In Tippett v. Ameriprise Ins. Co., Civ. Action No. 14-4710, 2015 U.S. Dist. LEXIS 37513 (E.D. Pa. Mar. 25, 2015), the United States District Court for the Eastern District of Pennsylvania held that the Pennsylvania Supreme Court is unlikely to impose a duty of care for negligence claims brought by an insured on an independent insurance adjuster hired by the insured’s insurance company.
Plaintiffs brought an action against Ameriprise Insurance Company (“Ameriprise”) and IDS Property Casualty Company (collectively the “Insurers”) and All American Adjusters (“All American”) relating to a claim Plaintiffs filed under their homeowners’ insurance policy for a fire at Plaintiffs’ home. The Insurers issued the homeowners’ policy and All American had been hired by the Insurers to document the damage to the Plaintiffs’ home and prepare an estimate to repair the home. Plaintiffs had hired A-Plus Public Adjusters (“A-Plus”) to help them with filing the insurance claim. The Insurers moved to dismiss four counts of the complaint and to strike parts of two other counts while All American sought to dismiss all six counts against it.
In particular, All American moved to dismiss Count IV, which alleged that All American was negligent in preparing the loss estimate for Plaintiffs’ home to which All American claims it had no duty of care to Plaintiffs. The court noted that the Pennsylvania Supreme Court, intermediate appellate Pennsylvania courts and the federal courts interpreting Pennsylvania law have not addressed whether an insurance adjuster owes a duty of care to the insured in such a case. As a result, the court looked to other state supreme court decisions, finding a majority of states have held that “an insured cannot bring a negligence claim against an independent insurance adjuster because an independent insurance adjuster owes the insured no duty of care.” In addition, the court examined a recent Seventh Circuit Court of Appeals decision, which predicted that the Indiana Supreme Court would similarly hold that adjusters owe no duty of care to insureds and cannot be sued for negligence. While All American cited the Eastern District of Pennsylvania decision, Peer v. Minn. Mut. Fire & Cas. Co., No. 93-2338 (E.D. Pa. Dec. 23, 1993), in support of its position, the court in that case only predicted that the Pennsylvania Supreme Court would prevent a plaintiff from suing for punitive damages in tort arising out of the bad faith practices of an insurance adjuster.
The court recognized that other jurisdictions found that there is no duty of care owed to the insureds for two reasons. First, insureds can already recover for an adjuster’s torts by bringing actions for breach of contract and bad faith actions against their insurers. As a result, the potential for a double recovery exists if the insured is permitted to recover from the adjuster and also the insurer for the same conduct. Second, “imposing a duty on the adjuster to the insured could create ‘an irreconcilable conflict between such duty and the adjuster’s contractual duty to follow the instructions of its client, the insurer.'”
Finally, the above reasons are consistent with Pennsylvania law, which permits an insured to sue its insurer for actions of the insurer’s agents including adjusters. Furthermore, Pennsylvania courts recognize that “independent insurance adjusters ‘owe a duty of performance to their principals, the insurance companies.'” As a result, the court held that the Pennsylvania Supreme Court is unlikely to find that adjusters hired by an insured’s insurance company owe a duty of care to the insured, and therefore, dismissed Count IV of Plaintiffs’ complaint with prejudice.
The Insurers also moved to dismiss other counts of the complaint. With respect to Count II in which Plaintiffs claim that the Insurers acted in bad faith during the investigation of their insurance claim in violation of Pennsylvania’s Bad Faith Statute, 42 Pa. Cons. Stat. § 8371, the Insurers sought to strike Plaintiffs’ claims for compensatory and consequential damages. The court noted that two types of bad faith claims exist: (1) a contract claim for breach of the implied contractual duty to act in good faith; and (2) a statutory bad faith tort claim under 42 Pa. Cons. Stat. § 8371. Given that Plaintiffs did not bring a common law bad faith claim, which allows for the recovery of compensatory damages, and Pennsylvania’s Bad Faith Statute does not allow for compensatory damages or consequential damages, the court struck the Plaintiffs’ claims for these damages in Count II of the complaint.
For more on the court’s ruling, the full opinion can be downloaded here.