Ethics, Unfair Practices, and Fraud Prevention
The fiduciary core
A public adjuster is the insured's fiduciary. That sentence drives most ethics questions. It means loyalty to the insured's interest, full disclosure of compensation and any conflict, competence, confidentiality, and careful handling of money.
Money handling: claim proceeds and client funds belong in a trust or client account, never commingled with operating funds, and fees should be withdrawn only as the contract permits. Undisclosed fee-splitting with contractors, restoration firms, or unlicensed referral partners is both a licensing violation and a conflict of interest. Performing repairs on a loss you adjusted, or steering the insured to a company you own, is a textbook conflict.
Fraud prevention: inflating quantities, adding undamaged items, backdating documents, or coaching an insured to misstate facts is insurance fraud under California law (see Penal Code §550) and grounds for revocation, fines, and restitution. You must avoid and report suspected fraud rather than leaving it for the carrier to catch.
Unfair practices: Insurance Code §790.03(h) lists prohibited claims practices. The classic trap is frequency - a single act generally must be committed with such frequency as to indicate a general business practice, though many specific acts are separately regulated under 10 CCR §2695.
Worked example. A roofer offers a $5,000 marketing fee for each roof claim you refer. Accepting is an undisclosed conflict and a prohibited inducement, and it taints every roof estimate in your file. Decline, disclose, document.
Rule of thumb: if you would not put the arrangement in writing in the client's file, do not do it.