AB 597 prescribes a single, commissioner‑approved written contract for public insurance adjusters operating in California and spells out mandatory contract terms, disclosures, cancellation rights, and prohibited contract provisions. The bill requires duplicate execution and retention of the contract, a $20,000 surety bond disclosure, strict limits on how and when adjusters may be paid, and affirmative consumer protections for solicitation and cancellation during disasters.
For compliance officers, insurers, and adjusters, the bill replaces fragmented contract practices with a prescriptive form and multiple procedural safeguards. It aims to curb predatory solicitations after losses and to make fee arrangements transparent, but it also creates new operational and recordkeeping obligations for adjusters and enforcement tasks for the Department of Insurance.
At a Glance
What It Does
The bill requires public adjusters to use a commissioner‑approved written contract executed in duplicate and containing specified items (identities, fee formula, services, bond disclosure, and cancellation notice). It bans certain contract terms (e.g., collecting full fee from the first insurer payment or requiring insurer payments be issued in the adjuster’s name) and restricts solicitation during active loss events and between 6 p.m. and 8 a.m.
Who It Affects
Licensed public adjusters in California (including small firms) must adopt the approved form, retain original contracts, and adjust business practices; insurers and their adjusters will receive mandatory notification after the adjuster’s cancellation period expires; homeowners and claimants get expanded cancellation and disclosure rights, especially after declared disasters.
Why It Matters
AB 597 shifts the compliance baseline from custom contracts to a state‑approved standard form, raising documentation, disclosure, and timing obligations that change how adjusters are paid and how solicitation is permitted after losses—particularly in catastrophe zones where special cancellation rules apply.
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What This Bill Actually Does
AB 597 makes a single, written contract the starting point for any public adjuster representation in California. The adjuster must use a form approved by the Insurance Commissioner, sign two originals (one for the insurer to keep, one for the insured), and keep their copy available for inspection.
The bill then mandates specific contract content: names and license numbers, a description of the loss, the insurer and policy number if known, a precise description of services and the exact compensation formula (percentage and base), and a conspicuous statement that the adjuster represents the insured only. The text requires a separate printed disclosure describing the three types of adjusters and contact information for the Department of Insurance.
The bill restricts what adjusters can contract for and how they can collect fees. Contracts may not let an adjuster collect a fee on amounts the insured received before the adjuster was hired; may not permit collection of the entire fee from the first insurer payment instead of pro rata across payments; may not require insurer payments be made only to the adjuster; and may not impose late fees or collection costs on the insured.
The contract must include language about a $20,000 surety bond and must contain a completed, clearly separated notice-of-cancellation form in the same language used to negotiate the contract.AB 597 also tightens when and how adjusters may solicit work. It bars solicitation during a 'loss‑producing occurrence'—including when causes of the loss remain present, emergency responders are on scene, or evacuations are in effect—and bans unsolicited contact between 6 p.m. and 8 a.m. unless the policyholder requests it.
For catastrophic disasters and declared emergencies, the bill extends the cancellation window: the insured gets three business days normally, and five calendar days after a catastrophic disaster or state of emergency. The law enumerates remedies: if the adjuster misrepresents material facts or violates solicitation rules, the insured may void the contract without time limit.
Finally, adjusters must notify the insurer, its adjuster, or its attorney within a short timeframe after the cancellation period has expired that a written contract exists, and the Department of Insurance retains enforcement authority.
The Five Things You Need to Know
The contract must be on a form approved by the Insurance Commissioner, executed in duplicate, and the adjuster must keep one original available for inspection at all times.
Contracts must expressly state the compensation formula (percentage and base) and include the insured’s initials next to the fee disclosure; the adjuster’s fee cannot reduce any amount the insured already received from the insurer before the contract.
The contract must include a $20,000 surety bond disclosure and a separate printed consumer disclosure describing public, company, and independent adjusters with Department of Insurance contact information.
Solicitation is prohibited while a loss‑producing occurrence exists and between 6 p.m. and 8 a.m. unless the policyholder requests contact; emergency presence, active causes of loss, or evacuation orders trigger the solicitation ban.
Standard cancellation: insureds may cancel within three business days (refund within five business days); for catastrophic disasters or declared emergencies the cancellation window extends to five calendar days and the adjuster may only recover documented out‑of‑pocket emergency expenses.
Section-by-Section Breakdown
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Commissioner‑approved written contract and duplicate execution
This provision makes a written, commissioner‑approved contract the legal prerequisite to adjuster representation in California and requires two originals: one retained by the adjuster (inspectable by the commissioner) and one provided to the insured. Practically, it centralizes form control with the Department of Insurance and creates an immediate recordkeeping obligation for licensees.
Mandatory contract content and fee transparency
Subdivision (b) lists required contract elements: identities, license numbers, loss description, insurer and policy identifiers when known, a detailed description of services and the specific compensation method, signature and date fields, and a conspicuous surety bond disclosure. Requiring the exact fee formula and the insured’s initials next to it forces granular fee disclosure and reduces ambiguity about what percentage applies to which payments or coverages.
