A week or so ago I encountered a strange argument from an insurance company: policyholders are not allowed to list a carrier’s independent adjusters as fact witnesses in a contractual dispute; i.e., independent adjusters relate only to an insurer’s claim handling and are therefore only relevant to an extra-contractual (bad faith) dispute. Mind you, the insurance company advancing this argument had no problem listing the public adjuster on its fact witness list. Quite a slippery slope would be created if a carrier were allowed to secret germane information by having an “independent” adjuster gather same. It is a good thing time-tested legal principles do not support the carrier’s argument.

At the threshold, allow me to remind everybody of something very basic – an independent adjuster retained by an insurance company “is a special agent of the company for whom he or she acts, and the adjuster’s powers and authority are prima facie coextensive with the business entrusted to his or her care, which usually is limited to ascertainment and adjustment of a loss.”1 Here’s some more on what it means to be a “special agent”:

While acting in the line of settling and adjusting claims against his or her principal, an insurance adjuster has the power and authority of the president, vice president, or secretary of the principal. … An insurance adjuster may bind his or her company by admissions or denials of liability made after an investigation, particularly when the adjuster’s acts are ratified by the insurer.

What does this mean? The independent adjuster, for all legal intents and purposes, is the insurance company. An insurance company does not get to preclude a judge or jury from being told how, what, why, where, and / or when an independent agent’s work influenced a claim decision. Indeed, that is why the well-respected insurance treatise quoted above makes clear that “[a]n in[dependent] adjuster may bind his or her company by admissions or denials of liability made after an investigation.” If it were otherwise, a policyholder’s breach of contract case would be limited to this: “Dear judge (or jury), the insurance company’s claim decision breached the insurance contract. I do not get to show you how or why the claim decision was incorrect, you just need to trust me.” In my opinion, asking a Court to so limit the policyholder would not pass what we lawyers call the laugh test.

1 3 Couch on Ins. § 48:64 (West, June 2013) (internal citations omitted).