Fire Claim Contract and Late Cancellation
On a Friday evening after a kitchen fire, homeowner Priya signs a two-page contract with public adjuster Marcus. The contract states a 12% fee on the gross settlement, a $500 “inspection and document fee” that is “nonrefundable,” and that Priya’s authorization is “irrevocable once signed.” Marcus does not give Priya a copy that night; he emails a PDF the following Tuesday. On Wednesday, Priya cancels in writing because her cousin, an insurance agent, offers to help for free. Marcus has already spent about two hours photographing and inventorying. He tells Priya the cancellation is too late, keeps the $500, and says he will file a lien on any settlement if she does not pay 12% of whatever the insurer pays. The policy has a $40,000 dwelling limit, and no settlement has been offered.
1. Was Priya’s Wednesday cancellation timely? Identify the contract defects and explain the effect of each.
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Priya’s cancellation was likely timely. Minnesota requires public adjuster contracts to be written, to disclose compensation, and to give the insured a right to rescind within three business days. A clause making the authorization 'irrevocable' is contrary to that right and cannot be enforced. The contract also imposes a 'nonrefundable' $500 inspection fee; a fee is enforceable only if it is disclosed and actually earned, not a penalty for canceling. Because Marcus did not give Priya a copy at signing and emailed it on Tuesday, the rescission period may run from Tuesday, making Wednesday’s written cancellation within the period. Even if counted from Friday, Wednesday may still fall within three business days depending on the weekend and holiday rules, so Marcus should not treat the cancellation as late without a documented calculation. The lien threat is also improper because it chills the statutory cancellation right.
2. Can Marcus keep the $500 fee or collect 12% after cancellation? Explain using the facts.
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No, not as stated. Once a valid cancellation occurs, Marcus cannot collect the 12% contingent fee on a settlement he does not procure. He may seek only an earned, reasonable fee for work actually performed before cancellation if the contract and statute permit it, and he bears the burden of proving the amount. Two hours of photographs and inventory is unlikely to support a $500 nonrefundable charge, especially when the clause was coupled with an invalid irrevocable provision. The $500 should be refunded or reduced to a documented earned amount; the lien should be released. Marcus should send a written cancellation acknowledgment, return all original documents, and not communicate with the insurer as Priya’s adjuster after cancellation. If he believes he is owed a fee, he should bill separately with time records rather than withhold the refund or threaten a lien.