Insurance Adjuster Held to Attorney Standard of Care
September, 2002
Insurance Adjuster Held To Attorney
Standard of Care
by Tracey A. Jordan
tjordan@clausen.com
The Washington Supreme Court holds that an insurance claims adjuster must comply with the standard of care of a practicing attorney when preparing and completing documents that affect the legal rights of third party claimants and when advising third parties to sign such documents. Jones v. Allstate Ins. Co., 45 P.3d 1068 (Wash. 2002).
Facts
On November 21, 1997, Janet Jones’ car was struck by an Allstate insured, Jeremy France. Jones sustained serious injury and had nearly $75,000 in medical expenses. Janet and her husband, Terry Jones, were contacted by Christy Klein, the claims adjuster for Allstate, three days after the accident. Over the next two months, Klein assisted the Joneses in identifying the medical coverages available to them, finding insurance to pay their outstanding medical bills and obtaining subrogation waivers.
In early December 1997, Terry Jones consulted with, but did not retain, attorneys to discuss a potential seat belt product liability claim on behalf of his wife. Examination of the Joneses’ car after the accident showed that Janet’s seat belt may have malfunctioned because it would not lock into the floor mounted receiver. The Joneses made Klein aware of the meeting with the attorneys concerning their potential product liability claim. Klein told Terry that she could not represent him if any attorney was retained.
In January 1998, Klein sent Janet Jones a letter, a check and a release. The check in the amount of $25,000, which represented France’s insurance limits for bodily injury coverage, provided in the space for “in payment of” the following language: “FINAL SETTLEMENT OF ANY AND ALL CLAIMS ARISING FROM BODILY INJURY CAUSED BY ACCIDENT ON 11/21/97.” The accompanying letter contained the heading, “Settlement of your medical claim for Janet Jones.” The release contained the heading, “RELEASE OF ALL CLAIMS” and the language, releasing and discharging “Roy & Amy France, Jeremy France, Allstate Insurance Co., any other person, firm or corporation charged or chargeable with responsibility. . . from any and all claims. . . and causes of action.” A post-it note on the release asked Janet to sign and return the document to Klein’s attention.
Janet Jones signed and deposited the check, although the release was not executed or returned to Allstate. In September 1998, the Joneses attempted to return the money to Allstate because they felt their ability to assert other claims arising from the automobile accident, such as a products liability claim, might otherwise be foreclosed. Allstate refused to accept the money contending the Joneses’ claim was settled and closed.
The Joneses brought suit against Jeremy France, his parents, the car manufacturer and Allstate. The Joneses filed a motion for partial summary judgment asking the court to find that Allstate and its claims adjuster engaged in the unlicensed, negligent practice of law. The trial court granted the Joneses’ motion. Allstate appealed and the Court of Appeals certified the case to the Washington Supreme Court after determining that the case involved an issue of broad public import.
Analysis
The Washington Supreme Court first determined whether Klein’s activities constituted the practice of law. The court found that the “practice of law” includes not only activities or services pertaining to a court of justice, but also “legal advice and counsel, and the preparation of legal instruments and contracts by which legal rights are secured.” The Court found that even if Klein only entered objective data onto a preprinted release form and sent a computer-generated settlement check, those acts constituted the practice of law which includes “the selection and completion of legal instruments by which legal rights and obligations are established.”
Having determined that the claims adjuster engaged in the practice of law, the Court next determined whether it would permit such activities by insurance companies. The Court stated it would permit claims adjusters to prepare and complete documents which affect the legal rights of third parties, but only if the adjuster complies with the standard of care of a practicing attorney. The court imposed this duty because the adjuster’s actions in this case directly affected the Joneses and their legal rights. The Joneses were not advised that they might potentially be foreclosed from asserting claims against other parties, that they were settling with Allstate for a fraction of medical expenses actually expended, and that they likely should have engaged independent counsel.
Applying these standards to the case, the Court found that the adjuster’s actions fell below the standard of care. The Court found that Klein was more than a scrivener when she requested the return of the release without advising the Joneses of the consequences of executing the binding document and without referring the Joneses to independent counsel. Also, the Court stated the adjuster must disclose her potential conflict of interest to the third party claimants, much like an attorney does.
The Court did not address or decide whether the activities of the adjuster were “unauthorized” as the Joneses did not seek to enjoin or prohibit the practice.
Learning Point: When dealing with third party claimants insurance company claims adjusters should: 1) disclose their potential conflict of interest; 2) advise of the legal consequences of executing a release; and 3) refer the claimants to independent counsel as they could potentially be held to the standard of care of a practicing attorney. ?
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