The Tablet Contract at the Door
After a tornado warning, 78-year-old Mr. Whitfield's roof is tarped by a public adjuster, Karen, who knocks on his door the same evening. She presents a contract on a tablet: 15% of "all money recovered," a power of attorney to endorse checks, and a clause requiring arbitration in another county. She says she is "with the insurance department" and that he must sign tonight to "preserve his rights." The policy has a $2,000 deductible and $40,000 dwelling limit; the insurer's adjuster has already inspected and offered $16,800 for roof and interior. Karen tells Whitfield not to talk to the insurer and that she will "get him a new roof and new floors." She also refers him to her brother-in-law's water mitigation company, which bills $9,000 for drying that was not performed. Whitfield's daughter calls you.
1. Identify the unfair trade practices and ethical violations in Karen's conduct.
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Karen's statement that she is "with the insurance department" is a misrepresentation of government affiliation and an unfair trade practice. Telling an elderly homeowner he must sign "tonight" to preserve rights is false urgency and undue influence. Promising a "new roof and new floors" misrepresents what the policy will pay and ignores the $40,000 dwelling limit and $2,000 deductible. Telling the insured not to talk to the insurer interferes with the claim and may violate the duty of good faith. The 15% fee exceeds Ohio's 10% cap on public adjuster compensation based on the amount of the claim paid. The referral to her brother-in-law creates a conflict of interest, and the $9,000 invoice for work not performed is potential insurance fraud. A public adjuster must be honest, disclose conflicts, and act in the insured's best interest, not use the claim for self-dealing.
2. Analyze the enforceability of the contract terms: 15% fee, power of attorney, arbitration venue, and the "tonight" pressure.
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The 15% fee is unenforceable to the extent it exceeds Ohio's 10% cap. A public adjuster may not evade the cap by labeling part of the fee as "recovered" money or expenses. The broad power of attorney to endorse checks is highly suspect; a public adjuster generally cannot endorse the insured's settlement check without specific written authorization, and many states prohibit it outright. The arbitration clause in another county may be unconscionable and may violate consumer protection principles, especially when buried in a tablet presentation. The "tonight" pressure undermines informed consent, and the insured has a right to rescind within three business days after signing. The contract should be separate from any repair agreement and must clearly state the fee, the right to cancel, and the fact that the adjuster represents the insured. On these facts, the contract is likely voidable.
3. What should be done about the $9,000 drying invoice and the referral to Karen's brother-in-law?
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The invoice must not be submitted. Billing $9,000 for drying that was not performed is insurance fraud, and a public adjuster who submits or supports a false invoice violates the law and the duty of honesty. Karen must withdraw the invoice, correct the record with the insurer, and not refer work to a relative if she receives any compensation or has an undisclosed conflict. The insured should not pay the invoice and should demand documentation of the actual drying performed. If Karen receives a kickback or has a financial interest in the mitigation company, that is an illegal referral arrangement and must be disclosed and terminated. The adjuster should preserve the invoice and the correspondence, report the suspected fraud to the insurer and the Ohio Department of Insurance, and advise the insured that the claim can proceed with accurate, documented mitigation costs.