Owner, Adjuster, and Rebuilder: The Affiliated Restoration Company
Marcus is a licensed Illinois public adjuster who also owns 49% of a restoration and reconstruction company. A fire at a 12-unit apartment building produces a likely loss of about $480,000. The insured owner wants Marcus to adjust the claim and wants Marcus's company to perform the rebuild, paid out of the insurance proceeds. Marcus proposes an 10% contingency fee on the claim plus a $395,000 fixed-price rebuild contract. The carrier later disputes the valuation, invokes appraisal, and the insured asks Marcus to serve as the insured's appraiser because "you know the file best."
1. May Marcus adjust the claim and also have his affiliated company rebuild? What must be done to make the arrangement defensible?
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It is not automatically prohibited, but it is a textbook conflict of interest and has to be managed rather than hidden.
Required steps: (1) disclose the ownership interest in writing before the public adjuster contract is signed, so consent is informed; (2) keep two separate written contracts - one for adjusting, one for construction - with the construction scope itemized and priced at market rates; (3) do not tie the repair contract to the adjusting engagement, and tell the insured in writing that it may solicit competitive bids; (4) compute the adjusting fee only on the insurance proceeds, never on the construction contract price or on change orders; (5) do not use the rebuild scope to enlarge the claim, and do not shift overhead and profit generated by the rebuild into the insurance scope to grow the fee base.
The failure mode examiners look for is double-dipping plus inflated scope - the adjuster's contingent fee gives a direct financial reason to inflate the very scope his company will build.
2. Can Marcus serve as the insured's appraiser in the same claim?
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No. Appraisal is a dispute-resolution mechanism that depends on competent, disinterested appraisers; the party-appointed appraiser may advocate for a position but must still exercise independent valuation judgment. Marcus has been the insured's advocate throughout, holds a contingent fee in the outcome, and has a construction contract that grows with the award. An award produced under those conditions invites the carrier to challenge it and a court to set it aside.
Correct handling: decline the appointment in writing, keep building the insured's documented valuation position with estimates and engineering support, and help the insured select a qualified independent appraiser (for example, an experienced adjuster or contractor with no interest in the property or the proceeds). Explain the difference between the adjuster's role and the appraiser's role so the insured understands why the request is being refused.
3. The insured asks Marcus to add $22,000 of "supervision" and "general conditions" to the claim scope because "the carrier always negotiates it down anyway." How should Marcus respond?
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Refuse. Scope items must reflect work that is actually necessary to repair the damage. Padding a scope so it can be "negotiated down" is a misrepresentation of the loss, and it is especially dangerous here because the same person profits from the padded line item - it converts a negotiating tactic into apparent self-dealing and potential insurance fraud exposure.
Instead: document the legitimate general conditions with time-and-material support, overhead and profit calculations where the policy and file support them, and the actual supervision hours required. If the carrier disputes those items, that is a valuation dispute resolvable through documentation, reinspection, or appraisal - not through invented figures.
If a client insists on a false submission, the adjuster must not sign or transmit it; withdraw if necessary and document the reason with the insurer and, where appropriate, the Department.