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C.P. v. Allstate Insurance Company3/3/2000
y to prosecute the assigned claims. The claims went to arbitration; the Lancasters did not appear and offered no evidence. The arbitrator found Dolan and Eleanor's liability to be $474,330.
C.P. sued Allstate on the elder Lancasters' assignment. After proceedings not relevant here, Chief Judge James K. Singleton of the United States District Court for the District of Alaska issued a certification order asking us to answer three questions of state law. We quote the questions below. Summarized, they concern the potential tort duties of Allstate's adjuster, Allstate's coverage obligations, and the effect of a declaration of no coverage.
We accepted certification of these three questions.
III. DISCUSSION
A. Standard of Review
The certified questions are questions of law. To answer them, we adopt the rule of law that is most persuasive in light of precedent, reason, and policy.
B. Does an Insurer's Salaried Adjuster Owe the Insureds a Tort Duty of Reasonable Care?
The district court first poses this certified question:
Does a salaried employee in the claims department of an insurance company owe those who are insured by the company a duty enforceable in a tort action against the employee personally to exercise reasonable care in connection with claims by the insureds that are assigned to the employee for investigation, evaluation and adjustment, to avoid interfering with the insureds' rights under the policy of liability insurance to receive a defense and indemnity against tort claims made against them by third-parties?
C.P. argues that Alaska law already recognizes a cause of action against liability insurers' adjusters for negligent adjustment (including investigation and evaluation) of a claim. C.P. relies on two cases -- Continental Insurance Co. v. Bayless & Roberts, Inc. and Sauer v. Home Indemnity Co. -- to support her contention. Amicus J.D. Glass & Door, Inc. supports C.P.'s contention.
Allstate contends that an insured's claims for negligent adjustment are contract claims which can only be made against Allstate itself. (Allstate also contends that the settlement agreement permitted C.P. to sue only Allstate, and that the Lancasters' assignment does not cover suits against Norton. We do not consider this contention because it is not part of the certified question.)
The Continental line of cases answers the broad question posed. The Continental Insurance Company discovered midway through its defense of its insured, Bayless & Roberts (B & R), that B & R had changed its story as to the facts of the third-party liability claim being litigated. When Continental refused to defend B & R further, B & R sued it and its claims adjuster, Arthur Stanford.
Stanford held the title of branch manager at the Underwriters Adjusting Company. But we recognized that Underwriters Adjusting was a subsidiary of Continental Corporation and functioned as the claims department of Continental Insurance Company, another subsidiary. We also concluded that Stanford was "Continental's claims adjuster" and that "Continental assigned the adjustment of the . . . claim against B & R to Stanford."
B & R's suit against Stanford alleged that "Stanford breached his fiduciary duty in failing to adequately investigate" the claim in question, and in failing to fully inform B & R, Continental, and Continental's attorney of the facts of the case. Stanford contended that "he had no duty to B & R under his contract with Continental that would subject him to personal liability." We concluded that "Stanford could not be held lia
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