A public insurance adjuster is an insurance adjuster that may be hired directly by the insured to represent them against their insurance company for the purpose of settling the insurance claim. Typically a public adjuster will charge a percentage of the claim proceeds for their services as their fee. In the State of California, a public adjuster must be licensed with the California Department of Insurance and abide by the laws that govern them, primarily found in the California Insurance Code. After a fire or disaster, you may be solicited by a public adjuster offering their services. Before you consider signing a contract, take the time to become thoroughly informed.

Note: Don’t allow yourself to be pressured by salespeople into making a hasty decision or signing a contract prematurely. Especially on the day of the disaster.

The California Department of Insurance has issued an informational booklet entitled "Don't Get Burned After A Disaster" recommending you attempt to settle your claim directly with your insurance company before hiring a public adjuster or an attorney. To request a hardcopy to be sent to you, call 1-800-927-HELP (4357).

There are three types of insurance adjusters. Brief definitions of the three types are as follows:

Company or Staff Adjusters are insurance claims adjusters who are employed by the insurance company. They represent the insurance company's interests. They will not charge the insured a fee and they do not need to be individually licensed by the State of California.

Independent Adjusters are insurance claims adjusters who are hired by the insurance company as independent contractors. Similar to Company or Staff Adjusters, Independent Adjusters represent the insurance company's interests and are paid by the insurance company. Independent Adjusters must be licensed and will not charge the insured a fee.

Public Adjusters are insurance claims adjusters who do not work for insurance companies. They work solely for the insured, to assist in the preparation, presentation, and settlement of the claim. Public adjusters are compensated by charging a percentage of the amount they recover from the insurance claim settlement. This percentage can range from 2 percent to 25 percent or more, depending on the size and complexity of the claim. Public adjusters are required to be licensed, bonded, and tested by the State of California.

A public adjuster may be able to assist in the following capacities:

  • Preparation and presentation of the insurance claim
  • Investigation and interpretation of applicable coverage available in the policy
  • Provide advice on claim related issues to maximize benefits and attempt to resolve coverage disputes
  • Negotiate and settle any amounts due in connection with the property and/or personal property elements of the claim

On complex or large property damage claims, insurance adjusters usually rely on outside experts to provide them with the information they need to settle the claim. To maximize the recovery benefits of your policy coverage, you will need to provide detailed documentation and support from contractors, engineers, personal property experts, and any other resources available to support your claim.

Note: If your insurance company adjuster or independent adjuster gives you what appears to be an incomplete or low estimate, it may only be a preliminary estimate without all the details. If you are concerned about any estimate provided by your adjuster, ask for clarification.

The California Insurance Code governs the activities of public adjusters. Some of the laws applicable to public adjusters, found in Section 15027 of the Insurance Code, are as follows:

  • Public adjusters cannot solicit your business while the loss is underway, or between the hours of 6 p.m. and 8 a.m
  • Your "Public Adjuster Contract," with a public adjuster representing you, should clearly indicate the amount of the fee you will be paying to your public adjuster. Your contract, with this fee percentage, should be acknowledged by your initials on the "Public Adjuster Contract." The salary, fee, commission, or other consideration is to be paid by you (the insured), not the insurance company (insurer)
  • You have the right to cancel the contract with your public adjuster, without any penalty or obligation, within three business days from the date the contract is signed. If you cancel the contract with your public adjuster, any money or other consideration paid by you will be returned within five business days following the receipt of your cancellation notice, and any security interest arising out of the transaction will be canceled. To cancel the contract with your public adjuster, mail or deliver by certified mail, return receipt requested, or other form of mailing which provides proof of mailing, a signed and dated copy of the cancellation notice, or any other written notice, or send a telegram to the public adjuster at the address in the contract
  • You have the right to, and may, communicate with your insurance company at any time if you feel the need during the claims process
  • If you have any concerns or questions, the officers at the California Department of Insurance Consumer Hotline are there to help you. Please call them at 1-800-927 HELP (4357), or visit their website at: www.insurance.ca.gov
  • No later than three business days after the cancellation has expired, the public adjuster shall notify the insurer, its adjuster, or its attorney, that he or she has entered into a written contract with the insured
  • If a public adjuster misrepresents or conceals a material fact from the insured prior to execution of the contract, the insured is entitled to rescind the contract without time limit

For a partial list of the laws and regulations that govern public adjusters, refer to the California Insurance Code Section 15006 -15027.

