Ethical Practices, Fiduciary Duties, and Unfair Trade Practices
What the exam tests
This domain tests the public adjuster's fiduciary role and the line between zealous advocacy and prohibited conduct. Expect questions on conflicts of interest, fees, misrepresentation, and fair claim dealings.
Fiduciary and ethical duties
- The public adjuster owes the insured loyalty, confidentiality, and honest accounting. The insured's interests come before the adjuster's fee or a contractor's referral arrangement.
- Disclose all conflicts in writing. Do not accept undisclosed compensation from contractors, restoration firms, or others involved in the claim, and do not steer repairs in exchange for a kickback.
- Keep claim funds and client property separate from business funds; account promptly and refund unearned fees.
- Do not give legal advice, sign documents on the insured's behalf without authority, or misstate policy terms, damage, or the insurer's obligations.
Unfair trade practices
- Prohibited conduct includes misrepresentation, false statements about coverage, coercion, improper inducements, and unfair settlement practices.
- Advocacy may be forceful, but it must be truthful. Inflating damage, hiding evidence, or mischaracterizing causation can violate the Unfair Insurance Trade Practices Act and jeopardize the license.
Worked example
A restoration contractor offers the public adjuster a 10% "marketing fee" for each referred job. Accepting would create an undisclosed conflict: the adjuster might steer the insured to a higher-cost contractor or overlook the insured's right to choose. The adjuster must decline the arrangement or, if any lawful relationship exists, disclose it clearly and obtain informed consent. A hidden referral fee is a disciplinary risk and undermines the claim's credibility.
Traps that cost marks
- Calling a kickback a "referral fee" or "marketing payment."
- Failing to disclose that a family business will perform the repairs.
- Promising a specific settlement amount to win the contract.
- Mixing client funds with operating funds or delaying a refund.
- Treating aggressive negotiation as permission to misstate facts.