California’s AB 597: What Policyholders and Public Adjusters Need to Know

California lawmakers are considering Assembly Bill 597 (AB 597), a measure that could dramatically change how public adjusters operate in the state. While the bill is framed as a consumer protection effort, many in the industry argue it could unintentionally make it harder for policyholders to access fair representation—especially after catastrophic disasters like wildfires or earthquakes.

Public adjusting plays a critical role in balancing the scales between insurance companies and policyholders. At the American Adjuster Association (AAA), we believe that reforms should enhance—not limit—a homeowner’s ability to get the settlement they deserve.

Key Provisions of AB 597

AB 597 introduces several new requirements and restrictions for public adjusters in California:

• Contract Requirements: Public adjuster contracts would need to clearly describe the services provided and specify which coverages or claims the adjuster will handle. This is designed to ensure that consumers understand exactly what they are agreeing to. Bill analysis here.

• Fee Restrictions: The bill prohibits adjusters from charging fees based on any insurer payments made before the date the written contract was signed. For claims that stem from catastrophic disasters or declared states of emergency, the law would impose a hard cap of 15% on adjuster fees.

• Consumer Rescission Rights: Policyholders would have expanded rights to cancel contracts if the adjuster misrepresented their services or improperly solicited the contract. In areas affected by disasters, the rescission period would be extended to give homeowners more time to review their options.

Why This Matters for Policyholders

At first glance, these changes may appear consumer-friendly. Who wouldn’t want clearer contracts and safeguards against unethical practices? However, when you look closer, some provisions could leave policyholders at a disadvantage:

• Reduced Access to Representation: By limiting how adjusters can charge fees and capping compensation after disasters, fewer professionals may be willing to take on smaller or more complex claims. This could force policyholders to negotiate directly with their insurance companies—without an experienced advocate on their side.

• Timing of Fees: Many claims involve months of negotiations and documentation. If an adjuster cannot include prior insurer payments in their fee calculation, they may be discouraged from taking cases where insurers issue partial checks before the contract is signed.

• Disaster Victims at Risk: When disaster strikes, the demand for adjusters skyrockets. A fee cap of 15% may sound like a protection, but in reality, it could deter qualified adjusters from traveling to disaster zones where their expertise is most needed.

Industry Response

AB 597 has sparked significant debate among consumer advocates, adjuster associations, and even the press. A Los Angeles Times editorial noted that the bill, while intended to protect homeowners, may backfire by making it harder for consumers to secure fair settlements.

Public adjuster organizations argue that the restrictions tip the scales further in favor of insurers, who already control much of the claims process. Limiting compensation for adjusters means fewer professionals are available to help, leaving policyholders at the mercy of insurance company adjusters.

The Bigger Picture

California is not alone in rethinking how public adjusting is regulated. Other states have recently introduced legislation with similar themes:

• South Carolina Bill 196 proposes a strict 10% cap on public adjuster fees and prohibits any upfront compensation before settlement. See the bill here.

• Mississippi HB 1174—known as the “Public Adjuster Professional Standards Reform Act”—would tighten professional and ethical standards for adjusters. Read the text here.

• At the national level, the National Association of Insurance Commissioners (NAIC) is considering revisions to its Public Adjuster Licensing Model Act, which could influence how states set fee structures, contract requirements, and advertising standards.

These trends show a growing push by regulators to impose fee caps and stricter rules on public adjusters.

What the American Adjuster Association is Watching

At AAA, our mission is to promote fairness in the claims process. While we support clear disclosures and consumer protections, we are deeply concerned that bills like AB 597 could discourage experienced adjusters from taking on the very cases where they are needed most.

When disaster strikes, families are often in shock, displaced from their homes, and unsure of how to navigate the claims process. Limiting their ability to hire a qualified advocate does not level the playing field—it tilts it further toward the insurance industry.

We are closely monitoring AB 597 and other legislative proposals nationwide. If enacted, this bill could set a precedent that spreads far beyond California. Our priority is ensuring that policyholders—particularly disaster victims—maintain access to the professional support they need to recover.

Conclusion

California’s AB 597 may be well-intentioned, but its impact could be far-reaching and harmful to the very consumers it aims to protect. By capping fees and limiting compensation, the bill risks reducing the availability of skilled public adjusters and leaving homeowners more vulnerable during the claims process.

AAA will continue to advocate for balanced legislation that protects consumers without restricting their access to representation. We encourage members, policyholders, and industry partners to stay informed, contact legislators, and speak out in support of fair, effective consumer protections.