Link to original WordPerfect Document
7 N.J.L. 147
January 19, 1998
151 N.J.L.J. 317
January 19, 1998
COMMITTEE ON THE UNAUTHORIZED PRACTICE OF LAW
Appointed by the New Jersey Supreme Court
OPINION 30
Licensed Public Adjusters
The Committee on the Unauthorized Practice of Law has received
an inquiry asking whether a licensed public adjuster is engaged in
the unauthorized practice of law by adjusting third-party claims or
first-party matters involving other than property damage claims.
In third-party adjusting, a public adjuster represents an
injured claimant in making a claim against a third person who may
be liable for an injury and who may or may not be insured under a
liability insurance policy. Under such circumstances, no agreement
or contract exists between the claimant and the insurance company.
In such cases, the claim cannot be settled by the mere allocation
of responsibility according to the insurance contract as is done in
first party adjusting. It is therefore necessary in third-party
adjusting to determine the legal rights, duties and relationships
of the parties.
In the negotiation of third-party claims, there are numerous
factors that come into play, including a judgment of the extent to
which the elements and evaluation of damages should be assessed and
compromised in settlement negotiations. This determination
necessarily requires legal knowledge and skill. There must be an
application of legal principles involving negligence, causation,
the elements of comparative fault, the Rules of Evidence and the
Rules of Court. In such matters, an adjuster must also consider
other factors that may affect a claimant's ability to pursue the
claim, such as Statutes of Limitations, jurisdictional issues and
affirmative defenses, all of which must be analyzed. Courts which
have considered the issue have determined that third-party
adjusting constitutes the practice of law. Utah State Bar v.
Sumerhayes and Hayden Public Adjusters, et al., 905 P.2d 867, 870
(S.C. Utah 1995); Idaho State Bar v. Villegas, 126 Idaho 191, 193,
879 P.2d 1124, 1126 (1994); Fitchette v. Taylor, 254 N.W. 910, 911-
12 (Minn. 1934). Other cases reaching the same conclusion include
Brown v. Unauthorized Practice of Law Committee, 742 S.W.2d 34, 42-
43 (Tex. Ct. App. 1987); Professional Adjusters, Inc. V. Tandon,
433 N.E.2d 779, 782-83 (Ind. 1982); Dauphin County Bar Association
v. Mazzacaro, 465 Pa. 545, 351 A.2d 229, 234 (1976); AAA v.
Merrick, 117 F.2d 23 (D. Ct. DC 1940); Cuyahoga v. Brunson, 38 UPN
66 (Ohio 1997) and Mevnier v. Bernich, 170 So. 667 (La. App. 1936).
No courts have held to the contrary
The practice of public adjusting in New Jersey is regulated by
both statute and Department of Banking and Insurance regulation.
N.J.S.A. 17:22B-2, entitled "Definitions" states, in pertinent
part:
"Public adjuster" or "adjuster" means any
individual, firm, association or corporation who,
or which, for money, commission or any other thing
of value, acts or aids in any manner on behalf of
an insured in negotiating for, or effecting, the
settlement of claims for loss or damage caused by
or resulting from, any accidents, incident, or
occurrence covered under a property insurance
policy, including, but not limited to a flood,
transit, inland marine or ocean marine policy; or
who, or which, advertises for, or solicits
employment as an adjuster of those claims. The
term "public adjuster" shall also include any
individual who for money, commission, or any other
thing of value, solicits or adjusts those claims on
behalf of any public adjuster. (Emphasis supplied)
This statutory definition is crucial because it limits the
field of public adjustment to: (1) first-party claims and (2)
claims which do not arise under a liability insurance policy. This
statute also contemplates that a public adjuster acts "on behalf of
an insured" and not on behalf of a claimant against an insured
tortfeasor.
N.J.S.A. 17:22B-3, "Licensing of Public Adjusters," provides,
in
part that:
a. No individual, firm, association or corporation
shall act as an adjuster in this State unless
authorized to do so by virtue of a license issued
or renewed pursuant to this act.
This section of the statute makes it clear that it is illegal
in the State of New Jersey to perform public adjusting services
outside the scope of the Licensing Act. This Act clearly limits
such services to adjusting first-party claims on behalf of insureds
under other than liability policies. The license to adjust, which
is issued pursuant to the statute, is limited by the definition of
a “public adjuster” to that form of service.
N.J.S.A. 17:22B-13, “Prohibited Acts,” states, in part:
No individual, firm, association or corporation
licensed under this act shall:
...
d. Make any misrepresentation of facts or advise
any person on questions of law in connection with
the transaction of business as an adjuster[.]
The New Jersey Department of Banking and Insurance has
promulgated regulations pertaining to the licensing of public
adjusters (N.J.A.C. 11:1-37.1). The definition of a public
adjuster set forth in N.J.S.A. 17:22B-2 is reiterated in N.J.A.C.
11:1-37.2. The regulation's definition reinforces that the role of
a public adjuster under New Jersey law is limited to handling
first-party claims on behalf of insureds under property policies.
N.J.A.C. 11:1-37.14(a), in turn, furthers the statutory prohibition
against public adjusters advising anyone with respect to a question
of law.
There are a number of practical concerns that also serve to
preclude the adjusting of claims involving personal injuries by
licensed public adjusters. Among these concerns are the
unregulated nature of the fees public adjusters may charge, as well
as the validity and enforceability of a release that may be
prepared by a public adjuster, and the potential referral of cases
and sharing of fees between attorneys and public adjusters. The
Committee is also concerned that if licensed public adjusters were
permitted to adjust even first-party personal injury claims, this
would permit them to become involved in the representation and
adjustment of claims involving PIP, as well as UMI and UIM claims,
which involve legal issues and require representation by a licensed
attorney of the State of New Jersey.
Given the foregoing, the Committee is of the opinion that
licensed public adjusters are limited to the adjusting of first-
party claims involving property damage only. The adjustment of
first-party claims involving matters other than property damage, as
well as the adjustment of any third-party claims constitutes the
unauthorized practice of law.
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