SB 240: Insurance Adjuster Act aims to curb bad advice

Senator Bill Dodd, who represents counties hit hard by recent fires, authored Senate Bill 240, aimed to curb alleged "bad advice" given by insurance claims adjusters to homeowners. The subject policies cover residential properties. The bill was approved without a single "no" vote.

A strong consumer protection effort was needed due to a litany of instances where insurance companies and their adjusters either did not know the relevant California law or gave homeowners the proverbial run around by assigning multiple adjusters to the file. To address these issues, the bill introduces several requirements of the California Department of Insurance and the insurance companies themselves:

• The department must annually prepare and deliver to every Insurance Adjuster Act licensee a notice describing the most significant California laws pertaining to property policies, as well as a handbook for adjusting in California that includes information relevant to evaluating damage caused by an emergency. The materials are to be available online.

• An insurer must establish a primary point of contact and provide the insured with one or more direct means of communication with the primary point of contact if, within a six-month period, the insurer assigns a third- or subsequent first-party real or personal property claims adjuster to be primarily responsible for a claim. The primary point of contact is to remain assigned to the insured's claim until the insurer determines that the claim is closed or litigation has been filed.

Presumably, "delivery" of the annual notice will be via online availability on the Department of Insurance website and it is expected that insurers operating in California will convey that information to its adjusters annually. The requirement of a primary point of contact is seemingly met since most adjusters have a supervisor on the file and the identity of the supervisor and contact information can be conveyed when it is required.

In addition, insurers who use nonlicensed adjusters to manage emergency situations such as in the wake of a fire are now required to register the nonlicensed adjuster. This requirement only applies to nonlicensed adjusters who are not employees. Insurers should be aware that the bill requires a supervising licensed adjuster or manager to ensure their registered nonlicensed adjusters and employee nonlicensed adjusters have read and understand the most recent significant law notice referenced above. Further, the bill would require a registered nonlicensed adjuster, under penalty of perjury, to certify that the nonlicensed adjuster has read and understands the notice and handbook no later than 15 calendar days from the date on which the nonlicensed adjuster began claims adjusting activity in California in connection with an emergency situation. An insurers' training and record-keeping requirements have now substantially increased.

The bill has support from different groups who might normally oppose such obligations. What is clear is that Senator Dodd and the California Legislature are very serious about addressing problems encountered by homeowners with their residential policy insurers.

Peter Weber is a shareholder at Murphy, Pearson, Bradley & Feeney. He can be reached at pweber@mpbf.com.