As the midwestern summer storm season nears, more and more residents will face unsolicited swarms of public adjusters stating, “I can see hail damage to your roof.” In March 2024, Illinois Attorney General Kwame Raoul warned residents to stay alert for these storm-related repair scams. Raoul stated that these storm chasers may operate as public adjusters who offer “free” inspections to submit a claim to property owners’ insurance companies. Hanging in the background of Raoul’s statements is a reminder about the rise in insurance fraud. (According to the Coalition Against Insurance Fraud, insurance fraud costs the United States $308 billion annually.) Illinois recently passed new legislation to protect residents from storm chaser scams and help combat the rise in insurance fraud.
Forty-six states, including Illinois, already have professional standards for public adjusters. In 2023, Illinois hailed new legislation (Senate Bill 1495) imposing more control over public adjusters. Florida, Georgia, Kentucky, and Indiana have followed this trend as well.[1]
SB 1495 went into effect in January 2024. It amends the Public Adjuster Article of the Illinois Insurance Code and caps public adjuster compensation at a maximum of 10 percent of the amount of the settlement claim. See 215 ILCS 5/1570(e). It also requires public adjusters to provide a written disclosure of both indirect and direct financial interests that a public adjuster has with any party involved in the claim. 215 ILCS 5/1590(f)(1). Further, SB1495 expands the mechanisms by which an insured or policyholder may void the public adjuster contract.
All public adjuster contracts with insureds must now contain an email address in addition to the permanent home state business address and a phone number. 215 ILCS 5/1575(a)(2). The public adjuster shall then provide the insurer with an exact copy of the contract by email no later than five business days after execution of the contract. 215 ILCS 5/1575(h). An insured then has the option to void the contract within five business days after the insurer receives the contract. (To do so, an insured can simply send an email to the email address contained within the contract.) 215 ILCS 5/1575(j). SB1495 requires strict compliance with these contractual requirements; all contracts in violation of this section are void and invalid. 215 ILCS 5/1575(l).
Of course, not all public adjusters engage in storm-chasing, insurance fraud, or predatory business tactics. SB1495 provides for more transparency between public adjusters, insurers, and insureds while also instilling more contractual rights for insureds. The cap on fees decreases the financial incentives for public adjusters to skew loss valuations and serves as a reminder to consumers that there is no such thing as a “free” contingency fee.
As the ever-changing field of property insurance coverage litigation expands, attorneys, insurers, insureds, and public adjusters should take note of legislative changes in order to comply with best practices.
[1] See Florida House Bill 1185, Georgia House Bill 222, Kentucky House Bill 232, and Indiana House Bill 1329.
AssociateJoseph A. Fay concentrates his practice on the defense of civil litigation matters, including insurance coverage, fraud, and bad faith litigation, as well as commercial general liability, commercial transportation, and ...