13.1 Scope of Authority, Ethics & Good-Faith Practice

Practicing Within the Texas License

Public adjusters serve insureds after disruptive losses. The role creates influence over evidence, estimates, settlement expectations, and proceeds, so competence and good faith are core licensing duties.

Authorized work

Chapter 4102 authorizes a license holder to adjust insured claims for fire and allied coverages, burglary, flood, and other real- and personal-property losses, including loss of income. Authorized services can include:

• reviewing the issued property policy;
• documenting damage and inventory;
• preparing repair estimates and business-income calculations;
• organizing proof and insurer requests;
• presenting the claim and negotiating amount;
• explaining the factual claim process and contract terms without legal advice.

Section 4102.102 requires preparation according to the terms and conditions of the policy under which recovery is sought. Custom does not override the contract.

Matters outside scope

Section 4102.157 prohibits acting on bodily-injury loss covered by life, health, or accident insurance and on a claim for which the client is not an insured. Section 4102.156 prohibits practicing law. A public adjuster also cannot act as the repair contractor on the adjusted property.

When issues require structural design, engineering causation, tax opinion, legal interpretation, or contractor performance, retain or recommend an appropriately qualified professional without accepting a referral payment.

Competence

Competence means accepting only work the adjuster can handle with proper preparation and assistance. A competent file shows:

1. complete policy and endorsements;
2. accurate loss chronology;
3. measured scope and photographs;
4. source-supported unit costs and valuation;
5. inventories and financial records;
6. calendar of duties and deadlines;
7. written claim communications;
8. transparent compensation.

Being licensed does not make an adjuster an engineer, appraiser for every specialty, or attorney.

Candor and accuracy

The adjuster must not knowingly make false reports to the employer or client or disclose information except as law requires or the client directs. Estimates should identify assumptions. If later inspection disproves an item, revise it. Advocacy is strongest when every claimed amount can be traced to evidence.

Commission cannot influence truth. A percentage-fee adjuster must not inflate a claim to raise compensation or suppress an undisputed payment because it might affect a negotiation position.

Confidentiality

Claim files can contain financial, medical, security, tenant, and business information. Limit access to people with a legitimate role, use secure transfer, and obtain authorization before disclosure. A regulator’s lawful request or legal requirement differs from marketing use.

Good-faith client communication

Explain:

• who the adjuster represents;
• services and limits of the license;
• fee calculation and cap;
• documents and deadlines;
• disputed and undisputed issues;
• available contractual processes;
• when legal advice is needed.

Never guarantee a recovery or timetable controlled by another party.

Ethical scenario

An insured asks the adjuster to list undamaged furniture as destroyed because “the insurer will negotiate it down.” The adjuster must refuse, correct the inventory, and explain that false presentation threatens coverage and licensing. If the insured insists, the adjuster should follow the contract and law for withdrawal and preserve accurate records.

In another scenario, a roof claim raises engineering questions about long-term movement. The adjuster can document conditions and obtain a qualified engineer; the adjuster should not invent an engineering opinion.

Conflicts and independence

Disclose relationships and avoid any direct or indirect financial interest in repair, salvage, legal, appraisal, or other firms connected to the claim. The client should receive advice based on claim merits, not hidden compensation.

Exam principle

Choose the answer that stays within property-claim authority, follows the actual policy, tells the truth, protects confidential information, and obtains qualified help. “Maximize the claim at any cost” is not policyholder advocacy; it is a disciplinary risk.

Use a role-boundary check on every assignment

Chapter 4102 authorizes compensated representation of an insured in specified first-party real-property, personal-property, and related income claims. Confirm that the client is an insured, the claim concerns covered property or income, and the requested work is adjusting rather than legal representation, contracting, or a third-party bodily-injury demand. Decline or refer work outside that boundary.

Competent practice begins with the issued policy and verifiable facts. Disclose the fee and role, identify uncertainties, protect confidential information, communicate material offers, and correct mistakes. Do not promise a particular recovery, inflate scope as bargaining leverage, conceal contrary evidence, or let a contractor dictate the claim. If expertise is missing—for example, structural engineering, accounting, marine survey, or law—recommend an independent qualified professional and disclose any relationship.

Good faith does not require passivity. The adjuster can challenge unsupported depreciation, document hidden damage, request the carrier’s basis, and negotiate vigorously. The ethical line is accuracy and client loyalty within lawful authority. Ask whether the same file would remain defensible if read by the client, carrier, TDI, and a court. If not, resolve the deficiency before sending it.