Discovering a Possible Material Misrepresentation Mid-Claim
A public adjuster is retained on a fire claim for a three-family rental property in Bridgeport. The insured stated in the claim interview that the property had no prior losses and no code violations. While gathering records, the adjuster finds a prior water-damage claim paid two years earlier and a city notice about faulty wiring in the rear unit. The insured also increased the dwelling coverage by 40% three weeks before the fire. A tenant tells the adjuster that the owner knew about the wiring problem and had talked about “letting the place burn” after a rent dispute. The policy has a 12% public adjuster fee and a $25,000 dwelling deductible. The insurer has not yet requested an examination under oath. The insured tells the adjuster not to mention the prior claim because it is “none of the insurer’s business.”
1. What are the public adjuster’s obligations after discovering the prior claim and coverage increase?
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The public adjuster represents the insured, but that does not permit the adjuster to present a claim the adjuster knows or suspects is false. The prior claim and the coverage increase are potentially material because they bear on the insured’s statements and on the insurer’s risk. The adjuster should advise the insured in writing to correct the claim interview and disclose the prior claim. The adjuster should not alter, hide, or destroy the prior claim information. If the insured refuses to correct a material misstatement, the adjuster should withdraw from representation and should not submit a claim containing the false statement. The adjuster should be careful not to accuse the insured of arson without evidence, but the tenant’s statement and the wiring notice must not be concealed. The adjuster should document the advice and the client’s response.
2. Can the adjuster continue to handle the undisputed part of the claim, such as the undisputed contents or additional living expenses?
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The adjuster may be able to continue on a clearly severable, undisputed portion if the adjuster can do so without presenting or relying on a false statement and without misleading the insurer. The adjuster should first disclose the conflict to the insured and obtain a written understanding about the scope. The adjuster should not use the undisputed portion as leverage to hide the disputed issues. If the suspected misrepresentation affects the whole claim, or if the insured insists on a false presentation, withdrawal is safer. Any fee should be tied to work actually and properly performed on the covered portion, not to a recovery obtained through concealment.
3. How should the adjuster handle the tenant’s statement and the wiring notice?
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The adjuster should treat both as evidence to be investigated, not as facts to be ignored or accepted. The adjuster should interview the tenant, preserve the tenant’s contact information, obtain the city notice, and request the fire marshal’s report. The adjuster should not coach the tenant or the insured to change statements. If the evidence supports a coverage defense such as increased hazard or misrepresentation, the adjuster should advise the insured of the risk and let the insurer investigate. The adjuster must not personally destroy or withhold evidence. If the adjuster withdraws, the adjuster should return the file to the insured or the insured’s new representative and should preserve the adjuster’s own records.