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NM Public Adjuster: Fiduciary Duties, Ethics, and Unfair Claims Practices

NM Public Adjuster · Work through your exam, one topic at a time.

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Fiduciary Duties, Ethics, and Unfair Claims Practices

Domain 8 - Fiduciary Duties, Ethics, and Unfair Claims Practices

This domain tests the standard of conduct: the public adjuster works for the insured, holds the insured's money, and must avoid the conflicts and shortcuts that draw discipline.

Fiduciary duties

  • Act in the insured's best interest and disclose anything that could bias your advice.
  • Hold claim funds and fee deposits in a trust account, separate from operating funds, and disburse only with authorization.
  • Keep confidences; share claim information only as needed to adjust the claim.
  • Never acquire an interest in the claim or the damaged property.
  • Never split fees with unlicensed persons or pay referral fees that are prohibited.

Unfair claim practices

Under NMSA 59A-16, prohibited conduct includes misrepresenting policy provisions, failing to acknowledge claim communications, failing to investigate promptly, refusing to pay without a reasonable basis, failing to explain a denial, and failing to affirm or deny within a reasonable time after proof of loss. Adjusters who document these failures create leverage - but must not commit them.

Ethics in practice

No unauthorized practice of law; no altered photographs or inflated scopes; no settlement without written authorization; no promises of a specific outcome; no disparaging the insured's prior adjuster.

Worked example

A settlement draft for $84,000 arrives payable to the insured and the mortgage company. The insured asks you to endorse it and hold the funds. Do not. Deposit only into a trust account if your agreement authorizes handling, obtain both endorsements, and disburse to the lienholder first, documenting the release. Commingling or unilateral endorsement is a fiduciary breach and a licensing matter.

Traps that cost marks

  • Calling a low offer "bad faith" without tying it to a specific statutory practice.
  • Holding client funds in the business operating account.
  • Settling before the insured authorizes it in writing.
  • Overstating damage to gain leverage - that is misrepresentation.