Disputes between the insured and its public adjuster (PA) are frequently contentious and have the unfortunate potential to draw the carrier into litigation.  A perfect example is last week’s decision in Public Adj. Bur., Inc. v. Greater N. Y. Mut. Ins. Co., et al., 2015 NY Slip OP 07942, 2015 WL 6510639, 2015 N.Y. App. Div. LEXIS 8000 (N.Y.App.Div., Oct. 29, 2015), where New York’s intermediate level appellate court held that the PA was entitled to its fee for performing “valuable services” even though those evidently ceased when suit was filed and it then took an additional ten years of bitter and protracted litigation to bring about a settlement.

While not as prolonged and torturous as Dickens’ Jarndyce v. Jarndyce, the case litigated in one form or another for fifteen years.  After a garage collapse in lower Manhattan in early 1999, the policyholder retained the PA and executed a retainer agreement that set the adjuster’s fee at 7% “of the amount of loss and salvage . . . when adjusted or otherwise recovered.”  Efforts to settle with the insurer were unsuccessful, however, and the insured brought suit in 2001.  Two trials, three trips to the Appellate Division, and ten years later, a settlement was reached in May of 2010.

The policyholder then balked at paying the 7% fee, contending that none of the PA’s work was used in the trials or to obtain the ultimate settlement.  That led the PA to file suit against both the insured and the carrier, resulting in five more years of litigation.  The trial court initially granted summary judgment to the policyholder, but this was reversed on appeal and the matter then went to trial.  After a jury found in favor of the PA, the trial court tried again to kill the claim by granting a motion for judgment notwithstanding the verdict.  Yet another appeal followed.  On October 29th, the Appellate Division reversed and directed that the verdict be reinstated.  The opinion was written by Justice David Saxe.

As discussed above, the issue on appeal was whether the PA had performed “valuable services;” under New York law, “[i]f a public adjuster performs no valuable services, and another adjuster, insurance broker . . . or attorney subsequently successfully adjusts such loss, then the first public adjuster shall not be entitled to any compensation whatsoever.”  The term “valuable services” was not defined in the state’s statutes, and the court had therefore held in the earlier appeal that it was a question of fact to be resolved by the jury.

The panel held that there was sufficient evidence of record to support the verdict in light of the fact that the facts that the PA: (1) sent the notice of claim; (2) assisted in document requests; (3) prepared the initial request for an advance; (4) prepared two proofs of loss; (5) retained and worked with an expert engaged to inspect the garage and estimate the cost to repair the structure; (6) conferred with and assisted the insured’s counsel in pre-suit negotiations; and (7) participated in engineering meetings and commented on claim documents at the request of the policyholder’s insurance agent.

The insured’s contention that the PA had failed to establish that there would have been no recovery but for its conduct was also rejected.  In the words of the opinion:

[N]either the Insurance Law nor the retainer agreement requires a “direct and proximate link,” or the actual procurement of a settlement.  Each requires merely that the public adjuster provide “valuable services” in connection with a settlement.

Arguments that the PA had to provide “continuous input” in the settlement process in order to be entitled to its fee also fell on deaf ears.

The insured’s third proof of loss, prepared by counsel, sought $21 million.  Thus, despite the fact that the PA’s futile efforts to bring about a settlement had to be followed by a decade of acrimonious and expensive litigation, it will ultimately walk away with what is probably a seven-figure fee.

Parenthetically, the court began its discussion with the following statement:

The work of public adjusters is not widely known about.  . . . [C]onsumers, and even a few insurance analysts, are generally unaware of their existence[.]

That would come as a surprise to most of the insurance professionals that I’ve had the privilege to work with over the last several decades, though the quoted comment of one 1890 writer that the profession was a “disreputable” one would surely be less of a revelation in far too many instances.