Conflict Over Public Adjuster Fee Caps and Solicitation Restrictions May Require Legislative Action

The regulation of public adjusters is expected to be a significant topic of the 2010 Florida Legislative Session, specifically as it relates to fee caps and solicitation restrictions on public adjuster services. 

Last year, two lawsuits were filed challenging the constitutionality of the solicitation restrictions imposed on public adjusters.  In addition, the Department of Financial Services (the “Department”) was petitioned for a declaratory statement regarding a contradiction of laws governing  fee caps on public adjuster services. 

In August and October 2009, two lawsuits were filed against Florida’s Chief Financial Officer, Alex Sink, challenging the constitutionality of section 626.854, Fla. Stat., claiming the statute violates public adjusters’ rights to freedom of speech and rights of equal protection by banning public adjusters from soliciting public adjuster services during the 48-hour period after the occurrence of a state of emergency, and capping public adjuster fees.  The lawsuits further allege that section 626.854, Fla. Stat., violates public adjusters’ due process rights because it denies them the right to contract and deprives them of their property interests in fees capped by the statute.  One of the lawsuits alleges that the State of Florida is tortiously interfering with the plaintiff’s prospective business rights by banning public adjuster services during the 48-hour period, yet permitting the representatives of the state-operated Citizens Property Insurance Corporation to contact policyholders during this time period. 

Both lawsuits seek to have section 626.854, Fla. Stat., declared unconstitutional on its face and as applied to the plaintiffs, as well as to have an injunction issued to prohibit the State of Florida from enforcing the statute.  The cases are currently in the early stages of litigation.

In November 2009, the Department was petitioned for a declaratory statement to resolve the substantive conflicts regarding the fee cap laws applicable to reopened and supplemental claims.  Rule 69B-220.201(5), Fla. Admin. Code provides that a public adjuster may only charge a fee equal to, but no more than, 10 percent of the amount of any insurance settlement or claim payment arising out of a state of emergency.  Section 626.854(11), Fla. Stat. was enacted subsequent to Rule 69B-220.201(5) and also imposes fee caps that public adjusters may charge.  This statute imposes different fee caps than Rule 69B-220.201(5).  The conflict between the statute and the Rule led to the filing of the declaratory statement petition with the Department. 

Subsection (b)(1) of section 626.854(11) provides that a public adjuster cannot charge a fee in excess of 10 percent of insurance claim payments based on claims made during the first year after a declaration of emergency.  Subsection (b)(2) imposes a fee cap of 20 percent on all other insurance claim payments.  Subsection (a), however, explicitly provides that fees based on reopened and supplemental claims are not subject to the fee caps imposed in subsection (b).  In essence, the petition alleges that section 626.854(11) legislatively overruled Rule 69B-220.201(5) and, as a result, there are currently no fee caps on reopened or supplemental claims arising out of a state of emergency.

In response to the Petition, the Department issued a Declaratory Statement addressing the fee cap issue on February 16, 2010.  The Department determined that the subsequent enactment of section 626.854(11) contradicted certain portions of Rule 69B-220.201(5) and thus, superseded those provisions.  Contracts for public adjuster services entered into on or after October 1, 2008 are governed by section 626.854(11) and are only governed by Rule 69B-220.201(5) to the extent the provisions of the Rule do not conflict with the statute.  The significance of this determination is that the fee cap provided in Rule 69B-220.201(5) on any insurance settlement or claim payment arising out of a state of emergency contradicts with the fee caps provided in the statute.  The Department did not expressly state that no fee caps apply to reopened or supplemental claims, but, based on the language of the statute, which was acknowledged by the Department, the fee caps imposed in subsection (b) of section 626.854(11) do not apply to reopened or supplemental claims. 

A declaratory statement is considered to be a final agency action and a party adversely affected by such action is entitled to judicial review, pursuant to sections 120.565 and 120.68, Fla. Stat.

The Florida Legislature may address these issues in the upcoming 2010 Session.  As of today, February 17, no bills have been filed with respect to public adjuster fee caps or solicitation restrictions, although proposed language is being circulated and reviewed.  In order to be considered for the 2010 Legislative Session, bills must be filed before March 2, 2010. 

Colodny Fass is actively involved in legislative discussions related to these issues and will continue to update clients on their progression.  Please do not hesitate to contact our office should you require further assistance.

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