Statute of Limitations Bars Insurers’ Claim Against Adjuster

By Jim Sams | April 22, 2019

A Connecticut independent adjusting firm dodged a $1 million bullet last week when the state Supreme Court ruled that a three-year statute of limitations applied to a negligence claim filed against it.

In a preliminary decision released Tuesday, the Supreme Court ruled that William Kramer & Associates did not have a “special relationship” with plaintiff Essex Insurance Co. that would have tolled the statute. The insurer had argued that because WKA was in a position of trust, it had a continuing duty to disclose that there was a mortgage on a policyholder’s property, even long after it had been paid for its adjusting services.

Because Essex was unaware of that mortgage, it paid the property owners $2.66 million to settle the claim and ultimately had to pay an additional $1 million to the mortgage holder, plus $250,000 in attorney fees, according to a briefing by the carrier.

WKA argued that if would be absurd for the court to hold that an adjuster’s duty to a client never ends.

“There is a world of difference between a professional having a duty to disclose a mistake if the professional has actual knowledge of the mistake, and saying that a professional who has completed an engagement has an ongoing and never-ending duty to discover a past mistake,” stated attorney Richard A. Simpson in briefing to the Supreme Court.

Essex was one of three carriers that insured the Villas of Lauderhill apartment complex in Broward County, Florida. It issued a $5 million excess policy that would kick in only if the primary carrier’s policy limits were exhausted.

In October 2005, Hurricane Wilma struck South Florida, causing extensive damages to The Villas. Essex hired WKA, based in Connecticut, to adjust the claim filed by the property owner, IDM Management.

During the course of its investigation, WKA adjuster Robert Oberpriller to review the damage. Oberpriller lived in Duluth, Minnesota, but logistics were handled by a secretary in WKA’s Palm Harbor, Florida office. Oberpriller, relying on another adjuster’s records, believed that there were no mortgages on The Villas property and told Essex so. Without his knowledge, the property owner’s insurance agent had mailed an accurate list of mortgages to WKA’s Palm Harbor office, where it was filed and forgotten.

Oberpriller surveyed the damage and reported that the primary carrier’s policy limit would likely be exhausted and Essex’s coverage would come into play. Essexpaid $2.66 million to the complex’s owner, IDM Management, in March 2007. No repairs were made and the apartment complex was eventually sold in foreclosure, according to court records.

As it turns out, Intervest National Bank did hold a mortgage on the property. The bank filed suit against Essex to collect its share of the claim payment.

Initially, WKA again told Essex that there was no mortgage on the property. But when it prepared for a deposition in the case in 2012, it discovered the letter that listed Intervest as a mortgage holder. It was in thin file that had made it to the main case file.

After learning that the mortgage had been overlooked, Essex cut its losses and negotiated a $1 million settlement with Intervest. Essex, in turn, sued WKA in 2013.

The insurer won the first round when a jury found that WKA had been negligent and awarded Essex $1.25 million, finding that the three-year statute of limitations did not apply. The trial judge disagreed, however, and ruled in WKA’s favor despite that verdict.

On appeal, the 2nd District Court of Appeal found that Connecticut’s statute of limitations was ambiguous and asked the state Supreme Court to decide if the statute of limitations applied to Essex’s claim.

The case hinged on whether WKA had a “special relationship of trust” with Essex. Generally, Connecticut courts have held that the statute of limitations clock in negligence actions starts ticking once the negligent act is taken, even if the aggrieved party is unaware of the negligence.But the courts have also held that the statute can be tolled if the parties have a “special relationship” that is also “continuous,” such as the relationship between a physician and a patient who continues to seek treatment, or to an attorney who continues to represent him in a manner.

The Supreme Court found that the exception did not apply. In a unanimous opinion written by Chief Justice Richard A. Robinson, the court said it could not find any way to construe the facts in a matter that would impose a continuous duty on WKA.

“Generally, an agent’s duty to use reasonable efforts to give his principal information that is relevant to the affairs entrusted to him ends with the termination of the agency,” the high court said.

Was this article valuable?

Here are more articles you may enjoy.