Predicting that Pennsylvania courts may allow for negligence claims against individual insurance adjusters, U.S District Judge Thomas N. O’Neill recently held that Plaintiffs did not fraudulently bring suit against individual adjusters in a bad-faith case in order to destroy federal diversity. Kennedy v. Allstate Property and Casualty Insurance, U.S.D.C. Eastern District of Pennsylvania, Case No. 15-2221.
Plaintiffs filed their bad-faith lawsuit in Delaware County Court of Common Pleas against various Allstate entities and three Allstate adjusters (Pennsylvania residents) that handled the accident case. Plaintiffs are alleging that the adjuster-defendants made false assurances that Plaintiffs’ UIM claims were being investigated.
Defendants removed to Federal Court arguing that the adjusters were fraudulently named as defendants in order to prevent removal. Defendants argued that Pennsylvania law does not provide a cause of action against individual adjusters for negligence or for claims under the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL) because adjusters owe no duty of care to an insured. Judge O’Neill agreed Pennsylvania law is silent on the issue of adjuster negligence. However, Judge O’Neill opined that the Pennsylvania Supreme Court could find that an adjuster does owe a duty of care to an insured that could be breached by failing to reasonably investigate an insured’s claim and/or by making misrepresentations. The judge noted that New Hampshire and Alaska allow claims against individual adjusters. The judge noted further that multiple Pennsylvania courts have opined that claims against individual adjusters for violation of the UTPCPL are actionable.
Defendants argued that the adjusters were fraudulently brought into the case merely to destroy federal diversity jurisdiction because Plaintiffs had no intention of prosecuting the action against the adjuster defendants. The judge disagreed pointing out that Plaintiffs conducted pre-complaint discovery and attached exhibits to their complaint such as log notes and adjuster correspondence containing alleged factual misrepresentations in support of their claims against the individual adjusters. The judge noted further that defendants did not show that Plaintiffs had no good faith intention of prosecuting the case against the adjusters.
Judge O’Neill remanded Plaintiffs’ bad-faith, negligence and unfair trade practices case back to Delaware County Court of Common Pleas. At this time, individual adjusters may be sued in Pennsylvania state courts for alleged negligent claims handling and alleged violations of the Unfair Trade Practices and Consumer Protection Law. A consequential result of Judge O’Neil’s decision is that insurance companies may be prevented from litigating bad faith lawsuits in Pennsylvania Federal Courts because diversity may be destroyed when individual adjusters, who live in Pennsylvania, are named as defendants in bad faith and unfair trade practices cases.