
trust.

LEGISLATIVE HISTORY:  This bill is similar to S. 3771-A which passed the
NYS Senate in June 2013.

FISCAL IMPLICATIONS: None.

EFFECTIVE DATE:  January 1st of the year next succeeding the date upon
which this bill shall have become a law.