Public Adjuster Contract, Referral Fee, and Pressure Tactics
Two days after a windstorm tears off part of a Havre apartment building roof, a public adjuster knocks on the owner's door at 10:30 p.m. The owner is 78, has no heat on the second floor, and is worried about tenants. The adjuster presents a one-page contract with a 15% contingency fee on 'all insurance proceeds,' no cancellation notice, no statement that the adjuster is not an insurer employee, and no description of the services. The owner signs. The adjuster then recommends a roofing contractor owned by his brother-in-law and says the contractor will pay him a $2,500 'marketing fee' if the owner hires him. The insurer later offers $180,000 on the building claim; the adjuster demands $27,000 and threatens to report the insurer for bad faith unless it pays within 48 hours.
1. Identify the Montana adjuster regulatory and ethical problems in this fact pattern.
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The contract is deficient. Montana public adjuster rules require a written contract with specified terms, including the services to be performed, the fee, and a cancellation right; this one-page contract lacks the cancellation notice, the statement that the adjuster is not an insurer employee, and a service description. Soliciting at 10:30 p.m. at the home of a 78-year-old owner two days after a disaster raises a serious undue-influence problem. The referral to the brother-in-law's roofing company, with a $2,500 marketing fee, is an undisclosed conflict of interest and must be disclosed or avoided. The 15% fee on 'all insurance proceeds' may reach undisputed amounts; the fee must be reasonable and clearly disclosed. Threatening to report bad faith unless payment is made within 48 hours may be improper pressure and is not a legitimate claim-handling tactic. These facts can support license discipline and fee forfeiture.
2. Calculate the fee at 15% of the $180,000 settlement and explain whether $27,000 is defensible.
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Arithmetic: 15% × $180,000 = $27,000. But arithmetic is not the answer to enforceability. Because the contract omits required disclosures and cancellation rights, it may be voidable, so the adjuster should not assume $27,000 is owed. The $2,500 referral fee must be disclosed and likely credited to the insured or refused. Charging a contingency fee on undisputed ACV or undisputed policy limits may be unreasonable; many contracts limit fees to the disputed increase. Advise reformation of the contract with clear written disclosure and a reasonable fee, or charge on a documented quantum meruit/hourly basis if no enforceable contract exists. Check current Montana statutes and any emergency rule for a percentage cap before demanding the fee. If the insurer's $180,000 offer is undisputed, the public adjuster should document what additional value was obtained.