Lapsed Adjuster License and Unlicensed Claim Handling
A Montana independent adjusting firm contracts with a regional third-party administrator. In February, the firm's only licensed Montana adjuster, Ms. R, lets her nonresident adjuster license lapse on March 1 because she missed continuing-education and renewal requirements. The firm's Montana volume is heavy after an April windstorm. The administrator's unlicensed desk examiner, Mr. K, who works from Idaho, begins reviewing estimates, negotiating with contractors, and signing denial letters on 37 Montana homeowners claims. The firm's owner says Mr. K is 'just helping with paperwork' and that a licensed supervisor reviews files 'when time permits.' One insured receives a denial letter signed by Mr. K; the letter does not identify Ms. R as the responsible adjuster. The firm has no written delegation policy. A complaint is filed with the Montana insurance department.
1. Did the firm violate Montana adjuster licensing requirements? Explain which activities require a license and whether clerical review is different.
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Montana licenses adjusters, and the core adjusting functions-investigating, evaluating, negotiating, and settling claims-must be performed by a licensed adjuster or under an authorized exemption. Mr. K's activities go beyond clerical support: he reviewed estimates, negotiated with contractors, and signed denial letters. Those are discretionary claim acts. A licensed supervisor's later review 'when time permits' does not cure the problem, because the unlicensed person already exercised judgment and communicated the insurer's position. Ms. R's lapsed license means she could not lawfully provide supervisory coverage unless she renewed or obtained a temporary or emergency authorization. The firm should have had a written delegation policy identifying who may do what, a license-status check, and a backup licensed adjuster. The fact that Mr. K worked in Idaho does not automatically exempt him if he was adjusting Montana claims. The denial letter signed by Mr. K is especially problematic because it does not identify a responsible licensed adjuster. The firm should treat the 37 files as potentially tainted and audit each one.
2. What should the firm do about the 37 claims and the denial letter, and what ethical duties are implicated?
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The firm should immediately stop Mr. K from adjusting Montana claims, reassign the 37 files to a properly licensed adjuster, and place a hold on pending settlements or denials. Each file needs a documented review of the investigation, estimate, coverage analysis, and communications. Denials signed by Mr. K should be reissued only after a licensed adjuster independently reviews the basis; if the denial cannot be supported, the insurer should reverse it and pay promptly. The firm should notify the insurer clients and its errors-and-omissions carrier, preserve emails and file notes, and consult Montana counsel about any licensing-board disclosure. Concealing the issue or backdating reviews would compound the ethics problem. The ethical duties implicated include competence, compliance with law, honesty in representations to insureds and regulators, and avoiding false statements that a file was supervised when it was not. The firm should also remediate: license tracking, continuing-education reminders, written supervision, and a prohibition on unlicensed negotiation. If the regulator asks, the firm should provide facts, not excuses.