“The majority rule on negligence of individual claim adjusters is that they do not owe a general duty of care to the insured, and therefore cannot be held liable to the insured for negligence as a matter of law.” Silon v. American Home Assur., 2009 WL 1090700 at *2 (D. Nev. April 21, 2009). At least 13 jurisdictions have developed case law where courts have found that insurance adjusters do not owe independent duties to policyholders. These include Alabama, Arizona, California, Florida, Mississippi, Missouri, Nevada, New York, North Carolina, Pennsylvania, South Carolina, Texas and Vermont.
The Vermont Supreme Court rejected claims of adjuster negligence in Hamill v. Pawtucket Mut. Ins. Co., 179 Vt. 250, 892 A.2d 226 (2005). The Vermont Supreme Court’s decision in Hamill was predicated, in part, on a recognition that the relationship between insurer and insured was fundamentally contractual and was defined and governed by the coverage provisions of the insurance policy and the implied covenant of good faith and fair dealing contained therein.
Previously, Vermont law prohibited a claimant from seeking damages for contractual losses through tort law. See, e.g., Wentworth v. Crawford & Co., 174 Vt. 118, 126-27, 807 A.2d 351, 357 (2002). The Vermont court had also previously held on numerous occasions that a negligence claim could only exist if “there [was] a duty independent of any contractual obligations. See, e.g., Springfield Hydroelectric Co. v. Copp, 172 Vt. 311, 316, 779 A.2d 67, 71-2 (2001).
More recently, in Murphy v. Patriot Ins. Co., 2014 WL 3965639 (Vt. Aug. 14, 2014), the Vermont Supreme Court reaffirmed the Hamill decision and rejected a claim seeking a negligence claim against adjusters.
The Murphy case involved storm damage and an independent adjuster retained by Patriot Insurance Company. The IA did an initial inspection of the storm damage from which Patriot paid the amount of the estimated loss. However, the insured filed a second claim after a worker discovered damage from rot resulting from water infiltration. Because of this newly discovered damage, the IA returned to inspect the property which led to a repair supplement. The insured then retained an independent building inspector who inspected the loss and found more extensive damage that had previously been discovered. This led to a second supplement paid by Patriot based upon the building inspector’s report. The insured and Patriot were still in discussions regarding the scope of damages when the insured filed a complaint for breach of contract. The insured amended the complaint to include a claim against the IA. The Vermont Supreme Court rejected the adjuster negligence claim, however.
The trial court in Murphy refused to find a cognizable legal duty against the IA for independent negligence and the Vermont Supreme Court affirmed. The High Court noted that a majority of courts had rejected an independent claim of negligence against adjusters reasoning that the relationship between the insured and the insurer was defined and governed by the insurance policy and the implied covenant of good faith and fair dealing. The conduct of the IA, acting as the agent for the insurance company, was imputed to the insurer which was subject to liability for the adjuster’s mishandling of claims in actions alleging breach of contract or bad faith. Therefore, the Court noted that subjecting adjusters to additional and potentially open-ended tort liability would be contrary to the law of agency and disproportionate to their ability to control their potential risks.
The Court found an independent negligent claim to be troublesome because of the unlikelihood that an action alleging negligent mishandling of a claim would be available even against the insurer. The Court reaffirmed its analysis in Hamill and reaffirmed its concurrence in the general view that there was no claim for independent negligence against adjusters under Vermont law. The Court could not discern any compelling public policy, reason or other basis for imposition of an independent, extra-contractual negligence duty under the circumstances.
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