At a trade conference a few years ago I gave a talk called “Rip Off the Law for a Better Contract.” I told our group how consumer contracts did more than apportion risk the way commercial contracts do. Consumer contracts, I argued, were a government-driven vehicle to inform consumers of their rights. Pick a regulated business which sells to the general public, and you’ll see that the law requires certain things to be included in its contracts of sale. In this way, a consumer contract is not really a two-party contract. It is a three-party contract, with the government as the unnamed shadow party.
In presenting this connection between the law and the underlying philosophy of consumer contracts, I told my audience that the smart way to draft a contract for a regulated business was to start with the relevant provisions of law, and import them as tent poles on which to hang the balance of the terms.
A few weeks ago a public adjuster friend brought me his standard contract for review.1 I took a look at it, and it seemed like a decent agreement, but I knew I would need to vet it against the laws that applied to his particular regulated business, and conform its terms accordingly.2 Compliance aside, I like to think the result is an improvement, tied to the relevant law for the sake of better outcomes for the business and the consumer both. I am setting the revised contract out here at length, omitting some proprietary provisions, to illustrate how to rip off the law for a better contract. In each instance of a mandated provision, take a look at the end note for the citation to authority, comments, and the relevant text of the regulation.
ABC PUBLIC ADJUSTER, INC.
Public Insurance Adjusters
Residential/Commercial
Street – Town, NJ Zip Code
Toll Free (888) Phone Number – (856) Phone Number – Fax (856) Fax Number
E-mail:
PUBLIC ADJUSTER CONTRACT3
1. Nature of this Contract.
This is a legally binding contract between you and ABC PUBLIC ADJUSTER, INC. for advice and assistance in the adjustment of an insurance claim to your Insurance Company, arising from a loss which occurred at the loss address of:
x____________________________________________________________________________
Please fill in location of loss above
2. Your Insurance Company.
x____________________________________________________________________________
Please fill in the name of your insurance company above
3. Date and Time of Loss.4
No public adjuster shall solicit the adjustment of a loss or damage occurring in this State from an insured, whether by personal interview, by telephone, or by any other method, between the hours of 6:00 P.M. and 8:00 A.M. during the 24 hours after the loss has occurred. Please write in the date and time of your loss:
Date of Loss: x_________________ Time of Loss: x_________________
4. Grant of Authority; Services to Be Rendered.5
You agree that ABC PUBLIC ADJUSTER, INC. has authority to aid you and to perform all actions reasonably required on your behalf in negotiating for, or effecting, the settlement of claims for loss or damage caused by, or resulting from, an accident, incident or occurrence covered under your property insurance policy. For the compensation agreed in this contract, unless you direct otherwise, ABC PUBLIC ADJUSTER, INC. will provide the following services to you:
a. Claim Notification.
[Description of services omitted]
b. Policy Review and Analysis.
[Description of services omitted]
c. Policy Condition Compliance.
[Description of services omitted]
d. Emergency Service Recommendations and Remediation Assistance.
[Description of services omitted]
e. Depreciation/Holdback Recovery.
[Description of services omitted]
f. Preparation of Personal Property Inventory.
[Description of services omitted]
g. Building Damage Evaluation and Estimate Preparations.
[Description of services omitted]
h. Negotiations with Insurance Company to Maximize Recovery.
[Description of services omitted]
i. Additional Living Expense Assistance.
[Description of services omitted]
5. Public Adjuster Compensation.6
You promise and agree to pay ABC PUBLIC ADJUSTER, INC. for the services it performs for you a fee equal to ___________% of the total insurance settlement recovered. This contingent percentage of all policy proceeds recovered will be the maximum fee charged. ABC PUBLIC ADJUSTER, INC.’s fee will be due and payable from and upon receipt of each insurance check/draft in the percentage listed in this contract. You agree that this stated fee is the product of negotiation between you and ABC PUBLIC ADJUSTER, INC., and reasonably related to the services to be rendered.
The adjustment of your claim may require the retention of consulting experts such as engineers, inspectors, appraisers, or valuation experts. You will be solely responsible for consulting experts’ fees and costs. You will hire any required experts directly, independently and not through ABC PUBLIC ADJUSTER, INC. as subcontractors. The fees and costs charged by experts will not be deducted from the fee charged by ABC PUBLIC ADJUSTER, INC. Be advised that your decision to forego retention of any expert recommended by ABC PUBLIC ADJUSTER, INC. may very likely have an adverse effect on the adjustment of your claim.
In the event ABC PUBLIC ADJUSTER, INC. is unable to resolve your claim with your insurance company, your claim may need to be litigated or decided through formal dispute resolution such as arbitration or litigation. In that event, you agree that the agreed percentage fee, or hourly charges upon early cancellation, whichever is applicable, for services performed for you by ABC PUBLIC ADJUSTER, INC. will remain a charge upon any recovery obtained by you against your insurance company through subsequent amicable settlement, award or judgment.
