Suing The Adjuster

Duncanville insurance attorneys need to know how to properly sue an insurance adjuster who improperly adjusts a claim. This issue was brought in a U.S. District Court, Dallas Division opinion. The style of the case is, The Denley Group, LLC v. Safeco Insurance Company Of Indiana and Lisa Seutter.
After a fire loss, Denley sued Safeco and Seutter for wrongful denial of full coverage stained to their insured property.
The lawsuit was filed n Dallas District Court for violations of Chapters 541 and 542 of the insurance code and other causes of action. Safeco had the case removed to Federal Court, asserting that Seutter had been improperly joined in the lawsuit.
Motions for remand are governed by 28 USC, Section 1447(c).
The Federal Court analysis the removal under a Rule 12(b)(6) analysis. In this analysis the court accepts all well plead facts as true, viewing then in the light most favorable to the plaintiff.
To survive this analysis, a plaintiff must plead enough facts to state a claim to relief that is plausible on its face.
In its original lawsuit pleadings, Denley asserts a claim against Seutter for various insurance code violations. Safeco argued that the allegations are merely conclusory and therefore insufficient to state a claim against Seutter.
Under the Insurance Code, 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.” This is pursuant to Texas Insurance Code, Section 541.151. The prohibited conduct, found in Section 541.060(a)(2)(A), 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.” Section 541.002 defines a “person” as any “legal entity engaged in the business of insurance, including an . . . adjuster.”
Both the Texas Supreme Court and the Fifth Circuit have recognized that an insurance adjuster may be held individually liable for violating chapter 541 of the Insurance Code. Numerous lower courts, including this Court, have specifically found that an adjuster may be held personally liable for engaging in unfair settlement practices under Section 541.060.
Despite the abundance of case law supporting adjuster liability under 541.060, however, a few courts have recently begun to question the propriety 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) prohibits those engaged in the business of insurance from “failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement.”
Webster’s defines the word “effectuate” by reference to the definition for “effect,” meaning “to cause to come into being” or “to bring about.” 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. Therefore, 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, Denley asserts that Seutter violated various provisions of § 541.060, including Section 541.060(a)(2)(A), by “failing to perform a proper and complete investigation of the claim,” “failing to obtain a legal opinion on the legal obligation owed Plaintiff,” “ignoring the true facts of the claim,” and “unreasonably delaying . . . the investigation, adjustment and resolution of Plaintiff’s claim.” Denley further alleges that Seutter’s actions were “a proximate and producing cause of Plaintiff’s damages.” Having reviewed these allegations, the Court found them sufficient to support a claim against Seutter in her individual capacity for violating Section 541.060(a)(2)(A) of the Insurance Code. Defendants thus failed to establish that there is no reasonable basis to predict Denley’s recovery against Seutter.