Lawyer sues insurance commissioner over out-of-state adjusters handling fire claims

Prominent attorney Jon B. Eisenberg has filed a lawsuit against the California Department of Insurance and its commissioner, Dave Jones, for allegedly permitting independent, out-of-state insurance adjusters to oversee claims without the supervision of California-licensed insurance adjusters.

By declaring an emergency situation after the worst wildfire season on record, Jones authorized out-of-state adjusters to handle insurance claims as long as they registered with the California Department of Insurance and performed their work under the active management of a state-licensed adjuster or insurer.

But the suit claims Jones has failed to enforce this provision, leading to hundreds of unqualified adjusters misinforming wildfire survivors of their rights under California insurance policies.

“The out-of-state adjusters don’t know anything about California insurance law,” said Eisenberg. “For example, very few of them know that in California, you are entitled to full replacement costs whether you rebuild or buy a house elsewhere.”

Eisenberg’s firm, Horvitz & Levy LLP, is not involved in the case.

Eisenberg said he learned non-California licensed adjusters were overseeing claims when he helped Jeff Sengstack, whose Santa Rosa house burned down, handle his insurance claims.

Sengstack filed a complaint with the state agency when he realized that the two out-of-state adjusters responsible for his claims were not being supervised by his insurance carrier, State Farm Mutual Automobile Insurance Company.

Chief of Consumer Services Lucy Jabourian followed up with Eisenberg and Sengstack by informing them that the adjusters the complaint mentioned were exempt from registration and active supervision because they were “employees of their respective independent adjusting companies.”

But plaintiffs’ attorney Neil Goteiner of Farella Braun & Martel LLP, who represents Eisenberg and Sengstack, argued that the out-of-state adjusters being employed by nationwide adjusting companies are independent contractors rather than regular employees, meaning they would not be exempt from the registration and active supervision requirements.

“The independent contractor paradigm is the business model for the entire catastrophic adjusting industry,” Eisenberg said. “I would be stunned to hear that nobody at the California Department of Insurance knew that.”

The suit was filed in Sonoma County Superior Court on Friday, demanding that Jones enforce the registration and active supervision of the adjusters through the use of cease-and-desist letters and the implementation of fines. Eisenberg et al., v. Jones et al., SCV-261920 (Sonoma Super. Ct., filed Feb. 2, 2018).

State Farm Mutual Automobile Insurance Company did not immediately respond to requests for comment Wednesday.

Ed Diab, who leads Dixon Diab & Chambers’ wildfire litigation department, said it is common practice for independent, out-of-state adjusters to assist when the California insurance commissioner calls a state of emergency and added that he is not aware of wildfire survivors complaining of out-of-state adjusters misleading them.

“It’s more ... that the adjusters are unfamiliar with what things go for out here in terms of pricing,” Diab said. “These are people from other states where [the] cost of living is not as high.”

Department of Insurance spokesperson Nancy Kincaid called the suit baseless and said that Eisenberg was informed that his complaint led to an active investigation in November. She said Eisenberg grew frustrated that the department could not reveal its status or results.

“We have an enforcement team that goes out on the field and checks licenses on the spot,” Kincaid said. “We do everything so they know we’re here to help them if there’s ever anything they need. Things are done at all levels here.”