Who Is Engaged In The Business Of Insurance?

The answer to the titled questions is partially addressed in a 2019 opinion from the Southern District of Texas, Corpus Christi.  The opinion is styled, MJ & JJ, LLC; dba Peacock Manor Apartments v. Clear Blue Specialty Insurance Company, et al.

After sustaining hurricane damage, Peacock sued Clear Blue, Madsen, Kneppers & Associates (MKA), Hylton Cruickshank, and Charles Jendrusch in State Court.  Clear Blue removed the case to this Court based on diversity jurisdiction.  Then they contend Cruickshand and Jendrusch should be dismissed.  Peacock file a motion to remand.

The parties agree Cruickshank and Jendrusch are not diverse, but the MKA defendants contend they were improperly joined, thus, removal to Federal Court was proper.

When Peacock filed the claim, Clear Blue assigned the claim to adjuster Joe Hornbeck to inspect the damage.  Clear Blue then retained MKA, which assigned Cruickshank and Jendrusch to adjust the damages.  Cruickshank and Jendrusch severely under-scoped the damages.

Jendrusch stated the following in a declaration.  MKA understood that Peacock submitted a claim to Clear Blue, which then retained Hornbeck, an independent adjuster with Provencher and Company, to adjust the claim.  Hornbeck created an estimate for the alleged damage, but the MKA Defendants were never provided a copy of his estimate or told what it was.  Provencher and Company retained MKA as a building consultant to create an estimate for repair costs.  Jendrusch assigned Cruickshank to complete the assignment.  They briefly inspected the property, prepared an estimate for the damage, and provided it to Hornbeck.  They had no further involvement in Peacock’s claim.  MKA is a construction consulting and engineering firm, not an independent adjusting firm, and none of the MKA Defendants are licensed adjusters.  They were never provided with a copy of Peacock’s insurance policy and did not evaluate or analyze Peacock’s coverage.

MKA’s report, prepared by Cruickshank and Jendrusch, stated that “reliance upon this document … should not be made by any party except the intended recipient.”  The purpose of the report was to prepare an opinion of the probable cost of construction for work on the Peacock apartments.

The Texas Insurance Code, Section 541.003, says a person may not engage in a practice that is “an unfair method of competition or an unfair or deceptive act or practice in the business of insurance.  Section 541.0o2(2) says a person is an individual, corporation … or other legal entity engaged in the business of insurance, including an … adjuster.  Section 4101.001 says an “adjuster” is someone who investigates or adjusts losses as an independent contractor or as an employee of, among other possibilities, an independent contractor.  Section 4101.051 says a person cannot act as an adjuster unless licensed to do so.

Texas courts have held that engineers and engineering firms who investigate and consult with insurance companies in the adjustment of a claim are not persons engaged in the business of insurance.

Here, Peacock has failed to state a claim for insurance code violations against MKA defendants because they are not a person “in the business of insurance.”

The Court denied the motion to remand and dismissed the MKA defendants from the lawsuit.