Public Adjuster Contracts: Requirements and Limitations in Puerto Rico

Contractual limitations between public adjusters and the insured or claimants in Puerto Rico are established under Puerto Rico’s Insurance Code.¹ The Insurance Commissioner’s Office through this regulation states all the definitions, requirements, duties and responsibilities that apply to insurance adjusters. Puerto Rico statutes have also established that services provided by public adjusters to an insured or claimant arising under an insurance policy or contract shall be by written contract.

The written contract between a public adjuster and the insurer or claimant shall comply with the clauses of Article 9.331 of Puerto Rico Insurance Laws:²

• Must be signed in writing and titled as “Public Adjuster Contract”;
• Full and legible name of the public adjuster and license number as registered in the Office of the Insurance Commissioner of Puerto Rico;
• Full name and residential address of the insured or claimant, name of the insurer and policy number, if known;
• A description of the loss and its location, if applicable;
• Description of the services that will be provided to the insured or claimant, and should clarify that the public adjuster is not an employee or representative of the insurer;
• Language that certifies that the public adjuster is in compliance with the laws of Puerto Rico;
• Description of any salary, commission, fee or other consideration of value that the public adjuster will receive for its services;
• If the insurer pays or agrees in writing to pay the policy limit on or before seventy-two (72) hours after the loss is reported, the public adjuster shall not receive a commission consisting of one percent of the amount paid and will only be entitled to a reasonable compensation based on the time devoted to the claim and the expenses incurred in its management, which must be clearly established in the contract;
• The right of the insured to rescind the contract, by written notice sent within three (3) business days from the date on which the contract was signed;
• Must contain a clause stating that the insured claimant has the right, but is not obliged to hire a public adjuster to assist in the process of adjusting the claim.

In addition, it shall contain the requirements and comply with the limitations under Article 9 of Puerto Rico’s Insurance Code:³

Requirements:

• A clause that specifies the type of financial compensation that the public adjuster will receive and it shall also include if the public adjuster could be appointed along with the insured, in the check for the payment of the claim.

• If the compensation is based on a percentage of the payment of the claim, the contract shall specify the exact percentage that the public adjuster will receive.

• The reimbursement of the initial expenses related to the adjustment of the claim should be specified in the contract by category or type, estimated in dollars, and any additional expenses previously approved by the insured or claimant.

Limitations:

• A public adjuster’s contract may not contain any clause that establishes the following provisions:
  • Payment in full to the public adjuster even if the insurer owes part of the compensation or which allows a public adjuster to collect all the compensation from the first check issued by the insurer, instead of a proportional percentage of each check issued by the insurer;
  • Require the insured or claimant to authorize the insurer to issue a check only in the name of the public adjuster;
  • Impose costs for collection procedures of the compensation of the adjuster or for late payment;
  • Prevent the public adjuster from filing civil recovery actions;
  • Provide the payment of commission, fees or other consideration of value to a person for the purpose of investigating or adjusting a claim that, in order to perform such acts, that person requires to possess a public adjuster’s license and does not own it;
  • Permit a person to accept commission, fees or other consideration of value for the investigation or adjustment of a claim if, in order to perform such acts, that person had to possess a public adjuster’s license and did not possess it;
  • Establish the payment of commission, fees or other value consideration based on discounts and incentives that violate Article 27.100 of the Insurance Code.⁴

The public adjuster must also provide a written disclosure to the insured or claimant prior to signing the contract.⁵ This written disclosure shall affirm that after a claim is submitted to the insurer for consideration, an independent adjuster or public adjuster may be involved in the process (both figures must be defined and specify their payment methods). This will not limit the insured or claimant’s rights to initiate direct communication with their attorney, insurer, independent adjuster, insurer’s attorney or any other person related with the resolution of the claim. It shall also state that a public adjuster is not a representative or employee of the insurer and that salary, fees, commission or other compensation of the public adjuster is the obligation of the insured or claimant, not the insurer.

It is required that contracts between public adjusters and insured or claimant be executed in duplicate for the purpose of providing an original to the public adjuster and an original to the insured or claimant. The public adjuster shall have the original contract available for inspection from the Commissioner. Last, the insurer shall receive notification from the public adjuster through the signed contract by the insured or claimant authorizing the public adjuster to represent the insured or claimant’s interests.
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¹ Puerto Rico Insurance Code, P.R. Regs. OCS REG. 8646.
² Contract Between the Adjuster and the Insured or Claimant, 26 L.P.R.A. §952b-1.
³ Puerto Rico Insurance Code, P.R. Regs. OCS REG. 8646(9)(a).
⁴ Rebates and Incentives, 26 L.P.R.A. §2710.
⁵ Puerto Rico Insurance Code, P.R. Regs. OCS REG. 8646(9)(b).