relationship with, and therefore owed no duty to, Dear. Absent such a relationship and concomitant duty, H & G could not be liable to Dear for improper investi- gation and settlement advice, regardless of whether Dear phrased his allegations as negligence, bad faith, breach of contract, tortious interference, or DTPA claims.20 A homeowner who chooses to pursue an insurance adjusting firm hired and controlled solely by the insurance company to investigate a claim is not likely to succeed in light of Dagley and Dear. However, if the homeowner can show enough communication or contact with the adjusting firm to prove that some or all of the investigative services were pro- vided or communicated directly to the homeowner, rather than just for the insurance company, the homeowner’s position would be significantly strengthened.
As noted above, another potential avenue for a ho- meowner bringing suit against an insurance adjuster is the
According to the Natividad case, an insurance carrier owes to its insured a non-delegable duty of good faith and fair dealing.
unfair insurance practices section of the TIC, Article 21.21. In order to fall under the provisions of this article, the TIC requires that the act or practice complained of be in the “busi- ness of insurance.”21 Unfortunately for a homeowner looking to pursue an insurance adjuster for an unfair insurance prac- tice claim, an independent insurance adjusting firm has a good argument to defeat a homeowner’s claim pursuant to Article 21.21 because it can more easily allege that its conduct does not concern the business of insurance. In the Dagley case, the Fourteenth Court of Appeals concluded that the independent engineering company hired by the insurance company was not in the business of insurance as required by the TIC and, there- fore, could not be held liable to the insured under Article 21.21.
State Farm hired Haag to determine the extent of dam- age, if any, from the storm. Haag did not: (1) partici- pate in the sale or servicing of the policies, (2) make any representations regarding the coverage of the poli- cies, or (3) adjust any claims. As an independent firm hired to provide engineering services, it cannot be said that Haag is engaged in the business of insurance.22
Following this ruling concerning the liability of third party investigators under Article 21.21, an insurance adjusting firm could very well escape liability to a homeowner under the same principles, even if unfair practices were indeed commit- ted by the adjuster. On the other hand, an adjusting firm might much more likely be considered in the business of insurance as opposed to an independent engineering firm such as the one in Dagley.
Entities and persons listed in Article 21.21 are pro- hibited from engaging in any deceptive trade practices set forth in the insurance code.23 According to section 2 of Article 21.21, a “person” includes any individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds insurer, fraternal benefit society, and any other legal entity engaged in the business of insurance, including agents, brokers, adjusters, and life insurance counselors.”24 The Texas Supreme Court in Liberty Mutual Ins. Co. v. Garrison Contractors, Inc. agreed that
the definition of “persons” in Article 21.21 does indeed in- clude insurance adjusters and adjusting firms.25
According to the Natividad case, an insurance carrier owes to its insured a non-delegable duty of good faith and fair dealing.26 This duty arises from the nature of the contract be- tween the two parties, which creates what the Texas Supreme Court in Natividad called a special relationship - one that arises due to the unequal bargaining power between an insurer and its insured.27 Ultimately, a homeowner choosing to follow any of the courses of action presented in this article must remem- ber that when his insurance company hires an outsider such as an insurance adjuster, the insurance company ultimately re- mains responsible for any and all breaches of duty.28
The options presented in this article are not exclu- sive remedies, and the position taken assumes that a home- owner is taking action directly against an insurance adjuster or adjusting firm. Articles 21.55 and 21.21 of the Texas Insur- ance Code and the Deceptive Trade Practices Act are the most likely avenues a homeowner and his lawyer would employ in the above situation. The most crucial point for a homeowner to remember is that Texas courts favor placing liability for both breaches of duty and mistakes made by an insurance adjuster on the homeowner’s insurance company, regardless of which entity actually made the mistake.
J.D. candidate, 2004, University of Houston Law Center,
Chief Managing Editor, JOURNAL OF TEXAS CONSUMER LAW.
TEX. INS. CODE ART. 21.55 § 1(4) (2004), provides:
“Insurer” means any insurer authorized to do business as
an insurance company or to provide insurance in this state, including:
(A) a domestic or foreign, stock and mutual, life, health, or accident insurance company;
(B) a domestic or foreign, stock or mutual, fire and casualty insurance company;
a Mexican casualty company;
a domestic or foreign Lloyd’s plan insurer;
a domestic or foreign reciprocal or insurance exchange;
a domestic or foreign fraternal benefit society;
a stipulated premium insurance company;
a nonprofit legal service corporation;
a statewide mutual assessment company;
a local mutual aid association;
a local mutual burial association;
an association exempt under Article 14.17 of this code;
a nonprofit hospital, medical, or dental service corpo-
ration, including a company subject to Chapter 20 of this code;
a county mutual insurance company;
a farm mutual insurance company;
a risk retention group;
a purchase group;
a surplus lines carrier; and
a guaranty association created and operating under Ar-
ticle 21.28-C or 21.28-D of this code.
Dagley v. Haag Eng’g Co., 18 S.W.3d 787, 793 (Tex. App.—
Houston [14th Dist.] 2000, no writ). State Farm hired Haag to determine the extent of damage, if any, from the storm. Haag did not: (1) participate in the sale or servicing of the policies, (2) make any representations regarding the coverage of the policies, or (3) adjust any claims. As an independent firm hired
Journal of Texas Consumer Law