In what sounds like a simple and obvious statement, an adjuster sent by the insurance company to perform an inspection and write an estimate of damages can be liable for violating the Texas Insurance Code. The Western District of Texas recently held that while an adjuster cannot be held liable as an insurer under the insurance code, the plaintiffs could have a valid claim against the insurance adjuster under Texas Insurance Code section 541.060.1

In SO Apartments, the insurance company argued, in what has become common practice, that any suit against the insurance adjuster sent to adjust the claim is improper and that the court should find the adjuster was improperly joined. The trial court ultimately looked at the specific facts pled by the insured, that the adjuster had been “dragging Plaintiffs’ claim along for months” . . . . “has yet to produce an estimate of the undisputed damage amounts” and “purposefully dragged the claim out and failed to act promptly in order to pad his billing and increase his bonusses.” The insureds also said that they provided information regarding the loss to the adjuster and he ignored it. These allegations were enough from for the court to hold that the adjuster was a proper party as to claims alleging:

  1. The adjuster misrepresented one or more material facts relating to the policy coverage;
  2. failed to attempt to in good faith to effectuate a prompt, fair, and equitable settlement of a claim;
  3. failed to promptly provide a reasonable explanation of the basis for the denial of full payment; and
  4. refused to conduct a reasonable investigation.

While the Texas Insurance Code still allows claims against an adjuster in all suits filed after September 1, 2017, the adjuster may no longer be a party that the insured can sue. Newly enacted Chapter 542A of the Texas Insurance Code requires an insured to give notice to any person that the insured may file suit against 61 days prior to filing suit.2 In that 61 days the insurance company may accept liability for the insurance adjusters on the claim. If the insurance company makes the election, the insured can no longer file suit against the adjuster.3 So, while the court in So Apartments remanded the case back to state court for lack of diversity jurisdiction, (the adjuster in this case—as is often the case—was a Texas resident), many future first-party property insurance cases in Texas will be litigated in the Federal Court system.
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1 SO Apartments, LLC, et. al. v. Everest Indem. Co., Case 5:17-cv-00965 (W.D. Tex. Nov. 30, 2017).
2 See, Texas Insurance Code section 542A.003.
3 See, Texas Insurance Code section 542A.006.

  • shirley heflin

    Dear Mr. Fowler:

    Are we talking about an Independent Adjuster in this case or an in-house Adjuster? I ask because your blog entry states “…. in order to pad his billing and increase his bonusses.”
    Just curious.

    Please advise.

    Respectfully,
    SHIRLEY HEFLIN
    Tampa, FL