The Restoration Contractor's Referral Fee
A public adjuster is handling a $210,000 water-loss claim for a Las Vegas strip-mall owner. The insured is 78 and wants to sign the adjuster contract with the fee left blank because she trusts him. A restoration contractor tells the adjuster that if the adjuster "steers" the job to the contractor, the contractor will pay him 12% of the invoice as a marketing fee. The adjuster's brother-in-law owns 40% of that contractor. The insured also asks the adjuster to supervise the repairs and "just add your fee to the contractor's bill." The adjuster has a Nevada public adjuster license but no contractor license. The contractor's estimate is $160,000; the adjuster's proposed fee is 10% of the claim.
1. Identify the ethical and licensing issues in this arrangement.
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Several ethical problems. First, the 12% "marketing fee" is a kickback for steering the restoration job; a public adjuster owes the insured undivided loyalty and cannot accept compensation from a contractor. Second, the brother-in-law's 40% ownership is a conflict that must be disclosed in writing; the adjuster should not recommend that contractor without giving the insured independent options. Third, the insured cannot sign a contract with a blank fee; Nevada requires a written, clear fee term. Fourth, supervising repairs for an added fee may be unlicensed contracting and creates a conflict between the adjuster's fee and the insured's recovery. The adjuster should decline the referral fee, disclose the family interest, obtain at least two independent bids, put the fee in writing before work, and refuse to act as contractor unless licensed.
2. How should the adjuster handle the insured's request to leave the fee blank and "add your fee to the contractor's bill"?
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The adjuster should refuse. A blank fee term invites dispute and may violate Nevada public adjuster contract requirements. Adding the adjuster's fee to the contractor's bill obscures the fee, mixes two roles, and may mislead the insurer. The adjuster should prepare a written contract stating the exact fee or contingency percentage, the services covered, the insured's cancellation rights, and the fact that the insured may select any contractor. The adjuster should explain the conflict to the insured in plain language, document that explanation, and give her time to review the contract with a family member or attorney. If the insured insists on the arrangement, the adjuster should decline the representation rather than accept an unclear or conflicted fee.
3. What should the adjuster do about the contractor's estimate and the brother-in-law's ownership interest?
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The adjuster should not rely solely on the brother-in-law's company. Obtain at least two independent restoration bids and compare scope, price, and schedule. Disclose the family relationship in writing to the insured and to the insurer if the contractor is recommended. The adjuster should not receive any payment from the contractor and should document that the insured made the final contractor choice. If the brother-in-law's bid is selected, the adjuster should confirm the insured understands the relationship and that the price is competitive. The adjuster's file should contain the disclosures, bids, and a memo of the conversation. If the conflict cannot be managed, the adjuster should withdraw.