1.3 The Public Adjuster Contract: Required Terms, Disclosures, Prohibited Clauses, and the Right to Void

Why the Contract Rules Matter

Domain V.B of the exam outline lists Section 1575 by name. The contract is where most consumer complaints arise, so Illinois regulates it in two layers: 215 ILCS 5/1575 sets the statutory terms, and 50 Ill. Adm. Code 3118.80 and 3118.85 (amended effective April 30, 2024) add filing, format, and disclosure rules. Any contract that violates Section 1575 is void and invalid (Section 1575(l); Part 3118.35).

Step 1: File and Obtain Approval of the Form

Part 3118.80(a) requires each public adjuster to file every contract form with the Director and secure approval before using it in Illinois. The filing must include the names and license numbers of the filing adjusters, whether the form is new or supersedes an earlier filing (with all changes identified), and the effective date of use. IDOI also requires the contract to be uploaded with the license application, and it warns that contract approval and license issuance are separate approvals that must both be in place before contracting.

Step 2: Include the Required Terms

Statutory terms (215 ILCS 5/1575(a))

1. Legible full name of the adjuster signing the contract, as shown in Department records
2. Permanent home-state business address, email address, and phone number
3. License number
4. The title "Public Adjuster Contract"
5. The insured's full name, street address, insurance company name, and policy number, if known or upon notification
6. A description of the loss and its location
7. A description of the services to be provided
8. Signatures of the public adjuster and the insured
9. Date and time the contract was signed by the adjuster and by the insured
10. Attestation that the public adjuster is fully bonded under Illinois law
11. The full salary, fee, commission, compensation, or other consideration, including any applicable cap under Section 1570

Additional rule requirements (50 Ill. Adm. Code 3118.80(c))

The rule restates the statutory terms and adds format and notice items. All contracts must be printed in no less than 10-point font and must contain:

• the form number and edition in the lower left-hand corner and the effective date of use;
• the title "Public Adjuster Contract" printed at the head of the form, with the adjuster's or firm's name and the location and phone number of the principal place of business (no P.O. box alone unless the location is rural with no street address);
• notice that the written contract is the entire agreement between the adjuster and the insured;
• notice of the insured's 5-business-day right to void and the three methods for doing so;
• notice that if the insurer pays or commits in writing to pay the policy limit within 5 business days after the loss is reported, the adjuster receives no commission, only reasonable compensation for services; and
• an attestation that the adjuster who signed the contract is the adjuster who solicited the business.

Optional and compensation terms (215 ILCS 5/1575(b))

The contract may name the public adjuster as a co-payee on the insurer's payment. If compensation is a share of the settlement, the exact percentage must be stated. Initial expenses to be reimbursed from claim proceeds must be listed by type with dollar estimates, and additional expenses need the insured's prior approval. Compensation provisions may never be redacted from a copy given to the Director.

Step 3: Give the Pre-Signing Disclosures

Part 3118.85(e) requires all financial-interest disclosures and the Consumer Rights Notice to be delivered before the client signs the contract.

Step 4: Avoid Prohibited Clauses (215 ILCS 5/1575(e))

A public adjuster contract may not contain a term that:

1. lets the percentage fee be collected when money is due but not yet paid, or lets the adjuster take the entire fee from the first check instead of a percentage of each check;
2. requires the insured to authorize the insurer to issue a check only in the adjuster's name;
3. prevents the adjuster or the insured from pursuing civil remedies;
4. includes a hold harmless clause indemnifying the adjuster for liability from the adjuster's own negligence; or
5. grants a power of attorney letting the adjuster act in place and instead of the insured.

Section 1590(j)(5) adds that an adjuster may not accept a contract or power of attorney giving the adjuster effective authority to choose who performs repair work.

Step 5: Execute, Deliver, and Wait

• Duplicate originals. The contract is executed in duplicate, with one original for the adjuster and one for the insured. The adjuster's original must be available for inspection by the Director at all times without notice (Section 1575(g)).
• Copy to the insurer. The adjuster must provide the insurer, or its authorized representative for receiving notice of loss, an exact copy by email no later than 5 business days after execution (Section 1575(h)).
• No services first. Other than emergency services, the adjuster may not provide services until an approved contract is signed and the exact copy has been sent to the insurer (Section 1575(j)).

The Insured's Right to Void (215 ILCS 5/1575(j)-(k))

At the insured's option, the contract is voidable for 5 business days after the contract is received by the insurer. The clock starts on the insurer's receipt, not on the date of signing. The insured voids it by notifying the adjuster in writing by:

1. registered or certified mail, return receipt requested, to the address on the contract;
2. personally serving the notice on the adjuster; or
3. email to the address on the contract.

If the insured rescinds, anything of value given by the insured under the contract must be returned within 15 business days after the adjuster receives the cancellation notice. Section 1590(j)(4) adds that the contract may not be read to prevent the insured from pursuing any civil remedy after the 5-business-day period.

Worked timeline

The Policy-Limit Rule (215 ILCS 5/1575(c))

If, not later than 5 business days after the loss is reported, the insurer pays or commits in writing to pay the policy limit, the adjuster:

1. may not receive a percentage commission;
2. must tell the insured the recovery might not increase; and
3. is entitled only to reasonable compensation based on time spent and expenses incurred until the claim is paid or the written commitment is received.