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from our blog
November 24, 2013
A homeowner purchases homeowner insurance hoping he never has to use it, but in case he does, he knows the insurance will help compensate him for the financial damage to his home. When damage does occur, whether it be minor such as a window broken by a falling tree branch, or major such as flooding [...]
A recent federal district court case tackled the issue of whether an Arizona insurance adjuster may be personally sued for bad faith insurance claim denial.
The case started on March 4, 2011 when Frank Gambrell collided with another vehicle on an Arizona freeway. Gambrell sustained serious injuries in the accident; his medical expenses totaled more than $87,000 and he lost more than $6,000 in wages from not being able to work. Gambrell filed a claim under multiple insurers, all of which accepted his claim except for his own personal auto insurer, IDS Property Casualty Insurance Co. After requesting reconsideration and being denied twice, Gambrell brought a lawsuit alleging bad faith denial of insurance coverage and breach of contract. Gambrell sued both IDS and the claims adjuster assigned to the case, Stacey Harrish. The defendants moved to dismiss the portion of the lawsuit against Harrish because it argued that the insurance adjuster could not be sued for a breach of the covenant of good faith and fair dealing.
Judge John W. Sedwick of the U.S. District Court for the District of Arizona ruled that Arizona law does not clearly allow or prevent an insured from bringing a claim for bad faith denial of insurance coverage. The judge noted that bad faith denial claims are based on the terms of an insurance contract to which only the insurer and insured are parties. However, the court noted that the Arizona Court of Appeals has held that the insurer and agent (the claims adjuster) are “engaged in a joint venture” which binds the adjuster to the same duties owed by the insurer. This case is helpful for policyholders because it potentially allows insureds to avoid diversity jurisdiction if the insurance claim adjuster is a citizen of Arizona and thus eliminates insurance carriers’ ability to remove bad faith lawsuits to the federal court system.
The case is IDS Property Casualty Insurance Co. v. Gambrell, Docket Number 2:12-cv-01227 .