While an adjuster may have contractual obligations to the insurance company that has hired them they cannot hide behind an insurer’s policies as a defense to actionable conduct. It is no defense to suit for an adjuster to argue “but I did what the insurance company told me to do.”

Texas insurance code holds liable a person that engages in an unfair or deceptive act or practice in the business of insurance and explicitly defines person to include an individual or other legal entity engaged in the business of insurance, including an adjuster.1

Recently, this blog discussed the Linron Properties opinion2 in which a federal court in the Northern District of Texas stated:

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. Liberty Mutual Ins. Co., v. Garrison Contractors, Inc., 966 S.W.2d 482, 486 (Tex.1998) (concluding based on chapter 541’s definition of a “person” that an individual employee of an insurance company may be held liable for violations of the chapter, so long as the employee is “engage[d] in the business of insurance”); Gasch, 491 F.3d at 282 (“Texas law clearly authorizes [chapter 541] actions against insurance adjusters in their individual capacities.”) (citing Liberty Mutual, 966 S.W.2d at 486). Following their lead, numerous lower courts, including this Court, have specifically found that an adjuster may be held personally liable for engaging in unfair settlement practices under provision 541.060 of the Texas Insurance Code. See Esteban v. State Farm Lloyds, 23 F.Supp.3d 723, 729–31 (N.D.Tex.2014); Yeldell v. GeoVera Specialty Ins. Co., No. 3:12–CV–1908–M, 2012 WL 5451822, at *4 (N.D.Tex. Nov.8, 2012); Campbell v. Hartford Lloyd’s Ins. Co., 3:05–CV–1180–B (N.D.Tex. Nov. 29, 2005) (Boyle, J., presiding); Blanchard v. State Farm Lloyds, 206 F.Supp.2d 840, 847 (S.D.Tex.2001); Shipley v. Nat’l Fire Ins. of Hartford, No. 3:95–CV–0972–BC, 1998 WL 355493, at *3 (N.D.Tex. June 25, 1998) (Boyle, J., presiding).

While the Linron case dealt with one specific section of the Texas Insurance Code, adjusters have multiple duties under the Code that could lead to liability.3 These include:

  1. Properly representing facts and policy provisions as they relate to coverage;
  2. attempting in good faith to effectuate a prompt, fair and equitable settlement;
  3. providing a reasonable explanation of the basis for a denial of a claim or offer of settlement; and
  4. conducting a reasonable investigation prior to denying a claim.

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1 See Tex. Ins. Code. §§ 541.002 and 541.003 (emphasis added).
2 Linron Properties, Ltd. v. Wausau Underwriters Ins. Co., 3:15-CV-00293 (N.D.Tex. June 16, 2015).
3 See Tex. Ins. Code §541.060.

  • Stephen Hadhazi

    I had thought that the new legislation passed in Texas, that will go into effect September 1st, will allow the insurance company to definitively take liability for all actions by an adjuster, thereby eliminating the ability for the lawsuit against the adjuster personally.

  • shirley heflin

    Dear Mr. Fowler:

    I could see how an “Independent Adjuster” working and/or representing an insurance company being held responsible for wrongdoings, but not an adjuster working directly for the carrier.

    The difference – to me anyway – is that a “non-independent” employee/adjuster is a “company person” and ordered to follow the rules and adjust the claims as ordered. The alternative would be for said Adjuster to report their employee to the proper authorities, thereby forfeiting his paycheck, benefits, job, etc.

    Respectfully,
    SHIRLEY HEFLIN
    Tampa, FL

  • Larry

    You are right Stephen. The adjuster still faces “liability” under the code, but the insurance company can assume that liability pre-suit, which will then preclude the filing of suit against the adjuster. The insurance company will be liable for the adjusters conduct at trial. Hopefully that will bring an end to lawsuits brought against adjusters for the sole purpose of keeping meritless lawsuits in state court.