The Potential Liability of Insurance Adjusters
D T PA
and the Texas Insurance
By Liz Brennan*
I f you are a homeowner in Texas, you can prob- ably empathize with the following situation. Imagine a husband and wife, joint homeowners, who uncover plumbing leaks throughout their house and the resulting cosmetic damage from these mysterious leaks. Having purchased an all- risks policy for their home, which insures homes against any losses not specifically included in a policy’s coverage terms, they fully expect the water damage to be covered. They file a claim with their insurance company without any immediate problems. The insurance company hires an independent insurance adjusting firm whose private adjuster inspects the damage to the couple’s house. The ad- justers hire an engineering and consulting firm to further in- vestigate and report on the cause of the leaks and damage to the home.
Much to the surprise of the homeowners, the engi- neering firm and the insurance adjusting firm conclude that only a minute portion of the cosmetic damage is attributable to plumbing leaks. Furthermore, the experts conclude that there is no foundation damage from the leak. The insurance company receives separate reports from the engineering and insurance adjusting firms and subsequently denies coverage for a substantial portion of the foundation damage.
The frustrated homeowners file suit against their in- surance company, the independent insurance adjuster and the adjuster’s firm. The claim alleges failure to promptly pay cov- ered claims under Article 21.55 of the Texas Insurance Code (hereinafter “TIC”), failure to settle claims and unfair settle- ment practices under Article 21.21 of the TIC, and misrepre- sentations of coverage under the Deceptive Trade Practices Act (hereinafter “DTPA”).
This article will examine the different avenues a ho-
meowner may pursue when filing a lawsuit against an entity such as an independent insurance adjusting firm. Cases and statutes addressing insurance adjuster liability are not as clear as those concerning a homeowner’s suit against his primary insurance company. Consequently, this article will take the road less traveled, and identify the pros and cons of suing an insurance adjuster under the DTPA and the TIC. In situa- tions similar to the scenario above, a homeowner should con- sider the difficulties in bringing a lawsuit against an insurance adjusting firm or an insurance adjuster under the TIC. While suing the insurance company is an avenue for compensation, homeowners might choose to pursue the insurance adjuster who conducted the investigation. Filing claims against an indepen- dent adjuster or an adjusting firm under Article 21.55 of the code, which addresses prompt payment of claims, poses the issue of whether an insurance adjuster is considered to be “in” the business of insurance. Article 21.55 provides an extensive list of who is considered an “insurer” and defines an “insurer” as any entity or business that is authorized to act as an insur- ance company or to provide actual insurance.1 This list estab- lishes which entities fall under the provisions of Article 21.55 and, therefore, which businesses acting as insurance compa- nies are expected to make prompt payment of claims to their insureds when necessary.2 Unfortunately for homeowners faced with the reality presented above, the list does not mention any form of insurance adjuster or insurance adjusting firm, in-
Journal of Texas Consumer Law