6. Early Cancellation.7
Please see the attached duplicate cancellation form for cancelling this contract under the FTC 3-Day Cooling Off Period. After the 3-Day Cooling Off Period expires, you may cancel this contract by sending signed written notice of cancellation to ABC PUBLIC ADJUSTER, INC., at Street, Town, NJ Zip Code. Upon receipt of written notice of cancellation, we will stop working for you, and you agree to pay ABC PUBLIC ADJUSTER, INC. for public adjuster’s time spent working for you under this contract at the rate of $____ per hour plus costs incurred on your behalf. Payment will be due upon submission of our bill. The parties to this contract agree to submit all disputes arising under this contract to any court of competent jurisdiction in the State of New Jersey, only.
7. Your Right to a Signed Copy of this Contract.8
This written contract will be executed in duplicate. You will be provided a fully executed copy of this contract upon execution, in the same language, e.g., Spanish, principally used in the oral sales presentation made to you by ABC PUBLIC ADJUSTER, INC. of the services covered by this contract.
8. Date and Time of Execution of this Contract; Signatures.9
No public adjuster shall enter into any contract or agreement, oral or written, with an insured, to negotiate or settle claims for loss or damage occurring in this State between the hours of 6:00 P.M. and 8:00 A.M. during the 24 hours after the loss has occurred. The date of this contract will be the latest date of all insureds’ signatures below.
“You, the buyer, may cancel this transaction at any time prior to midnight of the third business day after the date of this transaction. See the attached notice of cancellation form for an explanation of this right.”
You are to receive two copies of the notice of cancellation form attached. Please write in the date and time of your execution of this contract, and sign and print your full legal name below:
INSURED
x____________________________________
Please sign your full legal name above
x____________________________________
Please print your full legal name above
Date and Time of Insured’s Execution:
x_________________ at ________________
ADDITIONAL INSURED (IF ANY – CROSS OUT IF NONE)
x____________________________________
Please sign your full legal name above
x____________________________________
Please print your full legal name above
Date and Time of Additional Insured’s Execution:
x_________________ at ________________
ABC PUBLIC ADJUSTER, INC.
By____________________________________
Authorized corporate agent sign here
By____________________________________
Authorized corporate agent print name here
1. Special thanks to Bob Goldstein for permission to use portions of his company’s public adjuster contract.
2. The business of public adjustment is regulated in New Jersey by the Commissioner of the New Jersey Department of Banking and Insurance, whose rules on the topic can be found in Title 11, Chapter 1, Subchapter 37 of the Administrative Code.
3. N.J.A.C. § 11:1-37.13(b)4 “The written memorandum or contract between a licensed public adjuster and an insured: … Shall conform to the requirements of the Consumer Contracts Act at N.J.S.A. 56:12-1 et seq. and, as applicable, the Federal Trade Commission Act as set forth at 15 U.S.C. 41, and 16 C.F.R. subsection 429.1 (1993).”
Consumer Contracts Act at N.J.S.A. 56:12-1 et seq.
Federal Trade Commission Act as set forth at 15 U.S.C. 41 Quoted here in part:
“56:12-2. Contracts to be written in simple, clear, understandable and easily readable way
“A consumer contract entered into on or after the effective date of this amendatory and supplementary act shall be written in a simple, clear, understandable and easily readable way. In determining whether a consumer contract has been written in a simple, clear, understandable and easily readable way as a whole, a court, the Attorney General or the Commissioner of Insurance, in regard to contracts of insurance provided for in subsection c. of section 1 of this act (C. 56:12-1c.), shall take into consideration the guidelines set forth in section 10 of this act. Use of technical terms or words of art shall not in and of itself be a violation of this act.”
“…
“56:12-10. Guidelines
“a. To insure that a consumer contract shall be simple, clear, understandable and easily readable, the following are examples of guidelines that a court, the Attorney General or the Commissioner of Insurance, in regard to contracts of insurance provided for in subsection c. of section 1 of this act (C. 56:12-1c.), may consider in determining whether a consumer contract as a whole complies with this act:
(1) Cross references that are confusing;
(2) Sentences that are of greater length than necessary;
(3) Sentences that contain double negatives and exceptions to exceptions;
(4) Sentences and sections that are in a confusing or illogical order;
(5) The use of words with obsolete meanings or words that differ in their legal meaning from their common ordinary meaning;
(6) Frequent use of Old English and Middle English words and Latin and French phrases.
b. The following are examples of guidelines that a court, the Attorney General or the Commissioner of Insurance, in regard to contracts of insurance provided for in subsection c. of section 1 of this act (C. 56:12-1c.), may consider in determining whether the consumer contract as a whole complies with this act:
(1) Sections shall be logically divided and captioned;
(2) A table of contents or alphabetical index shall be used for all contracts with more than 3,000 words;
(3) Conditions and exceptions to the main promise of the agreement shall be given equal prominence with the main promise, and shall be in at least 10 point type.16 C.F.R. subsection 429.1 [Rule Concerning Cooling-Off Period for Sales Made at Homes or at Certain Other Locations]
4. N.J.A.C. § 11:1-37.13(c) – “No public adjuster shall solicit the adjustment of a loss or damage occurring in this State from an insured, whether by personal interview, by telephone, or by any other method, between the hours of 6:00 P.M. and 8:00 A.M. during the 24 hours after the loss has occurred.”
