Hot Off the Presses: California Further Regulates Out-of-state Adjusters in the Wake of Record-breaking Catastrophic Losses

• Publication year: 2020
• Author: Christina Lincoln

Hot off the Presses: California Further Regulates Out-of-State Adjusters in the Wake of Record-Breaking Catastrophic Losses

Christina Lincoln

Christina Lincoln is a graduate of Berkeley Law and is an advisor and experienced trial attorney practicing catastrophic loss insurance at Robins Kaplan LLP. She represents domestic and international insurance companies with claims relating to first-party property losses, including fires, hurricanes, volcanic eruptions, building collapses, pandemics, and earthquakes, among others.

Over the past few years, California has endured some of the largest catastrophic losses in the state's history. For example, in July 2018, the Mendocino Complex Fire consumed almost 460,000 acres of land, spreading across four different California counties.¹ Just a few months later, the Camp Fire destroyed almost 19,000 structures in Butte County, including the entire town of Paradise.² In short, declared emergencies stemming from record-breaking fire losses are becoming the new normal in California. For insurers, these CAT events with area-wide impact often create a shortage of in-state licensed adjusters to handle the influx of claims. This results in hiring many out-of-state adjusters. Recently, in response to the 2017 series of wildfires that caused unprecedented losses, the state Legislature held multiple hearings during which wildfire victims, public adjusters, the California Department of Insurance (the "Department"), and others testified about their concerns relating to the adjustment of fire claims by out-of-state adjusters. For example, witnesses testified as to how "claims were mishandled and delayed because, in part, out-of-state adjusters provided inaccurate information about California law pertaining to the claim."³ "Some witnesses testified that they repeatedly had to deal with new adjusters on the same claim and that the turnover resulted in delays and, in some instances, shifting standards or procedures."⁴

In response, the California State Legislature unanimously voted, in August 2019, to pass Senate Bill 240, also known as the Insurance Adjuster Act of 2019 (the "Act"), which the governor signed into law on October 3, 2019.⁵ Because the Act was designated as an urgency statute,⁶ it took effect immediately, instead of being delayed until January 1, 2020.⁷

As described by Insurance Commissioner Ricardo Lara, the Act is intended to provide the Department "with the authority to ensure that unlicensed adjusters are competent in California's property claims laws and issues related to adjusting wildfire claims."⁸ It sets forth a series of new requirements for the Department...