House Bills 2370 and 1736 were unanimously adopted by the Pennsylvania House Insurance Committee and are now on track to be adopted by the legislature if the Senate approves them in the Fall.
Quick Summary by Issue:
Fee Caps- none
Right of rescission: 5 business days
Ownership in Restoration Company: ok if disclosed to insured
Continuing Education: 24 hours every 2 years
Bond Amount: $20,000.00
Solicitor’s License: removed under new Act; current solicitors become adjusters automatically
Contract: more disclosures needed, and every disclosure must be initialed
Estimates: must be cc’d to insured
Revocation: minor violations added: certain violations of Act a third degree felony
Restriction on Solicitation: not during loss
AAPIA has been involved in negotiating some of these proposals, and a more detail on some of the changes in the law and a brief summary of those negotiations is below.
2370: During the last few months I have worked with the AAPIA leadership to fight for the interests of AAPIA members, the industry as a whole, and the consumer in Pennsylvania regarding proposals for drastic changes in the public adjuster licensing law. A summary of the initial draft of the Bill has been on the website for a few months. Since then there have been other proposals and amendments offered that will directly affect the way you do business.
One of the more dramatic proposals coming after the original draft of the Bill was the imposition of a fee cap of 12.5 percent on all claims. On behalf of its members, AAPIA strongly opposed the imposition of fee caps, due to the detrimental effect on the consumer as well as the public adjusting industry. Both Gene Veno and I have written extensively on this issue and attended stakeholders meetings in Harrisburg and successfully presented our position to protect both the consumer and the livelihood of public adjusters in Pennsylvania. As a result of our efforts---no fee caps in the Bill.
In order to win the battle on fee caps, we had to compromise on a few other issues, but as a whole, the Bill is something that is livable. The original draft of the Bill contained a proposal for a fifteen day right of rescission for the insured, instead of the current four day period. Fifteen days is obviously too long and is harmful to the industry, since you have an ethical and legal duty to act quickly to appraise the damage to the insured’s property, and report to the insurance company. The fifteen day right of rescission would result in you being unable to get paid for work performed during that period. AAPIA fought against this provision, as well. In the end, in order to avoid fee caps, we accepted a five business day right of rescission.
Another proposed addition to the law would have prohibited an adjuster from having an interest in or receiving profit from a restoration company or “similar business” entirely. As you know, Pennsylvania law currently prohibits public adjusters from being involved in emergency repairs on an insured’s property, but does allow a public adjuster to receive a “referral fee” from someone engaged in the repair business, as long as such fee or compensation is disclosed to the insured in writing in the initial contract. Further, public adjusters may perform restoration work as long as it is after the claim has been completely resolved. The new proposal would have done away with referral fees, and would also prohibit an adjuster or solicitor from working in the contracting, building and home repair business, at all, even if such work is unrelated to any insurance claim. AAPIA argued that these restrictions are too broad, and suggested alternate language, from the NAIC Model Act, which was adopted into the Bill. The new law will allow an adjuster to have such an interest in a restoration or repair business, as long as such is fully disclosed to the insured, and keeps in place the prohibition on performing such work until after the claim is fully resolved.
There is now a restriction on soliciting during the occurrence of a loss producing event. This mirrors the language in the NAIC model Act, and does not affect your right to solicit in the twenty-four hour period after the event, or at any certain times of day or night.
There are some other changes with regard to licensing and the contract with the insured. The separate license for a public adjuster solicitor has been eliminated, which does hurt some businesses, but the DOI would not compromise on that in order to allow Pennsylvania to be similar to and have reciprocity with other states. To make that change more palatable, the people who are solicitors now are “grandfathered” in as adjusters, and we successfully asked for the bond amount to be lowered to $20,000. Continuing education requirements will be 24 hours every two years, and copies of estimates will have to be sent to the insureds. There are now more disclosures required in the contract, and those need to be initialed by the insured. The new law will take effect 180 days after it passes. Your contract will have to be re-written entirely, and approved by the DOI, which I can help you with, after the Bill finally becomes law.
1736: This bill, also included in 2370, addresses violations of the Act. Certain willful violations of the Act, such as fraud, material misrepresentation, misappropriation of funds, and payments to non-public adjusters such as agents, brokers or attorneys to induce the hiring of public adjusters will now be considered a third degree felony. We fought to keep out the overly harsh proposals, such as making any violation of the Act a felony, and are responsible for adding the word “willful” into the statutory language. Also, the maximum fine is now $5,000.00.
We will keep you updated on the status of the Bill, as it goes through its final stages in the Fall. In order to have these Bills become law, without fee caps, we need the Senate to pass the Bills. You can help by contacting your State Senator and urging him or her to vote “yes” to pass these two Bills.