5. N.J.A.C. §§ 11:1-37.2, 11:1-37.13(a), 11:1-37.13(b)3.ii.
N.J.A.C. §§ 11:1-37.2 “Definitions … The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise: … “Public adjuster” or “adjuster” means any individual, firm, association or corporation, except as excluded at N.J.A.C. 11:1-37.1(c), 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 accident, 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. It shall also mean any individual, who, for money, commission or any other thing of value, solicits or adjusts those claims, in whole or in part, on behalf of any public adjuster.”
N.J.A.C. § 11:1-37.13(a) “No individual, firm, partnership, association or corporation licensed under this subchapter shall have any right to compensation from any insured for or on account of services rendered to an insured as a public adjuster unless the right to compensation is based upon a written contract or memorandum between the adjuster and the insured and specifying or clearly defining the services to be rendered and the amount or extent of the compensation.”
N.J.A.C. § 11:1-37.13(b)3.ii. “The written memorandum or contract between a licensed public adjuster and an insured: … Shall contain the following: … ii. A list of services to be rendered and the maximum fees to be charged, which fees shall be reasonably related to services rendered”
6. N.J.A.C. §§ 11:1-37.13(a), 11:1-37.13(b)3.ii.
N.J.A.C. § 11:1-37.13(a) “No individual, firm, partnership, association or corporation licensed under this subchapter shall have any right to compensation from any insured for or on account of services rendered to an insured as a public adjuster unless the right to compensation is based upon a written contract or memorandum between the adjuster and the insured and specifying or clearly defining the services to be rendered and the amount or extent of the compensation.”
N.J.A.C. § 11:1-37.13(b)3.ii. “The written memorandum or contract between a licensed public adjuster and an insured … Shall contain the following: …A list of services to be rendered and the maximum fees to be charged, which fees shall be reasonably related to services rendered; …”
7. N.J.A.C. § 11:1-37.13(b)5.; 16 C.F.R. subsection 429.1
N.J.A.C. § 11:1-37.13(b)5. “The written memorandum or contract between a licensed public adjuster and an insured … Shall prominently include a section which specifies: i. The procedures to be followed by the insured if he or she seeks to cancel the contract, including any requirement for a written notice; ii. The rights and obligations of the parties if the contract is cancelled at any time; and iii. The costs to the insured or the formula for the calculation of costs to the insured for services rendered in whole or in part.”
16 C.F.R. subsection 429.1[Rule Concerning Cooling-Off Period for Sales Made at Homes or at Certain Other Locations]
8. N.J.A.C. § 11:1-37.13(b)1.; 16 C.F.R. subsection 429.1
N.J.A.C. § 11:1-37.13(b)1 “The written memorandum or contract between a licensed public adjuster and an insured: … Shall be executed in duplicate and a fully executed copy shall be provided to the insured upon execution”
16 C.F.R. subsection 429.1[Rule Concerning Cooling-Off Period for Sales Made at Homes or at Certain Other Locations]
9. [N.J.A.C. §§ 11:1-37.13(d), 11:1-37.13(b)3.; 16 C.F.R. subsection 429.1]
N.J.A.C. § 11:1-37.13(d) “No public adjuster shall enter into any contract or agreement, oral or written, with an insured, to negotiate or settle claims for loss or damage occurring in this State between the hours of 6:00 P.M. and 8:00 A.M. during the 24 hours after the loss has occurred.”
N.J.A.C. § 11:1-37.13(b)3 “The written memorandum or contract between a licensed public adjuster and an insured: … Shall contain the following: … i. The signatures of the insured and the public adjuster; ii. A list of services to be rendered and the maximum fees to be charged, which fees shall be reasonably related to services rendered; and iii. The time and date of execution of the contract (day, month, year) by each party”
16 C.F.R. subsection 429.1[Rule Concerning Cooling-Off Period for Sales Made at Homes or at Certain Other Locations]
South Jersey construction attorney Robert J. Incollingo litigates contested property damage claims, insurance coverage issues and handles business transactions in Gloucester County, Burlington County, and Camden County, New Jersey from his office in Cherry Hill. If your regulated business contract isn’t all it needs to be, call him at 856-857-1500.
