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THE RETAINER
ROUND #1 DECISION
Last month's edition of The Adjuster's Advantage discussed the retainer and the apparent assault upon the contingent fee. On January 9, 2015 a panel of the New Jersey Appellate Division weighed in on the issue and did so solidly in favor of the Public Adjuster!
The opinion is SAB Public Adjusters v. Gormley, and was authored by a two-judge panel. In this case, the public adjuster sued to recover his 15% contingent fee on a house fire. The insureds refused to pay the public adjuster, contending that the retainer agreement was unenforceable because it did not contain a notice of a three-day right to rescind as allegedly required by N.J.A.C. 11:1-37.13(b)(4).
IMPORTANT FINDINGS
Before addressing the rescission argument, the Court first found that the retainer agreement otherwise complied with the statute, N.J.S.A. 17:22B-13(c), as it "specifies and clearly defines the services to be performed" by using the language "advise and assist in the adjustment of the insurance claim...covering loss which occurred" on a specified date at a defined location. The Court further found that the retainer "adequately" defined the amount of compensation due the public adjuster as 15% of any sum recovered.
The Court specifically rejected the contention that the public adjuster was obligated by law to provide further detail about the services it was engaged to render. This finding seems to negate the administrative regulation, N.J.A.C. 11:1-37.13(b)(3)(ii), requiring that a listing of services to be performed be included in the retainer agreement. It also undermines any argument that the Commissioner has the authority to require public adjusters to justify their fee by reference to time spent and expenses incurred for a specific adjustment.
THREE DAY NOTICE OF RIGHT TO CANCEL
The Court then addressed the central argument advanced that the retainer had to contain a three-day period for the insured to rescind the contract. The Court found no such requirement in either the New Jersey Consumer Contracts Act, N.J.S.A. 56:12-1 to -18 (which requires the use of plain language), or the Federal Trade Commission Act, 15 U.S.C. 41 (which relates only to the formation of the FTC, but which the Court expanded to include all of the Act). The decision centered on the federal administrative regulation set forth at 16 C.F.R. Sec. 429.1, which regulates door-to-door sales. The Court seized upon the "as applicable" language in the insurance regulation to mean that in some instances the Commissioner intended for the regulation not to apply, or more appropriately, to apply only in rare situations, such as door-to-door solicitations following a large-scale catastrophe. Indeed, the Court went so far as to suggest that "as applicable" might take the public adjuster's retention out of the "door-to-door" sale definition.
The Court took the Commissioner to task for creating a regulation employing convoluted language and cross-references requiring a "scavenger hunt among other regulations" when a plain, simple statement could have been used instead. The Court noted the irony that "a regulation which compels clarity and simplicity in public adjusting contracts should be so murky and convoluted."
The Court refused to reach the question whether the retention constituted a door-to-door sale because the record below was not clear enough for summary judgment. The Court would not even acknowledge that the retention constituted a "door-to-door" sale for purposes of New Jersey law.
EQUITABLE CONSIDERATIONS
By way of informational dicta, the Court noted that a technical violation of the regulation regarding the content of the retainer agreement would not necessarily preclude the public adjuster from obtaining a fee where the adjuster performed or substantially performed his undertaking. Noting the ancient maxim that "the law abhors a forfeiture," the Court found that equitable principles might require payment of the fee so as not to unjustly enrich an insured who benefited from the public adjuster's efforts. The Court was clearly concerned with a possible loss of the public adjuster's fee based upon a "tenuous and tortured connecting of the dots from statute to state regulation to federal regulation." The case was remanded for further proceedings; i.e. a trial on the merits.
This decision has not been approved for publication and hence may not be binding, but remains persuasive. If another panel of the Appellate Division encounters a similar challenge to the public adjuster's retainer agreement and disagrees with this panel, the issue will be ripe for resolution by the Supreme Court.
Until then, exercise caution and be sure that your retainer agreements clearly and explicitly advise your insureds about what you are going to do for them and how you are going to be paid. Be careful that your insureds realize that they have to cooperate with you and that you are not going to do everything without their input and participation. Some insureds unreasonably become resentful when presented with a contents list that they are told to annotate with purchase prices and ages.
As previously suggested, maintaining a log akin to the insurer's claim activity log remains a good idea for many reasons.
If you cannot find this opinion on line, please call me to request a copy. As always, if you or your insureds encounter similar issues, please feel free to contact us at 973-538-4100 or by email at tmaloney@thomasmaloneylaw.com. We are here to help!
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