Kennedy v. Allstate, No. 15-2221 (E.D. Pa. July 8, 2015).

District Court recognizes possibility that insurance adjusters owe a duty of care to insureds that would be breached by failing to conduct a reasonable investigation and by making misrepresentations about the insureds’ claim.

After Rachel Kennedy was injured in a car accident, she and her husband submitted underinsured motorist claims to their insurer, Allstate Property and Casualty Insurance Company.  The underinsured motorist claims were arbitrated in 2013, resulting in a $625,000 award.  The Kennedys subsequently sued Allstate and three adjusters employed by Allstate in Pennsylvania state court.  The Kennedys alleged that Allstate and the adjusters improperly evaluated their claims and engaged in intentional delay, misrepresentation and fraud in the course of processing, investigating and arbitrating those claims.  

Allstate and the adjusters filed a notice of removal claiming that the Kennedys had fraudulently joined the adjusters as defendants in order to defeat federal diversity jurisdiction.  Allstate and the adjusters argued that the Kennedys had no colorable claim of negligence or for violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (“UTPCPL”) against the adjusters.   In response to the notice, the Kennedys filed a motion to remand.

In opposing the motion, Allstate and the adjusters first argued that insureds have no colorable cause of action for negligence against an insurance adjuster under Pennsylvania law because adjusters owe no duty of care to insureds.  The court found that Pennsylvania law is silent on the issue and thus concluded that there is at least a possibility that the Pennsylvania Supreme Court could decide that an insurance adjuster owes a duty of care to an insured.   Absent Pennsylvania law expressly precluding the negligence claim, the court could not find that the Kennedys’ claim was “wholly insubstantial or frivolous” and held that the Kennedys stated at least a colorable claim for negligence. 

Allstate and the adjusters also contended that the Kennedys did not state a colorable claim under the UTPCPL.  Their argument was premised on four grounds: (1) the claims are not cognizable against insurance adjusters under Pennsylvania law; (2) the Kennedys failed to allege facts showing that they justifiably relied on the adjuster defendants’ misrepresentations; (3) the Kennedys did not sufficiently plead ascertainable loss; and (4) the Kennedys’ claims were barred by the economic loss doctrine.   The Court readily dismissed Allstate’s first argument, finding that multiple courts have concluded that claims under the UTPCPL against adjusters are colorable under Pennsylvania law.  Next, the court explained that in disposing of a motion to remand, the court could not properly inquire into the sufficiency of the pleadings on the element of justifiable reliance.   The court also dismissed the contention that the Kennedys failed to sufficiently plead ascertainable loss by pointing to the alleged harm to the Kennedys’ credit rating, their need to seek medical assistance from the state, and the alleged financial hardship that resulted from the adjusters’ conduct.   Finally, the Court noted that the application of the economic loss doctrine to UTPCPL claims is in flux in Pennsylvania and, “in [c]onstruing the uncertain state law in favor of plaintiffs as [it was] obliged to do,” held that Allstate failed to meet its burden to show that plaintiffs have no colorable claim under the UTPCPL against adjuster defendants.