Unlicensed Trainee Meets Insureds After Hail Storm
Northline Claims Services is a Michigan-licensed independent adjusting firm handling 210 hail claims after a June storm. Because of volume, the firm assigns 38 files to Jordan, a newly hired trainee who holds no Michigan adjuster license and has completed only two weeks of internal training. Jordan is told to inspect roofs, photograph damage, write Xactimate estimates, and “settle anything under $5,000” with homeowners. On the first 12 files, Jordan meets insureds alone, explains deductibles, negotiates minor discrepancies, and obtains signed releases. The firm’s compliance officer learns of this on July 15. Priya, a licensed nonresident adjuster working for the firm, is available but has not reviewed any of Jordan’s files. The insurer client has already received three of the signed releases and has paid two claims. The firm asks what must stop immediately, whether the 12 files can be salvaged, and what controls are needed before assigning the remaining 26 files.
1. Does Jordan’s work require a Michigan adjuster license, and which specific activities are most problematic?
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Michigan requires a license for a person who, for compensation, investigates or settles claims on behalf of an insurer. Jordan is not merely gathering clerical data: he inspects, discusses deductibles, negotiates, and obtains releases. Those are adjusting activities, and meeting insureds alone increases the risk that he will give coverage opinions. Internal training does not create a license. Data collection and photography may be performed by an unlicensed assistant only under close supervision and without negotiation or settlement authority, and the firm should confirm that position with counsel before continuing.
Step-by-step:
- Separate clerical tasks from adjusting. Inspections and photos can support a licensed adjuster; settlement discussions cannot be delegated to an unlicensed person.
- Stop Jordan's settlement authority immediately.
- Reassign the 12 open files to Priya or another Michigan-licensed adjuster.
- Document the stop-work instruction and notify the insurer client.
2. What should Priya do with the 12 files, including the three releases already sent and the two claims already paid?
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Priya should treat the 12 files as tainted until she independently reviews them. A later review does not erase the unlicensed negotiation, but it can prevent the insurer from relying on an unauthorized settlement. For each file she should:
- Confirm the loss, coverage, deductible, and scope.
- Re-inspect or obtain photos where the estimate depends on Jordan's observations.
- Compare the release to the actual damage and authority.
- Determine whether the insured was misled about coverage or settlement amount.
For the three releases sent and two claims paid, she should notify the insurer in writing, review for overpayment or coverage error, and correct any error. A release obtained through unlicensed negotiation may be voidable, so the insurer should not assume it is final. If the insurer concludes a licensed adjuster would have reached the same result, document that independent judgment. If not, renegotiate or rescind. Consider whether Michigan requires a report to DIFS; do not conceal the issue.
3. What controls should the firm implement before assigning the remaining 26 files?
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Before the remaining 26 files, the firm should:
- Verify every adjuster's Michigan license and appointment status.
- Assign a licensed adjuster of record to every claim.
- Limit Jordan to supervised data collection, with no insured contact alone and no settlement discussion.
- Require pre-payment review by a licensed adjuster for any file Jordan touches.
- Set written authority limits and a file audit sample.
- Train staff on licensing and unfair claim practices.
- Document supervision and report the prior issue to the insurer client.
A volume surge does not suspend licensing. If the firm needs more capacity, it should use licensed adjusters or properly supervised support staff, not unlicensed negotiators.