Door-to-Door Contract After a Tornado
Two days after an EF-3 tornado in western Kentucky, a public adjuster knocks on the door of a 78-year-old homeowner whose roof is covered by a tarp. The adjuster displays a tablet showing a license number, but the number belongs to a Tennessee nonresident license that lapsed 40 days ago; he says he is 'fully licensed in Kentucky' and can 'approve' the claim faster than the insurer. At 9:10 p.m., the homeowner signs an electronic contract with a 15% contingency fee. The contract states the fee is earned on signature, waives the right to cancel, and authorizes the adjuster to endorse claim checks. The homeowner's daughter calls the next morning to cancel and asks for copies of everything. The adjuster has performed no inspection, no estimate, and no contact with the insurer.
1. Identify the licensing and consumer-protection problems in the solicitation and contract, and explain which must be corrected before the adjuster does any work.
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Licensing is a current-status requirement, not a credential that survives a lapse. The adjuster cannot solicit, negotiate, or hold himself out as a Kentucky public adjuster while the nonresident license is lapsed; he must stop work and either reinstate or associate with a properly licensed entity. Saying he can 'approve' the claim misstates his role: a public adjuster advocates for the insured and does not bind the insurer. The contract also fails consumer-protection basics: it makes the fee earned on signature before any service, waives cancellation, and takes check-endorsement authority. Those terms must be corrected or removed before performance. The 9:10 p.m. signing and the elderly homeowner's apparent stress are not automatically disqualifying, but they increase the need to show the contract was explained, a copy was provided, and no false urgency was used. Any advertising using the lapsed number must be pulled.
2. How should the adjuster respond to the daughter's cancellation request and the fee demand, and why?
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The daughter's cancellation should be treated as effective. Because no inspection, estimate, or insurer contact occurred, there is no earned fee and no basis to charge 15% or any fee. The adjuster should acknowledge cancellation in writing, return the signed contract and any authorization, stop work, and keep a record of the cancellation date and the absence of services. If the contract contains an illegal waiver of cancellation, the adjuster cannot rely on it. Attempting to hold the homeowner to an 'earned on signature' fee would look like an unfair claim settlement practice and could trigger a Department of Insurance complaint. The adjuster may explain what work had been done, but should not pressure the family to reinstate. If any expense was genuinely incurred at the homeowner's prior written direction, it must be separately documented and reasonable; none appears here.
3. May the adjuster keep the check-endorsement authorization and use the lapsed license number in advertising? Explain.
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No. The check-endorsement authorization should not be kept or used. Claim checks are payable to the insured and often to a mortgagee; a public adjuster's role is to prepare and negotiate the claim, not to control settlement funds. Taking endorsement authority creates a conflict and invites fraud or commingling concerns. The lapsed license number also cannot remain in advertising, door hangers, or a website; continuing to display it is a misrepresentation of licensing status. The adjuster should correct the advertisements, retain copies of the corrected materials, and document the date the license lapsed and the date it was restored. If the adjuster wants to continue, the clean path is: restore the license, use a compliant contract with clear fee and cancellation terms, and never represent that he can approve coverage.