What Are the Pitfalls of Using a Public Adjuster?

"There are some very poor adjusters out there and you don't have to know a whole lot to become an adjuster," says Bob D'Amore, president of the New York Public Adjusters Association. "You have to pass a test and you can take a course that will teach you how to pass the test. It won't teach you how to be a good adjuster. Experience is the best teacher, and integrity and honesty [are two positive] attributes of a good adjuster."

Beware of self-dealing. The marquee example used to explain the 2014 law, known as the Gayla Marsh Bill, cited complaints filed against Bronx-based Adjustrite, an adjuster running a scam that directed homeowners to a contractor run by the same company that owned Adjustrite. The company may have more accurately been called "Adjustwrong," but there was nothing illegal about the arrangement at the time.

Beware of inflated insurance claims. In December 2008, four adjusters and three contractors were ordered to forfeit $248,000 after pleading guilty to kickbacks from inflated insurance claims on properties in Manhattan, Brooklyn, and Staten Island.

The contractors inflated the cost of repairs so they could keep a portion of proceeds for themselves and give part of the money to adjusters. In some cases, adjusters accepted golf outings, golf equipment, or dinners.

Three of the four adjusters involved were employed by Chubb with kickbacks totaling $1 million across 10 properties. The contractors ultimately returned $600,000 to Chubb.

The insurance company launched its own investigation into the scam before reporting it to the New York State Department of Finance and the office of the Manhattan district attorney.

Beware of kickbacks. Chubb had been contacted by a contractor who complained he'd been approached by one of the adjusters who wanted $3,750 as a kickback for a $37,500 repair project he was working on at a Park Avenue condominium.

Beware of paying twice for the same service. "Today, you find adjusters who try to steer people to particular contractors," explains D'Amore. "That's fine if it's a good contractor and you disclose in writing that the contractor is paying you a fee. The state legislature passed a law that says any fee a contractor pays you, plus the public adjustor fee, must not exceed 12.5 percent of the loss. A poor adjuster might [not] do that. What is the percentage of poor adjusters? I think it is small but because they are poor [at their job] they get a lot of attention. The vast majority of adjusters are extremely helpful to people."