The 10:15 p.m. Contract and the 15% Fee
Marcus is a Michigan-licensed public adjuster. At 10:15 p.m. on a Friday, he meets Elena at a hotel two hours after her kitchen fire. Elena is distraught and has not seen her policy. Marcus presents a one-page contract that sets his fee at 15% of the gross settlement, including emergency advances and any recovered depreciation. The contract has no cancellation or rescission statement, no description of the services, and no notice that Marcus is licensed by DIFS. Elena signs. The next morning, Marcus emails a restoration company owned by his friend and agrees to pay it a $750 lead fee for the referral. Elena later learns her neighbor signed with a different adjuster for 8%. She asks Marcus to cancel. Marcus says the contract is binding and he has already opened the claim.
1. Identify the contract and fee problems under Michigan public adjuster law and explain why each matters.
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Michigan requires a written public adjuster contract that describes the services, states the compensation, and gives the insured a clear right to rescind within 3 business days. A one-page contract signed at 10:15 p.m. at a hotel without a rescission notice is deficient; Elena can rescind, and Marcus cannot treat the contract as binding. The fee term is also unenforceable because Michigan limits public adjuster compensation to 10% of the insurance settlement. A 15% contingency, especially one that sweeps in emergency advances and recovered depreciation, exceeds that cap and creates an improper incentive. The missing DIFS/license disclosure and service description are separate deficiencies DIFS may cite. The $750 lead fee to a restoration company is an undisclosed conflict and an inducement; it is not a legitimate claim cost. Each defect affects enforceability, not just paperwork: a deficient contract can be rescinded, the excess fee is not collectible, and the lead fee can support discipline.
2. May Marcus keep any fee if Elena cancels, and what should he do with the $750 lead fee?
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If Elena rescinds within the 3-business-day window, Marcus must stop representing her and may not enforce the 15% clause. He may be entitled only to compensation for emergency services she actually authorized and that are documented, and even then the total cannot exceed the 10% cap. He cannot keep a contingency fee for merely opening the claim. The $750 lead fee should be recovered from the restoration company or refunded, and the conflict should be disclosed to Elena and, if relevant, the insurer. Marcus should provide a written cancellation acknowledgment, return the signed contract and claim documents, and not withhold the claim file. If he already received a direction to pay, he must account for those funds promptly. Retaining the lead fee or insisting on 15% would turn a contract defect into a prohibited practice and a potential fraud referral.
3. What should Elena do, and what DIFS remedies are realistically available?
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Elena should send written rescission immediately, keep proof of delivery, and ask Marcus for an accounting of any claim documents. She should notify her insurer in writing that Marcus is no longer authorized and confirm who may receive claim payments. A complaint to DIFS should attach the contract, the rescission, and any evidence of the referral fee. DIFS can investigate the deficient contract terms, the excessive fee, and the referral arrangement. Remedies can include license discipline, fines, and orders to cease prohibited practices. Elena may also pursue a civil refund of excessive compensation. The key judgment is to act inside the rescission period and to separate cancellation of the public adjuster from the insurer's claim decision. Cancelling Marcus does not cancel the fire claim.