Federal Court in Dallas Departs from Prevailing Case Law on Adjuster Liability for Failing to Effectuate Settlement under Texas Insurance Code

In another case that follows the recent trend of finding adjusters potentially liable in improper-joinder cases, Senior Judge Joe Fish remanded a hail-damage lawsuit to state court. The facts in Vakeia Roach v. Allstate Vehicle and Prop. ins. Co., No. 3:15-CV-3228-G, 2016 WL 795967 (N.D. Tex., Feb. 29, 2016), are similar to several other recent cases in which homeowners name individual adjusters as defendants to defeat federal diversity jurisdiction. The insured Vakeia Roach sued Allstate and adjuster Darren Morgan for claims arising out of Allstate’s partial denial of her insurance claim because the storm damage did not exceed the deductible.

The court focused on Section 541.060(a)(2) of the Texas Insurance Code, which imposes liability for “failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement” of an insurance claim. The court cited other cases out of the Northern District that held that this section did not apply to adjusters who do not have the authority to ultimately settle claims. The court considered the Texas Legislature’s use of the word “effectuate,” and concluded that this simply required that a party play a role in settlement, not that the party actually finalize the settlement. The court also noted that an adjuster has the ability to bring about a prompt settlement because “it is upon his investigation that the insurance company’s settlement of a claim is generally based.” The court then looked to Roach’s allegations that the adjuster conducted a substandard inspection; failed to include many damages in his report; misrepresented the cause and scope of damage and repairs; and made these misrepresentations to both Roach and Allstate. Finding that these allegations satisfied Texas’ lenient pleading standards, the court held that Roach had adequately stated a potential claim against Morgan and remanded the case to state court.