Properly Suing The Adjuster

Dallas insurance lawyers have to know how to properly sue an insurance adjuster. This is important in many cases so that a case can be maintained in a State Court rather than being litigated in a Federal Court. A 2015, U.S. District Court case from the Northern District of Texas, Dallas Division, provides guidance for doing this properly. The style of the case is, Linron Properties, Ltd. v. Wausau Underwriters Insurance Company and Sara Springman.
Linron Wausau and adjuster Springman for the improper handling of an insurance claim under a Commercial Property Policy, which Linron purchased from Wausau. After a storm caused damage to the insured property, Linron sought coverage for the cost of repairs under the terms of the Policy and Wausau hired Springman to serve as the adjuster for Plaintiff’s claim. Linron asserts that Springman “conducted an outcome-oriented investigation and also hired experts she knew would under-scope Plaintiff’s damages in order to allow Wausau to avoid payment on the claim.” As a result of Wausau’s and Springman’s actions, Linron claims that it has been wrongfully denied full coverage for the damages sustained to the property.
Linron sued Wausau and Springman in State Court asserting claims for breach of contract and various violations of chapters 541 and 542 of the Texas Insurance Code.
Wausau and Springman had the case removed to Federal Court base on lack of diversity of citizenship as required in 28 U.S.C. Section 1441(a). The allegation was that Springman was improperly joined because an independent cause of action could not be successful against her.
Linron asserted, pursuant to Texas Insurance Code, Section 541.151, an individual who has been damaged by “unfair methods of competition or unfair or deceptive acts or practices in the business of insurance” may bring a cause of action against the “person or persons engaging in such acts or practices.” Section 541.060(a)(2), says the prohibited conduct includes “failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of a claim with respect to which the insurer’s liability has become reasonably clear.” According to Section 541.002, the Insurance Code defines a “person” as any “legal entity engaged in the business of insurance, including an . . . adjuster.”
Despite the abundance of case law supporting adjuster liability under 541.060, however, a few courts have recently begun to question the appropriateness of holding an adjuster individually liable for unfair settlement practices under 541.060. These courts reason that an adjuster cannot be liable for violating those provisions of 541.060 specifically referring to the settlement or paying of claims, because an adjuster “does not have settlement authority on behalf of [the insurance company]” and his or her “sole role is to assess the damage.” But while the courts’ reasoning in these cases has some logical appeal, a closer examination of the precise language of 541.060(a)(2)(a) and the role played by insurance adjusters in the claims handling process belies their conclusions.
Section 541.060(a)(2)(A) prohibits those engaged in the business of insurance from “failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement.” The fact that the statute uses the word “effectuate” rather than a word that conveys finality (e.g., finalize), suggests that its prohibition extends to all persons who play a role in bringing about a prompt, fair, and equitable settlement of a claim.
As the persons primarily responsible for investigating and evaluating insurance claims, insurance adjusters unquestionably have the ability to affect or bring about the “prompt, fair, and equitable settlement” of claims, because it is upon their investigation that the insurance company’s settlement of a claim is generally based. As such, a delay in an adjuster’s investigation will undoubtedly cause a delay in the payment of the claim, and an insufficient investigation may well lead to a less than fair settlement of a claim.
In this case, Linron asserts that Springman violated various provisions of 541.060, including 541.060(a)(2)(A), by retaining an engineer and contractor who were known for arriving at findings that favored insurance companies, refusing to identify damage to the structure that was covered under the Policy, and failing to respond to Linron’s inquiries regarding the status of the claim and payment. Linron further alleges that Springman’s actions were “the producing cause(s) of injury and damage to Plaintiff” and ultimately contributed to Plaintiff suffering “actual damages, economic damages, and consequential damages.” Having reviewed these allegations, the Court found them sufficient to support a claim against Springman in her individual capacity for violating 541.060(a)(2)(A) of the Insurance Code. Therefore, Defendants have failed to establish that there is no reasonable basis to predict Plaintiff’s recovery against Springman.