The Brother-in-Law Contractor and the 15% Fee
A kitchen fire totals a home in Oklahoma City. Dan is a licensed Oklahoma public adjuster. He meets the homeowner, Mrs. Nguyen, at 11 p.m. at a hotel and has her sign a contract that charges 15% of the gross settlement, including recoverable depreciation, and authorizes Dan to use his brother-in-law's restoration company. Dan does not disclose the family relationship. He tells Mrs. Nguyen not to speak with the insurer without him and says he can get her $300,000, although the insurer's preliminary estimate is $210,000. Mrs. Nguyen later learns that the brother-in-law's company is not on the insurer's preferred list and that Dan has a financial interest in the restoration company. She wants to cancel the contract and asks a different adjuster what to do. The contract does not mention a right to rescind or the fee calculation method.
1. Identify the ethical and licensing problems in Dan's conduct and explain which are curable and which are not.
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The most serious problem is the undisclosed conflict of interest. Referring the insured to a restoration company owned by the adjuster's brother-in-law, without written disclosure and the insured's informed consent, creates a financial incentive that can taint the entire claim. Even if the referral is legal, the failure to disclose it is an ethical violation and may violate Oklahoma public adjuster duties. The adjuster should never receive a referral fee or hidden compensation from a contractor.
The 15% fee on gross settlement, including recoverable depreciation, is also problematic. The fee should be based on the amount actually paid or recovered, and the contract should clearly explain how the fee is calculated. Charging a fee on depreciation that the insured may never receive can overcharge the client. The late-night signing and the absence of rescission language are curable only if Oklahoma law permits correction and the insured is given a proper written contract with required disclosures.
The statement 'do not speak with the insurer' is not an absolute prohibition; the insured has the right to communicate with the carrier. The adjuster may ask to be included, but cannot mislead the client about her rights. The promise of $300,000 without a documented basis may be an unfair or deceptive practice. The conflict and the fee issue are curable by disclosure, re-papering, and refunding any excess; the misrepresentation and interference may not be curable if they already caused harm.
2. Mrs. Nguyen wants to cancel. What should Dan do about the contract, the fee, and the contractor referral?
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Dan should stop all work, acknowledge the cancellation in writing, and provide a final accounting of any fee or expense already earned. He should not retaliate by withholding the claim file, delaying the insurer, or telling the contractor to stop cooperating. If Oklahoma law gives the insured a right to rescind within a stated period, Dan must honor it. Even if the contract is silent, the failure to include required disclosures may make the contract unenforceable or subject to reformation.
On fees, Dan should recalculate only on amounts actually paid or recovered, not on gross estimates or unreceived depreciation. He should refund any unearned portion promptly. If he performed emergency services, he should document them and charge only a reasonable, disclosed amount. He should not claim a penalty or contingency on money the insured never receives.
On the contractor referral, Dan should withdraw the recommendation and give Mrs. Nguyen a written list of independent contractors or tell her to choose her own. He should disclose the family relationship in writing and confirm that he receives no compensation from the restoration company. If he already received a referral fee, he should disclose and refund it. He should also cooperate with any Oklahoma Insurance Department inquiry and preserve all records.
3. How should a public adjuster structure a compliant fee and disclosure process in Oklahoma?
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The adjuster should use a written contract signed by the insured that states the fee percentage or method, the basis on which the fee is calculated, and when the fee is earned. The contract should explain that the fee is based on the amount actually paid or recovered, not on the insurer's preliminary estimate or on recoverable depreciation that may never be paid. The adjuster should give the insured a copy at signing and should not solicit or sign clients at times or places that impair their ability to read and understand the contract.
The adjuster should disclose in writing any family relationship, financial interest, or referral arrangement with a contractor, appraiser, engineer, or restoration firm. The insured should be told that she may choose her own contractor and that the adjuster does not guarantee a specific settlement amount. The adjuster should also explain the insured's right to communicate with the insurer and the right to cancel or rescind to the extent Oklahoma law provides.
A compliant file includes the signed contract, disclosures, fee worksheet, correspondence, estimates, and a record of all payments. The adjuster should avoid advance fees that are not earned and should never split a fee with an unlicensed person. When in doubt, the adjuster should verify current Oklahoma public adjuster requirements with the Oklahoma Insurance Department before enforcing a fee term.