The Retainer
The agreement by which the insured engages your services and agrees to pay you for those services is a contract and is governed by laws and regulations in New Jersey.
Section 13 of the Public Adjusters' Licensing Act, N.J.S.A. 17:22B-13, requires a written memorandum signed by the insured and the public adjuster. The Commissioner of Insurance has adopted more specific regulations as authorized by the statute that governs your agreements. They are set out in the New Jersey Administrative Code at Section 11:1-37.13. Let's review some of the basics:
Agreement
The statute and regulations assume that the basic requirements of a contract are contained in your forms. A contract states the terms of an agreement between the parties, so it must include an identification of the parties, the subject of the undertaking, and the mutual promises of the parties. In the case of your retainer, a named insured has suffered a certain loss and hires/retains you to aid and assist in putting together the claim to the insurance company, helping the insured to comply with the conditions of the policy and negotiating with the insurance company to secure appropriate reimbursement. You agree to do the work and the insured agrees to pay you for your services and expenses, usually by assigning you a percentage of the recovery. Key to your agreements are the hiring (we retain/hire you) and the assignment of a portion of the proceeds (and assign to you X% of the insurance payment).
Form
The memorandum must comply with the Plain Language Rule. It must be written in "a simple, clear, understandable and easily readable way." Guidelines for compliance with the Plain Language Rule are set out at N.J.S.A. 56:12-10, e.g. short, simple and to the point, no double negatives, no exceptions to exceptions, etc.
Execution
The memorandum must be executed in duplicate and a fully executed copy given to the insured. That means the insured has to get a copy that you have signed. The Public Adjuster must keep the memorandum on file so that it is available for inspection without notice.
Required Contents
- Signatures of the insured and the public adjuster. Easy, but remember that all insureds should sign the agreement or the authority of the signer should be spelled out in detail; e.g. both husband and wife should sign, or if one is not available, the signer should represent that he or she has the authority to sign for both. In a corporate situation, be sure that you get the signature of a corporate officer who actually has the authority to hire you. If the insured is a partnership, you will want signatures from all the partners or else a representation by the signing partner that he/she has authority to bind the partnership. Remember to protect yourself by getting everyone on board with your retention.
- A list of services to be rendered and the maximum fees to be charged, which fees shall be reasonably related to the services rendered. This can be as simple as "aid and assist" in the compilation and submission of a claim to the insurance company for payment of the loss sustained. This is also where your percentage fee is stated. Using the correct language gives rise your equitable lien against the policy proceeds since you agree to work now to create a fund and to be paid from that fund in the future, once it comes into being.
NOTE: This is also where you want to include the language of assignment (and I/We hereby assign to you...). The language of the assignment should refer to it as security for the promise to pay (to assure that it is not considered to be for collection and hence revocable by the insured). This language, not required by the statute or regulations, is what gives you the right to the proceeds when paid by the insurance company. The insured actually gives you an entitlement to a portion of the proceeds and once notice of that assignment is given to the insurance company, the insurance company must pay you, either directly or by including your name on the checks. Failure by the insurer to do so gives you the right to demand and to obtain that payment directly from the insurer, which then ends up paying more than it intended. The insurer cannot simply tell you to go get your fee from the insured. The law of assignment is old and well established.
If you and the insured reach an impasse or disagreement, many times an insured will attempt an end run around you by telling the insurance company that you have been fired. If you have given the insurance company notice of the assignment (by giving it a copy of your retainer which includes the language of assignment), the carrier still has to include your name on the checks. Termination of an assignment requires an agreement by the assignee (the person with the entitlement to payment pursuant to the assignment, i.e. you) to relinquish the entitlement. Absent such a writing actually delivered to the insurer, the assignee remains entitled to payment and can enforce that right against the party making the payment (the insurer).
- The time and date of execution by each party. The time of day is important to be set out specifically in order to show compliance with the statutory and regulatory time limitations for signing an insured. The date must be written as day, month, year.
- Notice of right to cancel within 3 days. This requirement comes from the federal door-to-door sales law, incorporated by reference in N.J.A.C. 11:1-37.13 (b)(4), which provides a "cooling off" period for sales made at homes. The notice must be "in immediate proximity" to the space for the signature of the "buyer" (insured). It must be in bold face type of a minimum size of 10 points. The notice must advise the insured that he/she may cancel the contract, without penalty or obligation, at any time prior to midnight of the third business day after the date of the retainer. You must also tell the insured of the procedures to be followed for cancellation, including any requirement for a written notice, and where that notice must be delivered. You also must include a brief statement of the rights and obligations of the parties if the contract is cancelled at any time (even after the first three days) and the costs to the insured or the formula for the calculation of the costs to the insured for services rendered. This is where you tell the insured that you expect to recover any out of pocket costs and any part of the fee earned up to the point of cancellation. Note, if you have included the language of assignment as discussed above, the insured cannot effectively dismiss you without your agreement.
The art to drafting the retainer is to include all of this information on one page in a clear, easily readable way. If we can assist you in drafting or reviewing your retainers, please feel free to contact us at 973-538-4100 or at tmaloney@thomasmaloneylaw.com. We are here to help!
