Public Adjusting Practices, Contracts, and Compensation
Domain 3 - Public Adjusting Practices, Contracts, and Compensation tests the business side of representing the insured: licensing, written contracts, disclosure, fee calculation, fiduciary duties, solicitation limits, and conflicts. The exam expects you to know that a public adjuster works only for the insured and that the contract is a regulated consumer document, not a private handshake.
The contract is the compliance document
Use a written contract signed by the insured before work begins. It should identify the insured, the property, the loss, the services, the fee method, and the insured's right to rescind within the statutory period-Hawaii uses a short rescission window, commonly three business days. The contract must not exceed the authority the insured actually grants, and it should state that the public adjuster cannot bind the insurer or make coverage decisions. Advertising and contracts should carry the license identification required by Hawaii law. Keep copies and claim records.
Compensation and duties
Compensation is usually a percentage of the net recovery the adjuster helps obtain. The base-gross settlement, net of deductible, or net of prior payments-must be clear. Do not charge a fee on money recovered without your efforts, on undisputed emergency mitigation, or on amounts the insurer pays directly for a covered expense. Do not split fees with unlicensed persons, act as a contractor on the same loss, or take a power of attorney broader than needed. The adjuster owes confidentiality, loyalty, and accurate reporting; settlement authority comes from the insured in writing.
Worked example
A contract says 12% of the net recovery after deductible. The insurer pays $90,000; the deductible is $5,000; net recovery is $85,000. The fee is $10,200, leaving $74,800 before mortgage or lien payments. If the contract instead said 12% of the gross settlement, the fee would be $10,800. If the adjuster had obtained only $20,000 of the $90,000 through his efforts, a well-drafted contract should not charge the full percentage on the entire settlement. Ambiguity in a contract the adjuster drafted is usually resolved against the adjuster.
Traps
Common failures: charging a fee without a signed contract; omitting the rescission notice; soliciting at a disaster scene in violation of Hawaii restrictions; acting as both adjuster and contractor; settling without written authorization; and using unlicensed assistants to negotiate. Another trap is assuming a “standard” percentage is always lawful-the disclosure and the work performed matter.