Ethics, Fiduciary Duty, and Prohibited Acts
This domain tests the standard of conduct: the fiduciary duty a public adjuster owes the insured, the conflicts that must be avoided, and the specific practices Kansas treats as prohibited.
The fiduciary core
A public adjuster is the insured's agent, not a neutral referee. The duty is one of loyalty, good faith, candor, and reasonable diligence: communicate the insurer's offers, explain coverage limits and exclusions honestly even when the truth reduces the claim, keep the client's documents and funds separate from your own, and never let your fee interest override the client's interest. Because compensation is usually a percentage of recovery, every recommendation must be tested against the question "would I advise this if I were paid hourly?"
Prohibited and high-risk conduct
- Soliciting a loss victim at the scene of a loss, in a hospital, or during the immediate aftermath of a catastrophe, and door-to-door solicitation aimed at freshly damaged homes.
- Paying or receiving referral fees, kickbacks, or rebates to or from contractors, restoration firms, or anyone else in exchange for claim work.
- Steering repairs to a business you own or in which you have a financial interest without full written disclosure and the client's informed consent.
- Misrepresenting the license, credentials, or the likely settlement; promising a specific dollar result.
- Charging fees not stated in the written contract, or collecting a fee on money the insured recovered without your help.
- Altering photographs, estimates, invoices, or proof-of-loss figures.
Worked example
A public adjuster recommends her brother-in-law's water-mitigation company and accepts 5% of the invoice as a "marketing" payment. Disclosure does not cure it. The adjuster has a financial interest in inflating the very scope she is supposed to negotiate, and the payment is an unlawful inducement. The correct course is either no referral or a documented, disclosed list of independent vendors with no compensation flowing back.
Traps that cost marks
- Believing that written disclosure legalizes a kickback; it usually does not.
- Assuming advocacy means shading the loss; exaggeration is both an ethics violation and a fraud exposure.
- Missing the conflict when the adjuster's fee percentage rewards a slower, larger, more contested settlement.