The Roofer Referral and the Unlicensed Claim Helper
Lena is a Colorado-licensed public adjuster. She has a written contract with a homeowner on a $120,000 fire claim. Lena's company pays a roofing contractor, Top Ridge, $3,000 for each homeowner who signs a public adjuster contract with Lena; the payments are labeled 'marketing fees.' Lena's assistant, Dev, is not licensed. Dev meets insureds, gives coverage opinions, tells them what to say in recorded statements, and negotiates with the insurer's adjuster by phone and email. Lena reviews and signs the settlement letters. Dev is paid a salary, not a percentage. During a claim, Dev tells the insured to sign a release for $70,000 and says 'you can always reopen it later if you find more damage.' The policy has a $5,000 mold exclusion and a one-year suit limitation. The insured asks Lena whether Dev's advice is correct.
1. Identify the licensing and fee-sharing violations in Lena's practice.
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Dev is performing public adjusting without a license. A license is required to negotiate, give coverage opinions, advise on recorded statements, or settle a claim for compensation. Clerical support is different; Dev crossed the line. Lena also pays Top Ridge $3,000 per signed contract. A public adjuster may not pay an unlicensed contractor for referrals contingent on the insured signing a public adjuster contract; that is fee-splitting and solicitation, and it creates a conflict because the roofer has an interest in the repair scope. The $3,000 payments should stop, and any existing arrangement should be disclosed in writing to the insured and reviewed by counsel. Lena remains responsible for Dev's acts because she supervises the claim and signs the settlement letters.
2. Is Dev's release advice ethical and accurate? Explain the consequences.
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The release advice is wrong and unethical. A release of 'all claims' is generally final; the insured cannot 'always reopen it later' merely by finding more damage. The one-year suit limitation in the policy makes delay dangerous. Dev's statement misrepresents the legal effect of the document and could cause the insured to give up valuable rights. Lena must correct the statement immediately, in writing, and advise the insured not to sign the release until it is limited to known items or the insured has independent legal advice. A public adjuster may explain the document but may not give legal advice or misstate finality.
3. What should Lena do to bring the practice into compliance?
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Lena should immediately restrict Dev to clerical tasks, assign a licensed adjuster to all coverage and negotiation contacts, stop the Top Ridge referral payments, and disclose the prior arrangement to affected insureds. She should audit files Dev touched, correct any misstatements, and document corrective action. She should train staff on licensing boundaries and release language. Depending on Colorado rules, she may need to notify the Division and may face discipline for aiding unlicensed activity and fee-splitting. She should also review whether the $5,000 mold exclusion was explained and whether the release reserves supplemental claims.