The Contractor's Revised Invoice and the Client's Clean-Up Request
A public adjuster, Renee, represents a restaurant owner after a kitchen fire. The carrier's estimate is $210,000. The contractor submits a revised invoice of $298,000, including $41,000 for project management and $18,000 for equipment that Renee's site photos show was never delivered. Renee also has photos from her first inspection showing old water staining on the ceiling in the back office, an area outside the fire origin. The owner says the staining predates the fire and asks Renee to leave those photos out because the insurer will not know. The owner also asks Renee to pay the contractor a $5,000 referral fee out of her 10% contingency fee and to endorse the carrier's $150,000 advance check directly to the contractor. Renee's contract says she is paid 10% of the gross claim payment. The carrier has requested a sworn proof of loss and all photographs.
1. Identify the ethical and legal issues in the invoice and the photo request. What must Renee do?
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Renee cannot submit or rely on an invoice she knows is inflated. The $18,000 equipment charge and $41,000 project-management line must be supported by delivery tickets, invoices, time records, and contracts; if not, she must correct or withdraw them. Concealing the pre-existing ceiling staining is also a material misrepresentation, even if the client asks. The photos are relevant to causation and damage allocation, and the carrier has requested all photographs. Renee should tell the client in writing that she cannot participate in concealment, document the conversation, and if the client insists, withdraw and return the file. Her duty is not to maximize the claim at any cost; it is to present a supportable claim.
2. How should Renee handle the referral fee, the advance check, and her 10% fee?
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The $5,000 referral fee is an undisclosed conflict and may violate Mississippi public adjuster rules or fee-sharing prohibitions. Renee must disclose it, get informed consent, and confirm it is lawful; otherwise refuse. The 10% fee on the gross claim payment is also problematic if it charges on amounts not procured by her or on undisputed funds; check the contract and statute, and consider billing on net proceeds. The $150,000 advance check should not be endorsed to the contractor without the client's written authorization and lienholder or contractor safeguards. If Renee handles funds, use a trust account, keep a ledger, and pay only documented work. She cannot take a fee out of the advance before the claim is resolved.
3. What should Renee do before signing the proof of loss?
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Before signing the proof of loss, Renee must verify every figure and attachment. She should include the pre-existing staining disclosure, attach her photos, identify which damage is fire-related, and correct the contractor's invoice. A proof of loss is a sworn document; signing a false one exposes both Renee and the client to fraud claims. She should send a cover letter reserving rights, supplement later if needed, and keep copies. If the client refuses to allow accurate disclosure, Renee should not sign and should withdraw. Cooperating with the carrier's investigation is required; obstruction is not advocacy.