California Insurance Code Section 15027.1 States the Following Regarding Declared Disasters:

(a) Notwithstanding subdivision (e) of Section 15027, a licensee shall not solicit a contract of engagement for residential properties under this chapter until seven calendar days have elapsed after the occurrence of a disaster. (b) Subdivision (a) shall not apply if the licensee is contacted directly by the insured or the insured's representative. (c) For the purposes of this section, "disaster" means a loss-producing event that damages or destroys more than 25 dwellings, or a "disaster" as that term is defined in subdivision (b) of Section 1689.14 of the Civil Code.

California Civil Code Section 1689.14 Regarding Declared Disasters:

(a) Any home solicitation contract or offer for the repair or restoration of residential premises signed by the buyer on or after the date on which a disaster causes damage to the residential premises, but not later than midnight of the seventh business day after this date, shall be void, unless the buyer or his or her agent or insurance representative solicited the contract or offer at the appropriate trade premises of the seller. Any contract covered by this subdivision shall not be void if solicited by the buyer or his or her agent or insurance representative regardless of where the contract is made. For purposes of this section, buyer solicitation includes a telephone call from the buyer to the appropriate trade premises of the seller whether or not the call is in response to a prior home solicitation. (b) As used in this section and Section 1689.6, "disaster" means an earthquake, flood, fire, hurricane, riot, storm, tidal wave, or other similar sudden or catastrophic occurrence for which a state of emergency has been declared by the President of the United States or the Governor or for which a local emergency has been declared by the executive officer or governing body of any city, county, or city and county.

Where does the public adjuster's fee come from?

If your insurance company has denied your claim, underestimated the cost to repair or replace your damaged property, or has otherwise handled your claim poorly, a public adjuster may be able to help. But you must understand the potential risks and benefits of using a public adjuster.

First, the public adjuster will be your advocate with the insurance company, but they also will charge you for their service. Typically, the public adjuster will charge a fee that is equal to a certain percentage of your insurance recovery. The adjuster will be motivated to obtain a good result for you because their fee increases with their own success. But the public adjusters' contract should clearly state the basis for the fee and, if it is based upon a percentage of the recovery, it should identify both the percentage and the part of your recovery to which the percentage will be applied. Will it be applied to the total recovery or only the amount by which the adjuster can increase the recovery? Will it be applied to the dwelling coverage only, or will it be applied to all of the coverages, including the personal property, debris removal, landscape repairs, loss of use, and so forth? The contract also should state whether you must pay costs in addition to the fees. If so, it should detail those costs in advance.

Second, remember that the public adjuster's fee probably is not the only factor that will reduce your total recovery. It probably will be reduced by your insurance policy deductible, by exclusions and sub-limits in the policy, by non-recoverable depreciation, expert fees, and so forth. A good public adjuster will review your policy and make you aware of these issues before they ask you to sign their contract, so you can assess whether, despite the adjuster's aid, you might not recover enough to repair or replace all of your damaged property.

