Public Insurance Adjuster Contracts and New Licensing Requirements

This post has been updated, see the new post here.  

Imagine that your home is destroyed in a fire overnight.  After family and friends, you would likely next call your insurance company to report the catastrophe and initiate a claim.  The person from the insurance company who investigates your claim and calculates the amount to be paid for the loss is called an "adjuster."  About this time you also attempt to read through the fine print morass that is your insurance policy, and realize the difficulty of making sense of it all.  Now imagine that after you report the claim you receive a letter from a "public adjuster," which helpfully points out to you that the insurance company's adjuster is an employee of the insurance company and therefore tied to the insurer's interests, and that the public adjuster is available to help you negotiate a better settlement with the insurance company, often for a percentage of the settlement proceeds, say for example 10 percent.  At that time, in the immediate wake of the loss and faced with the prospect of having to navigate the claims process on your own, the thought of having an adjuster "on your side," working for you, may be attractive.  Months later when the house is rebuilt, the public adjuster's work is done, and you realize you have 10 percent less of the proceeds available to put into the house, your perception might change.  But like it or not, that contract is still enforceable in Illinois (but see below regarding licensing requirements for public adjusters).

This was the case in Golub and Associates, Inc. v. State Farm Fire and Casualty Company, Case No. 09-AR-281 (5th Dist. 2011).  Golub was a public adjuster retained by the homeowner pursuant to a written contract for 10% of the proceeds.  Once the contract was signed, the adjuster notified State Farm and requested that all checks issued be made out to both the homeowner and the adjuster.  Two months later, the homeowner had a change of heart and sought to terminate the agreement with the adjuster.  She notified her insurer and requested further checks be made out solely to her, and the insurer complied.  The adjuster then sued the homeowner for breach of contract and the insurance company for failing to retain the funds to which it was contractually entitled, which is a lien under Illinois law.  

On appeal, the Fifth District Appellate Court found that the contract was valid and enforceable against the homeowner, and also that the adjuster was correct, and that pursuant to 215 ILCS 5/512.52 of the Illinois Insurance Code, the adjuster had a lien against the insurance proceeds, and therefore the insurer could be held liable for releasing the funds to the homeowner without the adjuster's authorization.  The Court noted that the adjuster had performed its work and was entitled to be paid pursuant to the contract, and that the insurer "was wrong to go along with [the homeowner's] plan to deprive the [adjuster] of its rightfully earned fee."  

Now, the intent of this post is NOT to advise readers whether or not retain a public insurance adjuster.  That is a decision that must be made by each homeowner on a case-by-case basis, depending on the particular situation.  But homeowners would be well advised to not rush into such a decision, and to seek counsel from the Illinois Department of Insurance, the Illinois Attorney General's Office, or a licensed attorney before signing any agreement.  The Department of Insurance provides free advice to homeowners and can help the homeowner work with the insurance company.  I have included below some useful weblinks from these agencies. Homeowners should also note that Illinois' licensing requirements for public insurance adjusters changed effective January 1, 2011, pursuant to the Illinois Public Adjusters Law at 215 ILCS 5/1501, et. seq.  Any public insurance adjuster is required to be licensed by the State prior to soliciting business, their contract documents are required to meet Illinois law, and they are required to post a $20,000 surety bond or letter of credit.  A public adjuster's failure to comply with licensing requirements can be grounds to void the contract, and can also give rise to criminal proceedings by the Illinois Attorney General.  Any agreement for representation regarding a claim for fire damage, made within five days of the fire, is subject to a mandatory 10-day period in which the homeowner can void the agreement.  815 ILCS 625/1 (the "Fire Damage Representation Agreement Act").

IL Dept of Insurance - "When Disaster Strikes"
IL Dept of Insurance - "Disasters - Who Can You Contact?"
IL Dept of Insurance - "Public Adjusters"
IL Dept of Insurance - "Disaster" Brochure

If you wish to consider filing a consumer complaint, see the following, or speak with a licensed Illinois attorney.

IL Dept of Insurance - "I Want to File a Complaint"
IL Attorney General - "Protecting Consumers" 
IL Attorney General - Consumer Complaint Form

Nate Hinch is an attorney and partner at the law firm of Mueller, Reece & Hinch, LLC.  He has offices at 404 N. Hershey Road, Suite C, Bloomington, IL 61704, and 809 Detweiller Drive, Peoria, IL 61615, and can be reached by phone at (309) 827-4055 and email at

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