The Property Manager's Signature
A public adjuster signs a 15% contract with the on-site property manager of a 12-unit commercial building. The owner lives in Texas and has not signed. The manager's lease says he may 'manage day-to-day operations' but has no authority to settle insurance claims or hire professionals. The adjuster does not ask for a power of attorney. He also advances $2,000 to the manager 'for emergency expenses' and takes a promissory note. After the adjuster negotiates a $400,000 settlement, the owner refuses to pay the 15% fee and says the contract is void. The adjuster threatens to sue the manager personally and to hold up the settlement until paid. The insurer has already issued a check payable to the owner and mortgagee.
1. Is the public adjuster contract enforceable against the owner? What should the adjuster have verified?
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The contract is probably not enforceable against the owner unless the manager had actual written authority to bind the owner. A lease authorizing day-to-day management does not ordinarily include authority to hire a public adjuster or settle an insurance claim. The adjuster should have obtained the owner's signature, a written power of attorney, or a corporate resolution. Without that, the adjuster took a serious risk.
The adjuster may argue that the manager had apparent authority and that the owner accepted the benefit of the $400,000 settlement. That argument is uncertain and may support a quantum meruit claim for the reasonable value of services rather than the full 15% contract fee. The adjuster should not threaten the manager personally or hold the settlement hostage; those tactics can themselves violate prohibited-conduct rules and create liability. The proper steps are to document the work performed, provide the owner with a detailed fee statement, and negotiate a written resolution. If no agreement is reached, the adjuster should seek legal advice before suing.
2. Analyze the $2,000 advance and promissory note. What regulatory and ethical problems do they create?
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Advancing money to an insured is a serious conflict. It turns the adjuster into a creditor and can be used to pressure the insured into signing or staying with the adjuster. Louisiana's public adjuster rules restrict or prohibit advancing funds, loans, and similar inducements, and the promissory note compounds the problem because it creates a separate financial relationship outside the public adjuster contract. Even if the advance were intended for emergency expenses, the adjuster should not have made it without written authorization from the owner and full disclosure.
The adjuster should cancel or forgive any obligation tied to the advance, document that the $2,000 was not consideration for the contract, and avoid any collection effort against the manager personally. The fee dispute should be handled separately from the advance. The adjuster should also review recordkeeping requirements and retain the contract, correspondence, authority documents, and fee records. A regulator could view the advance and the threat to hold up the settlement as evidence of improper inducement and coercion.