FEDERAL COURT REITERATES POSITION ON ADJUSTER LIABILITY IN UNFAIR SETTLEMENT PRACTICES FOR PURPOSES OF JURISDICTION

Recently, the United States District Court for the Northern District of Texas addressed joinder of an insurance adjuster based on a claim of unfair settlement practices. Mary v. Allstate Lloyds, No. 3:16-CV-3383-L-BN, 2017 WL 6462009 (N.D. Tex. Dec. 19, 2017) (slip op.) recognized adjuster liability under Texas Insurance Code Section 541.060 for purposes of the Federal court’s jurisdiction. Plaintiff Margaret Mary moved to remand the case to state court based on joinder of Texas defendant, insurance adjuster John Spuriell. Mary alleged Spuriell was personally liable for unfair settlement practices under the Texas Insurance Code.

Defendants, in an attempt to keep the lawsuit in Federal court, argued that Mary’s joinder of Spuriell was improper as she had no reasonable basis to recover against him, since, as a matter of law, insurance adjusters cannot be held personally liable for unfair settlement practices. The Court disagreed stating, “this court and others have concluded that an insurance adjuster may be held personally liable for engaging in unfair settlement practices under § 541.060(a)(2) of the Texas Insurance Code because the adjuster can effect or bring about the settlement of an insured’s claim.” The basis for the potential liability of an adjuster is that Chapter 541 of the Insurance Code includes adjusters in the definition of “person” and does not distinguish between the roles of insurers and adjusters. Furthermore, liability for unfair settlement practices is not limited exclusively to conduct involved in settlement, but covers “a broader swath of conduct related to settlement.” The Court concluded that the “better approach” is to construe § 541.060(a)(2)(A) as not precluding claims against adjusters as a matter of law, but instead considering their liability on a case by case basis. As a result, the Court remanded the case as Defendants could not show that Spuriell was improperly joined in the lawsuit.

Editor’s Note: The Court did not address the merits of the claim against the adjuster or the potential scope of the adjuster’s liability. The burden for proving wrongful joinder is steep, the standard being whether the defendant has demonstrated there is no possibility for recovery against the improperly joined party. This holding simply states that adjusters are not insulated from liability as a matter of law in allegations of unfair settlement practices. The court must look at the particular facts of each case to make such a determination.