Third, watch out for razzle-dazzle sales pitches. Some public adjusters may suggest they will increase your recovery enough to cover their fee. If the fee is based solely upon the amount of the increase, or if the adjuster's contract guarantees that the increased recovery will be sufficient to cover the fee, that may be fine. If not, you must view the adjuster's sales pitch with skepticism. Other public adjusters may suggest that you don't really pay their fee because it will come from your repair contractor's overhead and profit, not from any line items associated with the actual repairs. These suggestions are seldom of any value. The public adjuster probably cannot ensure that the fee comes from the contractor's overhead and profit. Even if the adjuster can do so, it can cause a serious financial problem for the contractor who must perform the work. Seldom will a legitimate restoration contractor charge less than 20 percent for overhead and profit. In fact, reputable restoration contractors' operating overhead alone can exceed 30 percent of the project cost. If the contractor is forced to accept lower overhead and profit, the contractor may try to recover this shortfall in some other way, such as reducing the amount of work to be done, lowering the quality of certain materials, or requiring the homeowner to pay out of their pocket to complete the work.

Finally, if the public adjuster assists with your personal property claim, the fee is likely to be based on the amount recovered for your personal property. Consider carefully whether the public adjuster's assistance on this part of the claim is worth the cost. Your recovery for any given item of personal property may be reduced by the insurance company for depreciation, at least until you produce a receipt showing replacement of the item, and that you will have to pay the public adjuster's fee out of that reduced payment, resulting in a further reduction in your net recovery.

If you are considering hiring a public adjuster to represent you, you need to clearly understand the risks and costs associated with making this decision.

Here is one example of how hiring a public adjuster prematurely may not be beneficial:

Mr. Jones just had a fire, and he doesn't know what his policy limits are or what to do. He feels like he needs someone who knows insurance to represent him and decides to hire a public adjuster for a fee of 10 percent. Later, he finds out that he has a $250,000 policy limit on his dwelling and a $100,000 policy limit on his personal property. His insurance company adjuster visits the home and looks at the structural damages and decides that the damages have exceeded the policy limits and writes a check for the limits. Later, upon completing the inventory of his personal property, it is revealed that the replacement costs for the personal property exceeded the $100,000 policy limit here as well. The total combined amount available in the policy was $350,000. Since Mr. Jones decided to hire the public adjuster and later realized that he was under insured, he still has to come up with $35,000 to pay for the public adjuster's services, which at this point may not have amounted to much. That means Mr. Jones may have to find a contractor willing to rebuild the home for a lot less than the repairs are worth, omit items from the scope of work, or do some of the work himself. He may even have to secure a loan to finance the balance of the repairs. This also means that Mr. Jones won't have enough money to replace all of his personal property that was lost. In this example, if Mr. Jones had waited until he knew what he had to work with before he signed a contract with the public adjuster, he would have saved himself $35,000 in fees.

Here is one example of how hiring a public adjuster may be beneficial:

Mr. Smith had a total fire loss, where his home burned to the ground. His policy states that he has $500,000 of policy limits for the dwelling and $300,000 for the contents. The insurance company adjuster arrives at what's left of the home with a contractor to assist in putting together an estimate. They measure the house, take pictures, and after a few hours, they leave. A few weeks later Mr. Smith gets an estimate for the rebuilding of the dwelling for $300,000 along with a note that says that the contractor who came out with the adjuster has agreed to do the work for that amount. Then a couple weeks later, the adjuster sends a partially completed content inventory valued at $75,000. These amounts are far lower than the policy limits and Mr. Smith realizes that there are significant discrepancies in the scope of work as well as the personal property inventory. Mr. Smith asks a couple of local contractors to bid on the job while he tries to work on his personal property inventory. A couple of weeks later, the contractors submit their estimates, which come in over $500,000. Mr. Smith sends these estimates to his insurance company, but they refuse to pay any more. Now the claim seems to be at an impasse and Mr. Smith only has a year to rebuild before he runs out of additional living expenses. Mr. Smith doesn't have the time, knowledge, or patience to deal with the claims process by himself and he still has the daunting task of creating a complete personal property inventory. He will most likely need outside help. In this example, hiring a public adjuster may help to expedite the claim and/or negotiate a higher settlement. In a case where an insurance company is not handling the claim properly, or is being unreasonable, you may consider hiring a public adjuster for representation. But again, this should take place after you have had a chance to see what the insurance company is willing to pay you for and how much. Before signing a contract with a public adjuster, you may want to consult with an attorney.

