The Unlicensed 'Strategist' and the Vendor Referral Fee
A Maine-licensed public adjuster, P, has a two-person office. He pays "senior claim strategist" S, who is not licensed in Maine, $30 per hour. S meets with a homeowner after a November ice-dam loss, reviews the policy, tells the homeowner she is "covered for everything," and negotiates the depreciation figure with the insurer's adjuster by phone. S also signs the proof of loss as "authorized representative." Separately, a water-mitigation company agrees to pay P $750 for each homeowner he refers. P's contract states a 12% fee and adds that "consultant and processing fees may be added at the adjuster's discretion." The homeowner later calls P to complain that S could not explain the policy's $5,000 water-damage sublimit. P says S is "just clerical."
1. What licensing violations are presented by S's activities?
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S is doing far more than clerical work. Reviewing coverage, advising the insured that she is 'covered for everything,' negotiating depreciation with the insurer, and signing a proof of loss as authorized representative are public adjusting activities. Maine requires a license to act as a public adjuster for compensation. A nonlicensed assistant may perform clerical tasks such as scheduling, copying documents, or transmitting information, but may not negotiate, interpret coverage, or sign claim documents on the insured's behalf. P cannot avoid responsibility by labeling S a strategist or saying she is clerical. The adjuster is responsible for supervising unlicensed staff and for the representations they make. The statement that the homeowner was 'covered for everything' is also a misrepresentation of the $5,000 sublimit and exposes P to an errors-and-omissions claim as well as licensing discipline.
2. What is wrong with the $750 referral arrangement and the contract's fee language?
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The $750-per-referral payment from the mitigation company is undisclosed compensation tied to a vendor, creating a direct conflict of interest. The insured is entitled to know whether the public adjuster is being paid by the contractor he recommends. Such an arrangement can also violate Maine insurance law and ethics rules against rebating, sharing commissions with unlicensed persons, or receiving undisclosed inducements. The contract's language allowing 'consultant and processing fees' at the adjuster's discretion is similarly defective because it does not state a definite fee or explain who receives it. A public adjuster's compensation must be clear, agreed to in writing, and not contingent on steering work to a particular vendor. P should terminate the referral arrangement, disclose any existing payments, and revise the contract to state one transparent fee.
3. What corrective action should P take, and what should happen to the homeowner's file?
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P should immediately remove S from all claim negotiations, coverage discussions, and document signing; reassign the file to a licensed adjuster; and review every file S touched. He should disclose to the homeowner, in writing, that S was unlicensed, correct the misstatement about 'covered for everything,' and explain the $5,000 sublimit in plain language. He should refund or credit any undisclosed consultant or referral fee and provide a corrected contract with a definite fee. If the referral payments already occurred, P should stop them and consider self-reporting to the Maine Bureau of Insurance. The insurer should receive a corrected proof of loss if S signed one. P should also document the corrective steps. Continuing to bill the 12% fee while the file was handled by an unlicensed negotiator would compound the violation.