16th Sep 2014
§ T54.02:1 In general
First party claims
First party losses involve property loss and damages arising from covered risks. See § R85 RISK [§ R85:3 First party context]. The insured in general has far less skill than the trained adjuster in determining:
(a) the scope of the loss
(b) loss valuation, both partial and total
(c) meaning of exclusions and limitations contained in the policy coverages and exclusions. See Bock v. Hansen (2014) 225 Cal. App. 4th 215, 231 (adjuster can be sued for negligent misrepresentation of facts).
Third party claims
In third party claims, the adjuster is trained in investigating claims or suits against the insured in determining if the facts alleged against the insured give rise to “potential liability under the policy”. See § P67 POTENTIAL LIABILITY UNDER POLICY [§ P67:1.3 – § P67:2.9].
Policy is a contract of adhesion
The Supreme Court and the Courts of Appeal have long recognized as a matter of common knowledge that a very small percent of policy holders are cognizant of the meaning of provisions in their policies. [Bock v. Hansen (2014) 225 Cal. App. 4th 215, 231-232, citing Raulet v. Northwestern Nat. Ins. Co. of Milwaukee (1910) 157 C. 213, 230] See § E49 EXCLUSIONS [§ E49:13 Exclusion construed against insurer; Reason for rule]. An insurer’s direction to the insured to read the entire policy “is not a substitute for notice to the subscriber of a loss of benefit”. [Haynes v. Farmers Ins. Exchange (2004) 32 Cal. 4th 1198, 1211, citing Raulet v. Northwestern Nat. Ins. Co. of Milwaukee] See § D8 DECLARATIONS PAGE [§ D8:1.2 “Dear Customer” letter; references to changes or additions in policy]. An adhesion contract is a standardized contract written entirely by a party with superior bargaining power, leaving the weaker party in a “take it or leave it” position. [Gray v. Zurich (1966) 65 Cal.2d 263, 269] See § A25 ADHESION CONTRACT [§ A25:1].
“Special relationship” of insurer and insured
The relationship between insurer and insured is a limited fiduciary relationship, one involving the qualities of decency and humanity. [Bock v. Hansen (2014) 225 Cal. App. 4th 215, 229, discussing Vu v. Prudential (2001) 26 Cal. 4th 1142, 1150-1151] See § F20 FIDUCIARY RELATIONSHIP [§ F20:2]; § Q04 QUASI-PUBLIC IN NATURE [§ Q04:1-2].
Insurers hold themselves out as fiduciaries and with the PUBLIC’S TRUST must go PRIVATE responsibility consonant with that TRUST. [Egan v. Mutual of Omaha (1979) 24 Cal. 3d 809, 820]
§ T54.02:2 Adjuster’s relationship with insured
The existence of an insurer’s “special relationship” with its insured extends to the relationship between adjuster and insured. See Bock v. Hansen (2014) 225 Cal. App. 4th 215, 229-230]
An adjuster has a duty to communicate accurate information. [Bock v. Hansen (2014) 225 Cal. App.4th 215, 229-230 (giving the insured false information about policy terms and/or facts of the loss can support an insurance claim of bad faith and negligent misrepresentation)] See § C32.03 CLAIMS HANDLING AND TACTICS [§ C32.03:1]; § N13 NEGLIGENT MISREPRESENTATION.
§ T54.02:3 Adjuster’s individual liability
An adjuster who negligently gives false information to another is subject to liability for physical harm caused by the other in reliance upon such information. [Bock v. Hansen (2014) 225 Cal. App. 4th 215, 230] See § C32.03 CLAIMS HANDLING AND TACTICS [§ C32.03:5.1 Intentionally dishonest claims adjusting].
References in bold are to Mr. Cornblum’s legal text CALIFORNIA INSURANCE LAW DICTIONARY AND DESK REFERENCE, published by Thomson Reuters (1-800-344-5008). Those with WestLaw can search using the database CAINLAWDDR.