The Unlicensed Field Rep and the Referral Fee Ledger
You are the principal of a licensed public adjuster firm. You hire Marcus for 'field inspections and initial claim reviews.' Marcus is not licensed. He meets two new clients alone, tells each what the policy 'will pay,' and signs one of them to a contract on your firm's form. Separately, a water-mitigation company refers about six claims a month. Your office manager has been paying the mitigation technician $400 per signed contract out of claim proceeds, and the technician also attends your scope walks. One insured's claim arises from a Governor-declared wildfire emergency; his contract, signed four months after the declaration, states an 18% fee.
1. Identify each licensing compliance failure in Marcus's work and the corrective action.
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Failures:
- A public adjuster license is required to solicit, negotiate, or advise on a claim on behalf of an insured. Marcus doing solo client meetings and 'initial claim reviews' is unlicensed adjusting, full stop.
- Telling clients what the policy 'will pay' is both unlicensed activity and a misrepresentation - you cannot promise a coverage outcome before the carrier has inspected.
- A contract executed by an unlicensed person on the firm's form is a contract with a licensing defect, and it puts the fee at risk.
Corrective action:
- Immediately restrict Marcus to clerical and data-collection tasks under direct supervision of a licensed adjuster.
- Either license him - pre-licensing course, exam, application, appointment, background check - or end the field role.
- Personally review and re-execute the defective contract with the licensed adjuster; cure the defect before any fee is earned.
- Self-report and document. A file that shows you found and fixed it is a very different file from one where the regulator found it.
2. Analyze the $400 per-contract payments to the mitigation technician.
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Payments out of claim proceeds, to an unlicensed person, for generating claim volume are not defensible.
- Paying compensation to an unlicensed person for activity that requires a license is prohibited, and per-head referral fees for signed public adjusting contracts fall squarely into that category.
- Taking the money from claim proceeds compounds it: those funds belong to the insured and are earmarked for the settlement, and the insured never authorized a $400 deduction.
- The technician attending scope walks while being paid per signed contract is a financial conflict that will contaminate your estimates. His mitigation scope and your adjusting scope are supposed to be independent checks on each other.
- Fix: stop the payments immediately; unwind what has been paid where possible and credit affected insureds; institute a written policy that no referral compensation flows to unlicensed persons; and if the mitigation company is a vendor, put its pricing through a normal, disclosed vendor relationship with no per-claim incentive.
3. Is the 18% fee on the wildfire claim enforceable?
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No. For claims arising from a declared state of emergency, the statutory cap drops to 10% during the one-year period following the declaration. The contract was signed four months after the declaration - squarely inside that window - and the loss arises from the declared event.
- 10% of whatever the settlement pays is the ceiling, not 18%.
- The excess is unenforceable, and collecting it is a separate unfair trade practice exposure on top of the contract problem.
- The remedy is to amend the contract in writing, disclose the cap to the insured, and refund any excess already collected.
- Confirm the declaration date and scope before acting, and re-check the current statutory text - caps and emergency windows have been amended repeatedly, and the amendment in force at the time of the loss governs.