Prohibited contract terms that protect insureds’ prior receipts and payment flow
This section bans several common but problematic contract clauses: collecting the whole fee from the first insurer payment, basing fees on insurer payments made before the adjuster was retained, requiring insurer checks be issued only to the adjuster, and imposing late or collection fees on the insured. These mechanics limit aggressive fee collection tactics and preserve the insured’s prior insurer receipts.
Solicitation rules: loss‑producing occurrences and restricted hours
The bill defines conditions that keep an adjuster from soliciting—presence of the causal circumstances at the property, presence of emergency responders, or active evacuation orders—and bans unsolicited contact between 6 p.m. and 8 a.m. unless invited. These rules aim to prevent immediate post‑loss pressure sales but require adjusters to operationalize how they identify prohibited sites and times, especially in large or multi‑property losses.
Approved form features and cancellation mechanics
Subdivision (f) prescribes the form’s layout and cancellation mechanics: a separable 'Notice of Cancellation' in at least 12‑point type, the exact cancellation text (three business days normally; five calendar days for catastrophic disasters), and a bold statement 'WE REPRESENT THE INSURED ONLY.' The form must be in the same principal language used in negotiations, and the contract must spell out the proximity of catastrophic disaster disclosures next to fee language.
Refunds and compensation limits on cancellation
When an insured cancels within the statutory window, the adjuster must return all client payments and cancel any security interests within five business days and may only recover documented out‑of‑pocket emergency expenses. The adjuster cannot claim compensation for services beyond reimbursement for those emergency expenses if cancellation occurs within the allowed period.
Separate consumer disclosure and bond notice
Adjusters must hand the insured a separate printed disclosure explaining the three adjuster types and include Department of Insurance contact details. The contract must also contain a prescribed bond disclosure referencing a $20,000 surety bond, which flags the adjuster’s financial backstop to consumers without mandating the bond amount in the contract itself.
Notification, rescission, and disaster exceptions
The adjuster must notify the insurer, its adjuster, or attorney no later than three business days after the cancellation period expires that a written contract exists. If the adjuster misrepresents material facts or violates solicitation rules, the insured can void the contract without time limit. The statute clarifies that catastrophic disaster or state of emergency status expands the cancelation period to five calendar days and otherwise preserves the consumer protections.
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Explore Finance in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Homeowners and policyholders: Receive clear written contracts, explicit fee formulas, a mandatory cancellation window (three business days, five for disasters), and faster refunds—reducing risks of high‑pressure sales after a loss.
- Consumers in disaster zones: The extended five‑day cancellation window and explicit disaster disclosure give disaster‑affected claimants additional time to evaluate representation during chaotic recovery periods.
- Legitimate licensed public adjusters: Benefit from clearer market rules and a uniform contract form that can help distinguish them from unlicensed or unscrupulous actors.
- California Department of Insurance: Gains a standardized compliance lever (single approved form and explicit disclosure language) that simplifies investigations and consumer outreach.
Who Bears the Cost
- Small public adjusting firms and solo adjusters: Face costs to convert to the commissioner‑approved form, retrain staff on solicitation windows and cancellation procedures, maintain duplicate originals, and update billing practices to avoid prohibited fee mechanics.
- Insurers and their claims operations: Must process statutory notifications from adjusters and adjust internal workflows to ensure they do not inadvertently comply with prohibited payment instructions (e.g., issuing checks only to adjusters).
- Department of Insurance enforcement resources: Will need to monitor compliance, review forms, and investigate alleged misrepresentation or solicitation violations, which could strain staffing if filings rise after major disasters.
- Unlicensed adjusters and lead generators: Lose flexibility and opportunity as the statute tightens solicitation rules and imposes enforceable contract standards that favor licensed practitioners.
Key Issues
The Core Tension
The bill balances two legitimate goals—protecting consumers from coercive, post‑loss sales and ensuring access to competent adjuster representation—but the measures that limit solicitation and standardize contracts can also delay or restrict legitimate, time‑sensitive assistance after a disaster; regulators must choose between stricter safeguards that reduce abuse and looser rules that allow faster help in chaotic conditions.
AB 597 tightens consumer protections but creates operational gray areas that will surface at implementation. The prohibition on solicitation during a 'loss‑producing occurrence' is sensible in principle but raises practical questions about how adjusters and regulators identify the precise moment the occurrence ends—especially in multi‑property incidents or widespread disasters where some sites are safe while others remain active.
Likewise, the rule forbidding collection of fees on amounts the insured received before the contract protects consumers but could complicate fee accounting when insurer settlements involve multiple payments, advances, or third‑party reimbursements.
The bill centralizes the approved contract form with the Insurance Commissioner, which standardizes disclosure but also concentrates regulatory gatekeeping. The Department will need to issue guidance and possibly model procedures—on topics such as verifying that a contract’s fee applies only to specified coverages, documenting out‑of‑pocket emergency expenses, proof of mailing for cancellations, and the meaning of 'midnight of the third business day.' The $20,000 bond disclosure informs consumers but does not address whether the bond amount is sufficient for large‑scale losses; enforcement will depend on bonding and recovery mechanisms that are not changed by this text.
Finally, the notification requirement to insurers 'within three business days after the cancellation has expired' contains awkward timing language that may prompt administrative interpretation or litigation about when the duty to notify begins.
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