Although Adjustment of Claim is Not Required for Public Adjuster to Collect Its Fee, Whether Public Adjuster Performed "Valuable Services" Presents a Question of Fact

PROPERTY – PUBLIC ADJUSTER COMPENSATION – "VALUABLE SERVICES"
Public Adjustment Bureau, Inc. v. Greater New York Mut. Ins. Co.
(1st Dept., decided 9/25/2012)

Under New York regulatory law (11 NYCRR Part 25, a/k/a Insurance Regulation 10), licensed public adjusters in New York may charge a fee of no more than 12½ % of the recovery for the loss adjusted by such adjusters.  11 NYCRR § 25.7, entitled "Maximum compensation", provides:

No public adjuster shall charge any insured a fee in excess of 12.5 percent of the recovery for services rendered by the adjuster.

Section 25.10, entitled "Right to compensation", further states:

(a) The public adjuster shall not be entitled to any compensation for any services performed pursuant to a compensation agreement prior to its cancellation in accordance with section 25.8 of this Part.

(b) If a public adjuster performs no valuable services, and another public adjuster, insurance broker (in accordance with section 2101[g][2] of the Insurance Law) or attorney subsequently successfully adjusts such loss, then the first public adjuster shall not be entitled to any compensation whatsoever.

(c) Where more than one public adjuster performs valuable services for an insured, and there has not been a valid cancellation of the compensation agreement in accordance with section 25.9 of this Part, the insured shall not be obligated to pay an amount for all of such services in excess of the maximum compensation amount set by section 25.7 of this Part.

Property insurers are obligated to pay public adjusters their fee only if, at the time of the claim's settlement, the  the insured requests that the public adjuster be paid.  Section 25.12, entitled "Payment of losses", provides:

When a claim is settled where the insured is represented by a public adjuster, upon the request of the insured, the insurer's check may be made 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 insured and filed with the insurer. The balance of the proceeds shall be made payable to the insured or loss payee, or both, whichever is appropriate.

It occasionally happens that insureds do not want to pay their public adjusters either at all or what their public adjuster's compensation agreement specifies as the adjuster's fee.  In this case, plaintiff entered into a compensation agreement with Seward Park Housing Corporation in which the parties agreed:

TO THE INTERESTED INSURANCE COMPANIES:
We retain Public Adjustment Bureau, Inc. to perform valuable services, to include preparation and submission of claim detail and to advise and assist in the adjustment of claim detail and to advise and assist in the adjustment of the loss by collapse of January 15, 1999, at [the premises in question.] We agree to pay and hereby assign and request payment of expenses, disbursements and seven percent of the amount of loss and salvage be distributed to Public Adjustment Bureau, Inc. when adjusted or otherwise recovered, regardless to whom the loss is payable[.]

The claim was not adjusted; following extensive litigation, which included at least one trial and an appeal, Seward Park settled with Greater New York. Seward Park then disputed its obligation to pay the plaintiff, its public adjuster.  Public Adjustment Bureau (PAB) sued both its client, Seward Park, and the insurer, Greater New York Mutual Insurance Company.  Seward Park moved and PAB cross-moved for summary judgment.  Supreme Court granted Seward Park's motion, dismissing the complaint, and PAB appealed.

In MODIFYING the Supreme Court's order to deny both motions for summary judgment, the First Department, Appellate Division, held:

We reject Seward Park's argument that plaintiff is not due any fee under the contract because it neither adjusted the claim nor provided "valuable services" that resulted in the adjustment of the claim (see 11 NYCRR 25.10). In light of the "otherwise recovered" language in the retainer agreement, we find that adjustment of the claim is not a condition precedent to plaintiff's recovery of a fee (see GS Adj. Co., Inc. v Roth & Roth, L.L.P., 85 AD3d 467 [1st Dept 2011]; see also Goldstein Affiliates v Affiliated FM Ins. Co., 178 AD2d 301 [1st Dept 1991]). However, the record presents an issue of fact whether plaintiff performed valuable services.  

In New York State, public adjusters may be compensated only if they have a written and signed compensation agreement with the insured that "consist[s] of substantively the same information and statements contained in Form 1 in section 25.13(a) of [Part 25]."  11 NYCRR § 25.6(a).  The "otherwise recovered" language found in PAB's compensation agreement with Seward Park is contained in the prescribed public adjustment compensation agreement found at section 25.13 of Part 25 (Regulation 10).  In pertinent part, that form provides that the insured

hereby retains (name of adjuster) to act or aid in the preparation, presentation, adjustment and negotiation of or effecting the settlement of the claim for the loss or damage by (nature of loss) sustained at (loss location) on ________, [20] ________, and agrees to pay the adjuster for such services a fee of ________ percent of the amount of the loss including salvage when adjusted or otherwise recovered from the insurance companies.

Notably, the "valuable services" language that PAB incorporated into its compensation agreement is not required by or found in the prescribed compensation agreement of Regulation 10 and presumably derived  instead from section 25.10(b).  Had PAB not pledged in its compensation agreement to provide "valuable services" -- the delivery of which the First Department has now held presents a question of fact -- the question of whether a New York licensed public adjuster provides any "valuable services" would not be relevant to the public adjuster's compensation unless "another public adjuster, insurance broker ... or attorney subsequently successfully adjusts such loss[.]"  11 NYCRR § 25.10(b).