Claims Denial – Suing The Adjuster

Insurance lawyers time and time again have a difficult time properly suing insurance adjusters when their case is in Federal Court.  This is illustrated in a June 16, 2021, opinion from the Northern District of Texas, Dallas Division.  The opinion is styled, Thomas Paredes and Kerry Paredes v. The Cincinnati Insurance Company and John Schuster.

The Paredes had their property insured through Cincinnati.  They incurred a hail storm loss properly reported it.  Cincinnati assigned adjuster, Schuster to the claim.  The Paredes were dissatisfied with the way the claim was handled and filed the present suit.  The lawsuit was timely removed to Federal Court on the basis that Schuster (the Adjuster) was improperly joined and that without the Adjuster, diversity jurisdiction existed.  The Paredes filed a motion to remand which is the subject of this opinion.

Cincinnati says the Adjuster was improperly joined in the lawsuit because the Paredes have not stated a cause of action against him.

The Paredes assert that the Adjuster violated Texas Insurance Code, Sections 541.060(a)(2)(A), 541.060(a)(3), 542.003(b)(3), and 542.003(b)(4).

The Paredes have not adequately pleaded a section 541.060 violation against the Adjuster.  Notably, the allegations for Cincinnati and the Adjuster are identical for the section 541.060 claims.  Section 541.060(a)(2)(A) prohibits engaging in unfair settlement practices by failing to attempt a proper, fair, and equitable settlement of a claim where the insurer’s liability is reasonably clear.  The Paredes’ allegations against the Adjuster for this claim are merely legal conclusions and recitations of the statutory language.  Moreover, the allegations against the Adjuster predominantly mimic the allegations against Cincinnati, and to the extent they do not, the allegations are conclusory and do not satisfy the federal pleading standard.  Similarly, the Paredes’ allegations do not contain the measure of factual support courts have accepted as sufficient to state a claim under section 541.060(a)(3).  Section 541.060(a)(3) does not obligate an insurer to provide an insured every piece of information . . . the insurer has regarding the offer or the investigation.  Rather, an insurer is required to provide a reasonable explanation of the factual or legal basis in the policy for an offer.  A plaintiff who fails to provide any factual basis for its belief that [the insurer’s] explanation for a claim was unreasonable has not stated a claim under section 541.060(a)(3).

The Court acknowledges that the Paredes allege the Adjuster provided no explanation at all for the offer; however, this allegation is inadequate.  In previous 5th Circuit case law, the court found an allegation that defendants “failed to offer Plaintiffs adequate compensation, without any explanation why full payment was not being paid” sufficient under section 541.060(a)(3) given the factual allegations “as a whole,” because it was evident from the petition that defendants “never explained why [plaintiffs’] claim was denied with respect to several specific types of damages to their home.”  Unlike the plaintiffs in the 5th Circuit opinion who specifically stated types of damages that the adjuster likely missed in the short, 30-minute inspection of the residence, the Paredes fail to provide factual support for their contentions with any specificity as to how the Adjuster’s investigation was substandard or unreasonable.  In a bare boned manner, the Paredes recite the statutory language without providing sufficient facts to satisfy the federal pleading standard.  Moreover, the Paredes largely lump together the conduct of Cincinnati and the Adjuster without differentiating actionable conduct as to the Adjuster.

The Paredes also assert claims against the Adjuster under Chapter 542 of the Texas Insurance Code.  However, an individual adjuster cannot be liable under Chapter 542 because that chapter only applies to insurers.  An adjuster is not an insurer under Texas Insurance Code section 542.002.  Thus, the Court finds no reasonable basis to predict that the Paredes could recover against the Adjuster for violations under Chapter 542 of the Texas Insurance Code.

The motion to remand was denied.

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