Loss Adjustment Expense

3. Any expenses or fees, not to exceed 10 percent of the adjusted loss or claim, that are incurred by the insured as a result of the adjustment of the loss or claim. Coverage provided here-in is not subject to any coinsurance or average clause which may be attached to this policy, but is subject to the limit of liability as set forth in [area where this information could be found in the policy would be stated].
   

2. Special Exclusions—Excluded or Uncovered Expenses:
   
   1. Any and all expenses for taking inventory or preparation of any appraisal prior to any loss.
   
   
   2. Attorney or legal fees, including court costs.
   
   

Comment:
This endorsement provides broad coverage for loss adjustment expense, but limits the amount of insurance directly to 10 percent of the loss, however, not as an additional amount of insurance beyond the limit of liability. When a loss exceeds 91 percent of the policy limits, recovery of loss preparation costs, even if not exceeding 10 percent of the loss, could be reduced. If the loss equals or exceeds the limit of liability, no coverage is available for loss preparation costs. Note that any expenses relative to inventory or appraisals prior to the loss are not covered, nor are legal and court costs. Policies using this form may include a deductible that limits coverage.
   
Below is one of the more comprehensive endorsements reviewed from an excess policy developed by a surplus lines broker and it provided specific coverage for public adjusters fees.

4. Pays the named insured for any reasonable expenses incurred after a loss for the preparation of inventory of damaged and undamaged goods. (The insurance policy requires this of the insured, but expenses are not always covered.)

Reimburses the named insured for expenses incurred as a result of "going" to appraisal. (Under normal practices, the insured is expected to pay his own appraiser and 50 percent of the expenses of the umpire. These expenses are usually not recoverable under the insurance policy.)
   
Pays up to 10 percent of the adjusted loss for the services of a public adjuster. (Normally the insured should pay the public adjuster, but this coverage recognizes that the public adjuster performs many of the services the policy requires of the insured.)

Comment:
This form is very unusual with respect to its explanation of the coverage. It points out the inherent advantage of the coverage, which is extended specifically to cover public adjuster fees up to 10 percent of the amount of the loss, and to cover costs of any appraisal process which are not covered under conventional property insurance.¹       

In contrast to the depth and clarity of the previous examples, the following "Loss Adjustment Expense" endorsement included in a policy issued through a national insurance broker may not serve business clients who require the services of a public adjuster very well.