Claims Handling Practices, Consumer Protection, and Ethical Standards
Ethical duties and consumer protection
A public adjuster owes the insured loyalty, honesty, and full disclosure. The PA must not represent the insurer, settle without written authority, sign the insured's name, alter documents, or misstate coverage or damage. Colorado consumer protection law and licensing discipline reach deceptive solicitation, false urgency, and high-pressure tactics after a loss. The insured must be told that the PA is paid from the settlement, that the fee does not increase the insurer's liability, and that the insured may cancel within the statutory period.
Claims handling practice
- Acknowledge the engagement, document the loss, prepare a line-item estimate, and communicate material developments.
- Provide the insured copies of correspondence and estimates; explain the difference between ACV, recoverable depreciation, deductible, and policy limits.
- Do not steer the insured to a contractor in exchange for a kickback, rebate, or referral fee; disclose any ownership or financial interest.
- Do not split fees with unlicensed persons or pay a contractor to 'find' claims.
- Keep claim funds separate and do not endorse or control insurer payments without written authorization.
Worked example
A kitchen fire claim is estimated by the PA at $60,000 and by the insurer at $35,000. The PA should submit a line-item comparison, request reinspection, and explain the gaps rather than tell the insured to inflate the loss. If the claim settles at $50,000 and the fee is 10%, the PA discloses a $5,000 fee and the insured nets $45,000 before repair costs and any mortgage obligations. The PA may not accept a $2,000 payment from a restoration company for directing the work, and may not tell the insured to sign a direction to pay without explaining it.
Traps
Do not give legal advice or act as the insured's attorney. Do not settle without authorization. Do not promise a specific settlement amount or 'guaranteed' approval. Do not let a contractor control the claim or the fee. Do not charge a fee on money never recovered or conceal a conflict of interest.