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ALERT: Court Rules That Insured Claims Against an Insurer's Adjuster May Be Possible

July 21, 2015

The Eastern District of Pennsylvania has recently held that negligence claims asserted directly against an insurance company’s adjuster-employees may be viable under Pennsylvania law as a result of their claims handling activities. Kennedy v. Allstate Prop. & Cas. Ins. Co., No. 2:15-cv-2221-TON, slip op. at *1 (E.D. Pa. July 8, 2015).

In Kennedy, the plaintiffs, Rachel and Sean Kennedy, filed a Complaint in Pennsylvania state court alleging various state law claims against Allstate and three (3) adjuster employees. The plaintiffs alleged that the adjusters improperly evaluated their underinsured motorist claims and engaged in intentional delay, misrepresentation and fraud in the course of processing, investigating and arbitrating their claim. The defendants removed the case to Federal Court asserting that the adjusters were fraudulently joined in order to defeat federal diversity jurisdiction and that the negligence claims asserted against them were not viable under Pennsylvania law. In response, the plaintiffs filed a Motion to Remand. In considering the plaintiffs’ Motion, the Court had to determine whether the plaintiffs’ claims against the individual adjusters are permitted under Pennsylvania state law.

The plaintiffs alleged that the individual adjuster defendants affirmatively misrepresented and concealed material facts from them in order to delay resolution of their claims. In support of removal, the defendants argued fraudulent joinder asserting that no colorable grounds supported the claims against the individual adjuster defendants under state law. The Court highlighted the standard stating that if there was “even a possibility that a state court would find the Complaint states a cause of action” the Court must remand. The defendants asserted that there were no colorable grounds to support the negligence claims against the adjusters since the adjusters owed no duty of care to an insured under state law. The Court stated that while Pennsylvania law is silent on the issue of whether the adjusters owed such a duty, other jurisdictions, specifically New Hampshire and Alaska, have found such a duty. The Court found that there is at least ‘a possibility’ that the Pennsylvania Supreme Court, construing state ‘substantive law in favor of the plaintiff’ could decide that an insurance adjuster owes a duty of care to an insured that would be breached by failing to reasonably investigate an insured’s claims and making misrepresentations regarding the ongoing status of the investigation.

Therefore, the Court determined that remand was necessary as the plaintiffs had stated at least a colorable claim for negligence against the individual adjuster defendants under Pennsylvania law. The Court also found that the gist of the action doctrine did not preclude the plaintiffs’ negligence claims.

The Court’s Memorandum makes clear that its holding is limited to finding that such claims may be permitted and that whether such claims will be permitted under Pennsylvania law is an issue yet to be determined. Still, the holding opens the door for an enlarged scope of bad faith claims to include potential negligence liability against the individual claim adjusters.

*This case was not handled by Zarwin Baum attorneys. 


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