- Protection for Insurance Adjusters
- December 20, 2013
- Law Firm: Carlock Copeland Stair LLP - Atlanta Office
Insurance adjusters are a vital conduit in the claims process, whether it is pre-suit, during litigation, or during the resolution stages of a claim. Pursuant to Georgia law, an insurance company has a duty to exercise ordinary care and good faith in the handling of a claim against its insured. See Dumas v. ACCC Ins. Co., 349 Fed. App’x 489 (11th Cir. 2009). “The obligation to act in good faith ‘arises out of the relationship between the insurer and the insured created by the contract or policy of insurance.’” Id. at 491-92. Moreover, the relationship between the insurer and insured creates an independent duty, implied from the terms of the contract, that the insurer not injure the insured through negligence or acts of bad faith. Interestingly, however, Georgia courts have held that insurance adjusters do not share the same relationship with an insured as the insurer because there is no confidential relationship between the insured and the adjuster.
In Dumas v. ACCC Ins. Co., John Dumas was killed when Tammy Carter drove her vehicle off of a road in Decatur, Georgia. Thereafter, Dumas’s surviving spouse and daughter sought to recover from Carter, as well as American Century Casualty Company (“ACCC”). ACCC assigned McMasters, an insurance adjuster, to handle the claim. The Dumases submitted a policy limits settlement demand of $25,000 to McMasters. In addition, the Dumases agreed to release ACCC, but refused to release Carter from personal liability, above the policy limits. McMasters agreed to the terms of the deal without submitting a counteroffer to condition the settlement on the release of both parties and tendered the $25,000 to the Dumases. ACCC later claimed that McMasters had mistakenly agreed to the demand, and the Dumases sued to enforce the settlement. Ultimately, ACCC agreed to the pay the $25,000, pursuant to the original terms, and the lawsuit was dismissed.
Following the settlement, the Dumases filed a wrongful death suit against Carter. ACCC defended Carter in that lawsuit for over a year before Carter eventually reached an agreement with the Dumases wherein she consented to a judgment for four million dollars and also assigned her potential claims against ACCC to the Dumases. ACCC filed a declaratory judgment action in federal court, but the Dumases filed a complaint in state court alleging that both ACCC and McMasters “acted with negligence and in bad faith by accepting the demand of the Dumases without requiring them to relinquish all claims against Carter.” ACCC and McMasters removed the negligence action to Federal Court and the Dumases’ motion to remand was denied.
The Dumases argued that the addition of McMasters defeated diversity jurisdiction, but the District Court held that McMasters could not be held liable for negligence and dismissed him from the action. The court concluded that McMasters, as an insurance adjuster, did not have a contractual relationship with Carter, and, thus, did not owe her an implied duty to act in good faith. As assignees of Carter, the Dumases could not establish a cause of action premised on negligence. Carter and ACCC had a contractual relationship that required ACCC to handle the claim against Carter in good faith; however, McMasters did not owe Carter an independent duty to act in good faith.
While ACCC remained subject to the cause of action, joining the adjuster to the cause of action was unsuccessful in precluding removal to Federal Court.