In the world of claims recovery, trust is currency. Public adjusters, attorneys, and clients all rely on the ethical handling of funds to ensure settlements are distributed promptly and properly. Unfortunately, situations can arise where checks are returned for insufficient funds, client proceeds are delayed, or disputes between firms create uncertainty over who holds the money.
While these situations are uncomfortable, they also serve as critical reminders for public adjusters and service professionals about the importance of oversight, documentation, and proactive communication.
- When Trust Accounts Don’t Protect Trust
Every professional who handles client funds—especially attorneys—is bound by fiduciary duty and bar regulations that dictate how money must be held and disbursed. Settlement funds must remain in a trust account until properly distributed.
When money is transferred to an operating account or used to cover unrelated expenses before client checks are cleared, it not only risks violating those rules—it undermines confidence in the entire process.
If a returned check or delay occurs, the public adjuster has an ethical obligation to protect the client’s interests, even if the funds technically originate from another professional’s account.
- Document Everything
Keep meticulous records of every transaction, communication, and attempt to collect payment. Your paper trail should include:
- Copies of the original settlement agreements or closing statements
- Copies of checks, deposit slips, and returned check notifications
- Email correspondence and payment requests
- Timelines showing when funds were received, deposited, or promised
In situations where funds are disputed or delayed, documentation becomes your strongest defense and may later be necessary for recovery actions or regulatory reporting.
- Consider Reporting — But With Care
When a professional’s handling of trust or client funds raises concerns, reporting to the appropriate regulatory or licensing body (such as a state bar association) may be warranted. However, it should be done thoughtfully, not reactively.
Ask yourself:
- Is this a systemic issue or an isolated event that was promptly corrected?
- Has restitution been made and documented?
- Could a complaint protect future clients from the same issue?
If you’re uncertain, consider consulting with a compliance or ethics attorney familiar with fiduciary duties in your jurisdiction. The goal of reporting should be transparency and protection—not retaliation.
- Protecting Clients When Funds Are Delayed
If there’s reason to believe settlement funds were not properly deposited or disbursed:
- Notify the insurer and request confirmation of payment details and payees.
- Verify whether checks have been negotiated or remain outstanding.
- Advise the client to maintain written communication with all involved parties.
- Avoid disbursing or endorsing any funds until it’s clear where the money legally belongs.
In some cases, insurers may agree to reissue payment directly to the policyholder if a dispute prevents proper distribution—especially when supported by documentation showing good faith on the part of the adjuster and client.
- Internal Safeguards for Public Adjusters
Public adjusters can strengthen financial transparency and client trust by implementing:
- Written disbursement protocols when working with outside counsel or third parties
- Verification steps before forwarding funds or relying on another entity’s assurances
- Retention clauses in contracts that specify when payment is due and how disputes will be handled
- Independent trust accounting reviews to confirm compliance with state laws
Even the best working relationships can break down under pressure. Having systems in place before conflict arises helps ensure your firm stays above reproach.
- Balancing Professional Courtesy with Accountability
While many disputes resolve without escalation, a pattern of late or returned payments can signal deeper issues. In those cases, accountability may require uncomfortable action. Upholding professional standards—even when it means confronting another firm—ultimately protects the client, the profession, and your reputation.
Closing Thoughts
The lesson here is not about blame, but about vigilance. Financial missteps, even if unintentional, can have serious implications for clients and for those entrusted to represent them.
Every public adjuster should have a clear plan for monitoring, documenting, and escalating financial irregularities in a way that preserves both ethical integrity and client confidence.
Disclaimer:
Employees of Green Public Insurance Adjusting are not attorneys and do not provide legal advice. This article is for educational and informational purposes only.
