The Appraisal Award, the Deductible, and the Adjuster's File Lien
A fire destroys a 1920s home in Newark. The policy has $600,000 dwelling, $300,000 contents, $150,000 ALE, and a $5,000 deductible. The public adjuster's contract says '12% of the gross amount of any award, including policy deductible and any code-upgrade money, whether or not collected.' After appraisal, the panel awards $520,000 dwelling, $180,000 contents, and $60,000 ALE; the insurer pays $755,000 after deductible. The insured disputes the fee and asks for a copy of the file. The adjuster refuses, claiming an 'adjuster's lien' on the file and demanding 12% of $760,000, the award before deductible. The insured also discovers the adjuster charged a separate $3,500 'document preparation' fee not in the contract. The insured is 78 and has moved into a rental.
1. Calculate the correct fee under the likely statutory cap and explain the errors in the adjuster's calculation.
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Assuming Delaware caps public adjuster compensation at 10% of the claim proceeds, the fee should be based on the $755,000 actually paid, not the $760,000 award before the deductible. Ten percent of $755,000 is $75,500. The adjuster's demand of 12% of $760,000 is $91,200, an overcharge of $15,700 even before considering the separate $3,500 fee. The deductible is not claim proceeds to the insured and should not be used to inflate the fee. Code-upgrade money should be included only if it was actually paid or recovered and the contract lawfully covers it. The 12% rate exceeds the cap and is unenforceable to the extent of the excess. The $3,500 'document preparation' charge is an undisclosed fee and likely violates the written-contract and disclosure requirements; it should be refunded unless it was separately authorized in writing and lawful.
2. Can the adjuster withhold the claim file or assert a lien over it? Explain the consumer-protection concerns.
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The adjuster should not withhold the insured's claim file as leverage for a disputed fee. The file contains the insured's documents, correspondence, photographs, and claim records, and the insured is entitled to copies. A public adjuster's lien, if any, is limited and should not be used to strand an elderly insured who needs the records to pursue the claim or challenge the fee. Withholding the file can interfere with the insured's ability to meet policy deadlines, respond to the insurer, or seek legal advice. It also raises unfair or deceptive practice concerns, especially where the fee is disputed and the contract may be unenforceable. The adjuster should provide copies promptly, keep originals only as permitted, and resolve the fee dispute separately. The insured should put the demand in writing and complain to the Delaware Department of Insurance if the file is not released.
3. What steps should the insured take to resolve the fee dispute and protect the claim?
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The insured should send a written demand for a full accounting, copies of the contract and all file materials, and a refund of the overcharge and the undisclosed $3,500 fee. The demand should state that the 12% rate exceeds the statutory cap and that the deductible is not a proper fee base. The insured should preserve the appraisal award, the insurer's payment records, and the rental receipts. A complaint to the Delaware Department of Insurance should ask for review of the contract, the fee calculation, and the file-withholding. The insured should also consult a Delaware attorney about rescission, restitution, and any lien claim. Because the insured is 78 and displaced, the adjuster's conduct may draw heightened scrutiny; the insured should not sign a release or a new fee agreement without independent advice.