Ethics and Professional Responsibilities
Domain 5: Ethics and Professional Responsibilities
This domain tests how a public adjuster applies fiduciary, honesty, and competence duties in real claim situations. Questions often ask what is ethically required when a fee, contractor, family member, or settlement pressure creates a conflict.
Fiduciary and loyalty duties
The public adjuster acts for the insured, not the insurer, and must place the insured's interests above the adjuster's fee or business relationships. Keep client funds separate, account for them accurately, and never commingle settlement money with operating funds. Disclose compensation in writing, explain that the fee reduces the insured's recovery, and do not take undisclosed compensation from contractors, restoration firms, or other vendors. Confidentiality continues after the representation ends.
Conflicts and referrals
Avoid relationships that create a personal stake in the claim. Do not refer the insured to a contractor in exchange for a kickback, markup, or percentage of the repair; that is an undisclosed conflict and may violate licensing and unfair-practice rules. Do not represent both the insured and a contractor or buyer with adverse interests. If a family member or business associate will perform repairs, disclose the relationship in writing and let the insured decide.
Competence and communication
Accept only claims within your knowledge, and bring in engineers, accountants, or contractors when the scope requires it. Explain the policy and the process in plain language; do not guarantee a settlement amount or timing. Return calls, document advice, and confirm settlement authority in writing. Do not sign the insured's name, notarize without authority, or give legal advice.
Fraud and integrity
Do not inflate a claim, create receipts, alter photographs, or conceal evidence. If the insured asks you to submit false information, refuse, document the request, and consider whether to withdraw. Report suspected insurance fraud to the proper authority. A public adjuster who participates in a false claim faces license discipline and criminal exposure.
Worked example
A restoration contractor offers an adjuster 10% of every job the adjuster refers. The adjuster has three water-damage clients who need emergency drying. Accepting the payment would create undisclosed compensation and a conflict: the adjuster might refer for the fee rather than for quality. The ethical response is to decline the arrangement, give the insured a list of independent contractors, disclose any relationship the adjuster already has, and document the choice. The insured retains the right to select the contractor.
Traps
- Treating a referral fee from a contractor as a normal business courtesy.
- Promising a specific dollar settlement to win the contract.
- Signing or notarizing documents for an absent insured.
- Continuing to act after a conflict becomes clear.
- Sharing claim information with vendors without authorization.