The 7th Circuit Court of Appeals affirmed the grant of an insurance adjuster’s motion to dismiss it from an injured man’s lawsuit alleging negligence in how it handled his case. The judges pointed out that the Indiana Court of Appeals has held that an insurance adjuster owes no legal duty to the insured and the plaintiff didn’t show that the Indiana Supreme Court would disagree with that decision.
Robert Lodholtz was severely injured while working in the factory of Pulliam Enterprises. He sued in St. Joseph County, seeking compensation for his injuries. Pulliam filed a claim with its insurer, Granite State Insurance Co. Granite retained claims adjuster York Risk Services Group Inc. Pulliam erroneously assumed Granite would provide a defense under the insurance policy and defaulted on the state court claim. Then Pulliam assigned to Lodholtz any claims it had against Granite or its agents for failing to undertake a defense under the insurance policy.
At issue in Robert Lodholtz, as assignee of Pulliam Enterprises Inc. v. York Risk Services Group, Inc., 14-2571, is whether York could be held negligent because it allegedly breached a duty owed to Pulliam by failing to exercise reasonable care in handling its defense in the state court proceedings. York did not inform Pulliam that Granite would not defend it in the matter until after default judgment had been entered against Pulliam in state court.
Since the Indiana Supreme court has not addressed the precise issue before the 7th Circuit, the judges turned to decision of the Court of Appeals for guidance. Citing Troxwell v. American States Insurance Co., 596 N.E.2d 921 (Ind. Ct. App. 1992), and Meridian Security Insurance Co. v. Hoffman Adjustment Co, 933 N.E.2d 7 (Ind. Ct. App. 2010), the 7th Circuit pointed out that the COA has held the insurance adjuster is an agent of the insurer and therefore has no direct relationship with the insured.
The federal judges rejected Lodholtz’s arguments as to why these cases don’t apply and noted he has not found caselaw that would support his view. The judges noted the Supreme Court could adopt the rule in Troxwell because the rule in that case is the rule adopted by the majority of American jurisdictions, and that rule comports with the general principles of Indiana agency law in which an agent is not liable for actions taken on behalf of the principal.