The case,
Linron Properties v. Wausau Underwriters Insurance Company, involved a commercial property claim made because of storm-related damages. The insured, Linron Properties, filed to get coverage for the repair costs and to investigate the claim, the insurance agency hired an adjuster.
In the suit filed with the court, the insured has alleged that the adjuster broke the duty of good faith and fair dealing, and also personally violated the various provisions of the Insurance Code.
Specifically, the suit alleged that the adjuster violated section 541.060 and § 541.060(a)(2)(A) “by retaining an engineer and contractor known for arriving at findings that favored insurance companies, refusing to identify damage to the structure covered under the policy, and failing to respond to the insured’s inquiries regarding the status of the claim and payment.”
According to Linron Properties, this action of the adjuster led to the company suffering “actual damages, economic damages, and consequential damages.”
The Insurance Code allows individuals who have suffered “unfair methods of competition or unfair or deceptive acts or practices in the business of insurance” to file a case against the “person or persons” involved.
According to the Code, a “person” can be any entity including an insurance agency and an adjuster.
While studying the merits of the case, the Federal Court also took into older, similar cases into consideration.
In various cases such as
Liberty Mutual Ins. Co., v. Garrison Contractors, Inc., 966 S.W.2d 482, 486 (Tex.1998),
Campbell v. Hartford Lloyd's Ins. Co., 3:05–CV–1180–B (N.D.Tex. Nov. 29, 2005),
Blanchard v. State Farm Lloyds, 206 F.Supp.2d 840, 847 (S.D.Tex.2001), etc., various courts, including the Texas Federal Court, had found that the adjuster could be held personally liable.
However, even though there are a lot of cases supporting Linron Properties’ argument, a number of courts have begun to question to the validity of holding the adjuster personally liable. The reasoning behind it is that since an adjuster only assesses the damage, and it is the insurance company which ultimately decides on the settlement, he/she cannot be held responsible.
But, a closer inspection of the law works against this logic. Section 541.060(a)(2)(A) says that persons involved in the insurance business should not fail to “attempt in good faith to effectuate a prompt, fair, and equitable settlement.” The use of the word
effectuate is key here since it means “to bring about”. This means that all persons involved in the settlement, including the adjuster, can be held liable.
Ultimately, it is the duty of the adjuster to fairly assess a claim and check its validity. If there is any mistake or delay on the adjuster’s part, it will have a negative impact on the settlement of a claim as well.
After considering arguments of both sides, the court held that Linron’s allegations are satisfactory and ruled that an adjuster can be held personally liable in case he/she doesn’t handle a case according to the Insurance Code.
