The United States District Court for the District of New Jersey recently reinforced that a public adjuster’s fee is not a recoverable element of an insured’s damages. In doing so, the court distinguished the cost incurred in retaining a public adjuster from the cost incurred in retaining other third-party contractors following a loss.
The decision, Travelers Property Casualty Company of America v. Hallam Engineering & Construction Corporation, arose from a fire at a food processing plant operated by Goya Foods. No. 08-444 (D.N.J. 2013). Following the fire, Goya Foods retained a public adjuster to manage the adjustment of Goya’s claim with its insurer, Travelers Property Casualty of America. Travelers, on behalf of Goya, retained a construction-consulting firm to assist Goya in estimating the cost to repair its plant. The consulting firm also managed the repairs of Goya’s facility. When Travelers subsequently brought an action against the third parties responsible for the fire, Travelers sought to recover the fees charged by the construction consulting firm and the public adjuster as part of its damages.
The District Court determined the fee paid to the construction-consulting firm was a recoverable element of Travelers’ damage. The court explained the firm’s fee was a “reasonable cost” incurred by Travelers in an attempt to mitigate the damage caused by the defendants’ negligence. The fee flowed directly from, and was a consequence of, the defendants’ negligence. As such, that fee was recoverable by Travelers. The public adjuster’s fee, on the other hand, was not recoverable by Travelers. The court distinguished the public adjuster from the consulting firm on the basis the public adjuster acted solely as the insured’s agent for purposes of adjusting the insured’s claim with Travelers, and did not work to mitigate the insured’s damages. As such, the public adjuster’s fee was not a cost resulting directly from the defendants’ negligence, but, instead, an expense voluntarily assumed by the insured to facilitate adjustment of its claim. Accordingly, the public adjuster’s fee was not recoverable.
The court’s decision serves as a gentle reminder to a subrogating carrier that a public adjuster’s fee is not a recoverable element of damages. The decision also serves as a useful tool, in insured made-whole states, for a subrogating carrier confronted with an insured who seeks to recover the fee paid to its public adjuster as an element of its damages. In that situation, the carrier should gently remind the insured a public adjuster’s fee is not a recoverable element of the insured’s damages.