1.1 Article XLV Scope, the Public Adjuster Definition, License Exemptions, and the Director's Powers

Why This Section Matters on the Exam

Domain V of the Pearson VUE content outline, Illinois Laws and Regulations Pertinent to Public Adjusters, carries 25 of the 100 scored questions. Its first two subtopics, Regulation and licensing of Public Adjusters and Public Adjuster practices, responsibilities, and duties, point candidates to the Director's general powers (215 ILCS 5/401) and to Article XLV sections 1515, 1560, 1565, 1575, 1585, and 1590.

The Regulatory Framework

The Illinois Department of Insurance (IDOI) administers these laws through the Director of Insurance. Section 1505 states the purpose of Article XLV: it governs the qualifications and licensing procedures for public adjusters, sets their duties and restrictions, and limits their licensure to assisting insureds in first-party claims. Section 1615 authorizes the Director to adopt rules, which is the authority for Part 3118.

The Statutory Definitions (215 ILCS 5/1510)

Exam questions often turn on exact wording. Section 1510 defines:

• Adjusting a claim for loss or damage covered by an insurance contract: negotiating values, damages, or depreciation, or applying the loss circumstances to insurance policy provisions.
• Adjusting insurance claims: representing an insured with an insurer for compensation and, while doing so, negotiating values, damages, or depreciation or applying the loss circumstances to policy provisions.
• Public adjuster: any person who, for compensation or any other thing of value on behalf of the insured:
  1. acts, aids, or represents the insured solely in relation to first-party claims arising under insurance contracts that insure the insured's real or personal property, in adjusting a claim for loss or damage covered by an insurance contract;
  2. advertises for employment as a public adjuster, solicits business, or represents himself or herself to the public as a public adjuster of first-party property claims; or
  3. directly or indirectly solicits business, investigates or adjusts losses, or advises an insured about first-party property claims for another person engaged in the business of adjusting losses for the insured.
• Person: an individual or a business entity (corporation, association, partnership, LLC, LLP, or other legal entity).
• Home state: the state or territory where the public adjuster's principal place of residence or principal place of business is located. If neither has a substantially similar public adjuster law, the adjuster may declare another state where it is licensed and acts as a public adjuster.
• Webinar: an online presentation with a live, participating instructor and viewers whose attendance is periodically verified and who actively engage in discussion and questions. This matters for the CE ethics requirement in Section 1.2.

Notice what the definition does not include: third-party liability claims, life and health claims, or representing the insurer. A public adjuster works for the insured on that insured's own first-party property claim.

Who Must Be Licensed (215 ILCS 5/1515)

Subsection (a): a person may not act, advertise, solicit, or hold himself or herself out as a public adjuster, or as being in the business of adjusting insurance claims in Illinois, nor attempt to obtain a contract for public adjusting services, unless licensed under Article XLV. Soliciting a contract before the license is issued is itself a violation.

Subsection (b): a licensed public adjuster may not tell a claimant that he or she represents an insurer in any capacity, including as an employee or independent adjuster, unless the insurer appoints the adjuster in writing for that specific claim. If the adjuster accepts such an appointment, the adjuster may not charge that claimant a fee.

Subsection (c): a business entity acting as a public adjuster must hold its own license, applied for on the NAIC Uniform Business Entity Application. Before approving it, the Director must find that the entity paid the fees required to register as a business entity in Illinois and that all officers, shareholders, and persons with ownership interests are licensed public adjusters responsible for the entity's compliance. Section 1525(b) also requires designating a licensed individual public adjuster responsible for compliance and using only licensed individual public adjusters to exercise the entity's license.

Subsection (e): every contract entered into in violation of Section 1515 is void and invalid. Part 3118.35 repeats that contracts made by anyone violating Section 1515 or Section 1575 are void and invalid.

The Five Exemptions (215 ILCS 5/1515(d))

Three Kinds of Adjusters: the Statutory Disclosure

Section 1575(f) requires every public adjuster to give the insured, before the contract is signed, a separate signed and dated disclosure defining three adjuster types. The statutory definitions are the safest way to answer comparison questions:

The same disclosure must state that the insured is not required to hire a public adjuster, that the public adjuster is not a representative or employee of the insurer or the Department of Insurance, and that the public adjuster's fee is the insured's obligation, not the insurer's, unless the insured has assigned rights to the adjuster.

The Director's Enforcement Powers

• General powers (215 ILCS 5/401): the Director is charged with enforcing all Illinois insurance laws and may make reasonable rules and conduct investigations.
• Examinations (215 ILCS 5/1600): the Director may examine any applicant or licensee. The person examined, and its officers, directors, and members, must give the Director convenient and free access, at all reasonable hours, to all books, records, documents, and papers relating to public adjusting. Examiners report to the Director, and any report alleging substantive violations must be in writing, based on the evidence, and verified by the examiners.
• Injunctive relief (215 ILCS 5/1605): acting as or holding out as a public adjuster without a valid license is declared a public nuisance. The Director may report it to the Attorney General, who applies to the circuit court of the county where it occurred. The court may issue a temporary restraining order without notice or bond, may permanently enjoin the practice, and may punish violations of the injunction as contempt.
• Criminal penalties (215 ILCS 5/1610): violating Section 1605 is a Class A misdemeanor; misappropriating or converting money collected as a public adjuster, licensed or not, is a Class 4 felony.

License discipline, civil penalties, and hearings under Section 1555 are covered in Section 1.2.

Exam Traps

1. "Independent" does not mean neutral. Independent adjusters represent insurers.
2. Business entity ownership. Every officer, shareholder, and owner must be a licensed public adjuster; one designated licensee is not enough.
3. Appointment by the insurer. A licensed public adjuster may act for an insurer on a specific claim only with written appointment, and then may not charge that claimant.
4. Soliciting counts. Advertising or trying to obtain a contract without a license violates Section 1515(a) even before any adjusting work is done.