Stating A Claim Against An Insurance Adjuster

Arlington insurance attorneys want to know the proper way to state a claim against an insurance adjuster so as to keep a case in State Court rather than have an insurance company get the case removed to Federal Court. A recent case from the US District Court, Northern District, Dallas Division, shows how to be successful in this effort. The case is styled, Sara Esteban v. State Farm Lloyds and Aaron A. Galvan. Here is the relevant information from the case.
This case arises out of an insurer’s alleged failure to properly adjust and pay the full proceeds due on a claim made under an insurance policy. Esteban purchased an insurance policy fromState Farm to insure real property that she owned. A wind and hailstorm struck, causing significant damage to homes and businesses in the area. The Property suffered roof and water damage as a consequence of the storm, and Esteban submitted a claim to State Farm to cover the costs of repair. Galvan was assigned by State Farm to adjust Esteban’s claim. At all relevant times during the adjustment of Esteban’s claim, Galvan acted as an independent adjuster and was not an employee of State Farm. Esteban alleges that Galvan “improperly adjusted” her claim, and that his subsequent report “failed to include many of Esteban’s damages.” More specifically, Esteban charges that “his estimate did not allow adequate funds to cover repairs to restore her home” and that Galvan “misrepresented the cause of, scope of, and cost to repair the damage to Plaintiff’s Property, as well as the amount of and insurance coverage for Plaintiff’s claim/loss under Plaintiff’s insurance policy.” Esteban also insists that Galvan advised her as to how she could repair the Property in order to prevent further damage, but that this advice was negligent and false.
Esteban maintains that, as a consequence of Galvan’s misrepresentations, State Farm wrongfully denied portions of her claim and misrepresented the amount of damages, which in turn prevented her from properly repairing the Property and caused further damage. Specifically, while State Farm and Galvan represented that Esteban’s damages were only $1,932.72, Esteban insists that her damages exceed $33,000. Esteban asserts that State Farm has not performed its contractual duty under the Policy and that it has failed to settle her claims in a fair manner. She also insists that Defendants’ respective failures to properly adjust, inspect, or communicate with her regarding her claims, or to later fully compensate her, constitute violations of the Texas Insurance Code.
The parties’ main point of contention is whether Defendant Galvan was properly joined in this action. Defendants maintain that Esteban cannot assert a claim against Galvan as a matter of Texas law because he is an independent adjuster hired by State Farm, and thus owes Esteban no duty under the law. They also maintain that Esteban fails to make sufficient allegations in her Petition so as to state a claim against Galvan. Esteban counters that Galvan can be held individually liable under Texas law for his conduct in adjusting the claim, and she insists that she has stated sufficiently particular facts to make out a claim against him individually.
Esteban focuses specific attention on her claims under Chapter 541 of the Texas Insurance Code, insisting that she has pled sufficient facts to make out a claim that Galvan engaged in unfair settlement practices in his role as adjuster of her claim. Esteban points to cases from the Texas Supreme Court, the Fifth Circuit, and federal district courts to demonstrate that numerous courts have found that an adjuster can be held individually liable under the Texas Insurance Code.
Defendants respond by arguing that Galvan is improperly joined in this case because, as an independent adjuster, Galvan cannot be held liable to an insured for improper investigation or advice. Defendants cite to numerous Texas appellate cases holding that independent adjusters lack a sufficient relationship with insured parties to be held liable under various legal theories, including for violations of the Texas Insurance Code. Defendants attempt to distinguish those cases that Esteban cites, arguing that those cases only establish that adjusters employed by the insurer can be held liable under the Texas Insurance Code.
The Texas Insurance Code permits any person “who sustains actual damages” to bring an action “against another person for those damages caused by the other person engaging in . . . an unfair or deceptive act or practice in the business of insurance.” TEX. INS. CODE ANN. § 541.151. An “unfair or deceptive act or practice in the business of insurance” includes engaging in “unfair settlement practices with respect to a claim by an insured,” which, in turn, includes (1) misrepresenting to a claimant a material fact or policy provision relating to coverage at issue; (2) failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of:
(A) a claim with respect to which the insurer’s liability has become reasonably clear; or . . . (3) failing to promptly provide to a policyholder a reasonable explanation of the basis in the policy, in relation to the facts or applicable law, for the insurer’s denial of a claim or offer of a compromise settlement of a claim.
A “person” under the Code includes “an individual, corporation, association, partnership, reciprocal or interinsurance exchange, Lloyd’s plan, fraternal benefit society, or other legal entity engaged in the business of insurance, including an agent, broker, adjuster, or life and health insurance counselor.” The Texas Supreme Court has determined that the “adjustment of claims and losses” qualifies as “the business of insurance,” thus making an adjuster a “person” under the Insurance Code.
The Court concludes that Esteban’s factual allegations are sufficient to state a claim under the Texas Insurance Code. Esteban alleges in her Original Petition that Galvan “improperly adjusted” her claim, and that his report therefore “failed to include many of Esteban’s damages.” She charges that “his estimate did not allow adequate funds to cover repairs to restore her home” and that Galvan “misrepresented the cause of, scope of, and cost to repair the damage to Plaintiff’s Property, as well as the amount of and insurance coverage for Plaintiff’s claim/loss under Plaintiff’s insurance policy.” While these allegations are relatively spare and lacking in specificity, the Court determines that they allege sufficient facts under the lenient Texas fair notice standard such that Defendants would have adequate notice of the “nature and basic issues of the controversy and what testimony will be relevant.”
Specifically, the Petition alleges that Galvan was an adjuster engaged in the business of insurance, and therefore a “person” under the Texas Insurance Code. Additionally, the Petition alleges that Galvan improperly adjusted Esteban’s claim and misrepresented certain key facts related to her damages and coverage, which is sufficient to state a claim under § 541.060. These allegations are sufficient to state a claim under the Texas Insurance Code, and Galvan is therefore properly joined as a party to this action.