Federal Court Pleadings Against Adjusters

A successful pleading against an insurance adjuster was found in a Western District, Austin Division opinion issue in May 2017.  The opinion is styled, Affordable Portable Structures, Inc. and JFJ Group, Inc. v. The Cincinnati Insurance Company and Alfred Gray.

Affordable was insured by Cincinnati when a storm caused damage to property owned by Affordable.  Cincinnati hired Alfred Gray to adjust the claim, who hired Rimkus Consulting Group, to prepare a report.  According to Affordable, Rimkus is known to provide results oriented reports that are favorable to insurance companies and minimize damage estimates.

Affordable hired a consultant who estimated Affordable’s damages at $698,111.69.  Gray turned in an estimate for $25,935.38 — less than 3.5% of the figure that Affordable’s consultant estimated.  Affordable alleged that Gray is an inexperienced adjuster and, as such, knew or should have known that the Rimkus report vastly underestimated the amount of damage caused to the property.  Accordingly, Gray’s decision to conduct no further investigation was unreasonable and did not constitute a good faith attempt to effectuate a prompt, fair, and equitable settlement.

Affordable filed suit in state court for violations of the Texas Insurance Code and the defendants promptly removed to Federal asserting that the joinder of Gray was solely to defeat diversity jurisdiction and that the allegations against Gray are not able to stand on their own.  Affordable filed a motion to remand the case to the state court.

The legal standard for allegations of improper joinder are (1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse party in state court.  Under the second prong, the inquiry is whether there is no reasonable basis for the district court to predict that the plaintiff might be able to recover against an in state defendant.

The Texas Insurance Code has several provisions forbidding unfair and deceptive practices in the business of insurance.  One of these, section 541.060, forbids “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,” among other prohibited practices.

This court then discussed the way various courts look at situations where the adjuster can be held individually liable for his actions rather than the company being responsible.  A couple page discussion on this issue is presented and is must reading for insurance lawyers.

In this case, the court ruled in favor of Affordable and the case was remanded back to the state court.