A recent federal District Court decision from Indiana, Autumn Glen Homeowners Ass’n. v. Travelers Ind. Co. of America, 2015 WL 1256391, 2015 U.S. Dist. LEXIS 33317 (S.D. Ind., Mar. 18, 2015) provides insight into both affirmative, good faith adjustment processes and appropriate challenges to a public adjuster’s report which the claimant used to attempt to create a question of fact regarding the insurer’s good faith claims handling.  The court granted summary judgment to the insurer on bad faith and breach of fiduciary duty issues while striking the public adjuster’s affidavit. The case continues only on the breach of contract issues.

The underlying claim involves a common problem in adjusting a roof hail damage loss.  In this case the loss was to a large condominium project.  The loss occurred on April 1, the notice of loss was sent to the insurance carrier on April 10 and the insurer responded the same day and initially inspected the property on April 11.  The initial adjuster met with the claimant’s roofing contractor and followed a standard protocol, approved as an “industry standard,” to determine whether to replace roofing materials based on whether ten to twelve hail hits were visible within a standard 10 foot by 10 foot test area on various sectors of the roof.  The adjuster determined there was no evidence of hail damage to the roofing material itself but found some areas of aging and deterioration.  The adjuster did find hail damage to flashing and gutters.  Because of the size of the complex, the adjuster referred the claim to a higher level, general adjuster for the insurer who, in turn, hired an engineering firm to further inspect the roof.  On April 17, a re-inspection of the roof over a period of four hours took place. The initial adjuster discussed the claim with the general adjuster on April 18 and issued a check for $67,000 for the damage to soft metals on April 25, as the court noted, within 14 days of receiving notice of loss.

The insurer then sent the engineering report prepared at the second inspection to the claimant on May 21, the same day the insurer received the report.  The report confirmed no evidence of hail damage to roofing materials justifying replacement of the roofs themselves.  The insurer asked the claimant for comment or feedback and got none until December 20, even after the insurer repeatedly followed up.  At that time a public adjuster accused the insurer of improper claims-handling processes and demanded $2 million for roofing repairs.  The insurer responded on January 15, noting inconsistencies and inaccuracies in the public adjuster’s report.  Four months later the insurer received a demand from counsel for the claimant for $5 million plus $500,000 in attorney’s fees.  The insured filed suit for breach of contract, breach of the duty of good faith and fair dealing, and breach of fiduciary duty.  The insurer moved for summary judgment on the bad faith and breach of fiduciary duty counts, which was granted.

Although the claimant opposed the summary judgment, the court struck the proffered summary judgment evidence from the claimant’s public adjuster as containing hearsay, insufficient foundation, and inadmissible legal conclusions.  The court’s basis for its rulings is instructive.  First to the extent the public adjuster attempted to criticize the communications made during the claims process, the court found the adjuster, who did not participate in the adjustment process and inspections, had no basis to testify as to what transpired.  Second, to the extent the adjuster attempted to criticize the insurer’s general claims processes, the court found the public adjuster had stated insufficient grounds to establish his expertise to opine on the adjustment processes.  The court took special aim at the public adjuster’s efforts to criticize the insurer in particular because he established no basis in education or experience to make such judgments about that particular company’s practices.  Third, the court found the public adjuster could not properly opine about the binding authority of an adjuster or whether the actions of the insurer’s adjuster breached the insurance contract as such was a legal conclusion.

Although court opinions on bad faith seldom applaud the actions of the insurer, refreshingly, the court opined, “Not only has Travelers established that it did not act in bad faith, but [the claimant] has presented no evidence to support such a claim.”  The court was impressed with the speed at which the claim was addressed by the insurer and the promptness of payment of the undisputed claim amount.  The timing of repeated prompt communications and actions by the insurer clearly predisposed the court to find even if the adjusters made an error regarding the extent of the loss, the error was only a breach of contract and that the insurer’s actions in handling the claim were not evidence of bad faith, but rather showed the insurer acted in good faith.