Settlement Below the Written Floor and Full Release
Homeowner Luis signs a limited authorization giving public adjuster Gwen authority to ‘negotiate and settle the dwelling claim for no less than $85,000.’ The policy has a $120,000 dwelling limit. The insurer first offers $68,000, then raises to $79,500. Gwen emails Luis: ‘I recommend we hold out for $85,000.’ Luis, traveling with limited email, replies: ‘Use your judgment; I need the repairs done.’ Gwen accepts $79,500, signs a release ‘on behalf of Luis,’ and deducts her 10% fee ($7,950). The release contains a full waiver of all claims under the policy. Luis later learns the insurer also paid $6,000 for code upgrade, which Gwen did not include in her fee calculation, and he had wanted at least $85,000. Gwen says the email gave her discretion. The insurer has not issued the check.
1. Did Luis’s email authorize Gwen to accept $79,500 and sign the release? Analyze the scope of authority and the duty to communicate.
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No. The written authorization set a floor of $85,000 for settlement. Luis’s reply, 'Use your judgment; I need the repairs done,' is ambiguous and does not expressly authorize a below-floor settlement or a full release. A public adjuster’s authority is limited by the written contract; there is no general implied power to bind the insured to a settlement. Gwen also had a duty to communicate the $79,500 offer and the release terms before acceptance. The release is especially problematic because it waives all claims, a material term Luis never approved. The insurer may argue apparent authority, but Gwen’s own email recommending that they hold out for $85,000 undercuts that argument. The release is therefore vulnerable to rescission, and Gwen should not treat the email as blanket discretion. At minimum, she needed a clear written confirmation: 'I authorize you to accept $79,500 and sign the release.'
2. How should Gwen’s fee be calculated, and what should she do about the $6,000 code upgrade and the unauthorized release?
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Gwen must reconcile the fee to the actual settlement and the written fee term. If the contract says the fee is a percentage of the gross settlement, the $6,000 code-upgrade payment is part of the claim proceeds and must be included; she cannot quietly leave it out and then later claim a different basis. If the $79,500 acceptance was unauthorized, she should not charge a contingent fee on it until the insured ratifies or the release is corrected. She should give Luis a written accounting of all payments, including the $6,000, recalculate the fee, and refund any overcharge. She should also ask the insurer to set aside the release or obtain Luis’s written ratification after full disclosure. She must not condition further help on keeping the fee. If Luis refuses to ratify, Gwen should cooperate in restoring the claim and may bill only for earned, disclosed services, not for a settlement she lacked authority to make.