Here are some important tips to consider before you make a decision to hire a public adjuster.

Ask the prospective public adjuster for a list of current local references for the past 3 years, that includes the name of each reference, their phone number, and the dates the public adjuster's services were performed. These references should be claims that the prospective public adjuster personally settled. Contact each reference and ask:

  1. Would you hire this public adjuster again?
  2. Do you feel the fee you paid for representation was worth the service you received?
  3. After you signed a contract with the public adjuster, did he or she stay involved in the claim, or was someone else assigned after the 3 day cancellation period expired?
  4. How long did it take to settle the claim?
  5. Was your settlement enough to repair the house to its prior condition or better?
  6. Were you able to get enough money to replace all of your personal property?
  7. Did the public adjuster spend the necessary time to negotiate for even the small dollar amounts?
  • Ask the public adjuster if they will be the person working to adjust the claim or if they are a sales representative who will assign someone else to handle the adjusting?
  • Ask how long the public adjuster has been licensed and adjusting claims
  • Ask if the public adjuster lives locally and ask to see a driver's license. The quality of the service may depend on their availability
  • Public adjusters typically work on a percentage basis, taking a portion of the money the insurance company pays for damages. These fees can range from 2 percent to 25 percent or more, depending on the public adjuster, the size of the loss, and other criteria. The fee is negotiable. Negotiating the fee may be especially critical in cases where the insured doesn't have enough insurance coverage to repair or replace damaged property and pay the public adjuster's fee
  • In many cases, the public adjuster's company name may be placed on checks that come from your insurance company. If you are not comfortable with this, you may want to require the payee to be that of the insured only
  • After signing a contract with a public adjuster, you have 3 business days to cancel, for any reason. After three days, the contract is binding unless you can prove misrepresentation, fraud, or some other offense which could void the contract. You may want to negotiate with the public adjuster to extend the cancellation period. This can be a wise move if you want more time to see if your insurance company performs, or to see if the public adjuster is really making a difference
  • Discuss with the public adjuster their case load. If their case load is too heavy, you may not get the attention you need to have the claim settled in a timely fashion, which could affect your additional living expenses and the amount of time to complete the repairs
  • Another option available to you is hiring a public adjuster on what is called an "overage basis". This option limits the fee you pay the public adjuster to only the amount they are able to increase the settlement over what the insurance company may have offered
  • If you are satisfied with your settlement on a portion of the claim, for instance the structural repairs, but not on the personal property portion, you may consider hiring a public adjuster to represent you on the disputed portion only. This means that the public adjuster will earn a fee only on the portion of the claim you want help with and not on the portion you are satisfied with the settlement on. This arrangement will need to be specified in writing on the contract with the public adjuster
  • If you decide to hire a public adjuster, determine a reasonable amount of time that will be needed to settle the claim. You may want to limit the contract term to this time frame

NOTE: If disputes arise that cannot be resolved by the public adjuster or exceeds the legal authority of the public adjuster, you may have to retain legal counsel.

Fraud Warning

The following information was copied from the California Department of Insurance website under "CONSUMERS: INSURANCE FRAUD IS A FELONY" and can be viewed at: www.insurance.ca.gov

Property Claims Adjusting - This type of fraud is usually perpetrated by claims adjusters who are using illegal or questionable methods. Indicators of this kind of fraud include the following:

  • The public adjuster is unlicensed
  • The claims adjuster requests to have his/her name included as the payee on the insurance check
  • The claims adjuster requests the payee to endorse the insurance check, making it payable to the adjuster
  • The claims adjuster handles all business in person, avoiding the use of the mail
  • The amount of the claim check is noticeably larger than repairs made
  • The invoice of services performed includes repairs not rendered

For more information regarding public adjusters, visit The California Department of Insurance website at: www.insurance.ca.gov or call 1-800-927-HELP (4357)