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A federal district court in Texas has dismissed a complaint filed by two insureds against an insurance adjuster, concluding that it failed to “adequately describe the cause of their loss.”

The Case

In the aftermath of a hail storm, William and Minnie Caruth said that they discovered damage to their property resulting from water leaks. The Caruths filed an insurance claim with their insurer, Chubb Lloyd’s Insurance Company of Texas.

After receiving the claim, Chubb assigned Cynthia Morgan, an insurance adjuster, to investigate it. Ms. Morgan hired Roof Technical Services, Inc., to determine whether wind or hail had damaged the property.

Roof Technical’s report concluded that the damage to the Caruths’ property was not the result of wind or hail.

The Caruths contended that Ms. Morgan had mishandled the inspection, which resulted in underpayment and a partial denial of their insurance claim. They sued Chubb, and Ms. Morgan, alleging that Ms. Morgan had violated the following provisions of the Texas Insurance Code:

- “misrepresenting to a claimant a material fact or policy provision relating to coverage at issue,” Section 541.060(a)(1);

- “fail[ing] to attempt, in good faith, to effectuate a prompt, fair, and equitable settlement of . . . a claim with respect to which the insurer’s liability has become reasonably clear,” Section 541.060(a)(2)(A);

- “refus[ing] to pay a claim without conducting a reasonable investigation,” Section 541.060(a)(7);

- “making an untrue statement of material fact,” Section 541.061(1);

- “failing to state a material fact necessary to make other statements not misleading,” Section 541.061(2); and

- “making a statement in such a manner as to mislead a reasonably prudent person to a false conclusion of a material fact,” Section 541.061(3).

Ms. Morgan moved to dismiss.

The District Court’s Decision

The district court granted Ms. Morgan’s motion.

In its decision, the district court explained that, under Texas law, adjusters may be held individually liable for violations under Chapter 541 of the Texas Insurance Code. The district court added that, for an adjuster to be held individually liable, the adjuster must have committed some act prohibited by Texas law, and “not just be connected to an insurance company’s denial of coverage.”

The district court then ruled that the Caruths had failed to state a claim against Ms. Morgan because their complaint “merely recite[d] the statutory language with conclusory allegations that [Ms.] Morgan violated Chapter 541 of the Texas Insurance Code.”

The district court observed that the Caruths alleged that Ms. Morgan (1) “failed to perform a proper and complete investigation of the claim,” (2) “represented that certain damages would be covered then failed to pay for such damage,” and (3) “upon information and belief, retained [Roof Technical] because it was known that it would issue a report on which the claim for benefits would be denied.” In the district court’s opinion, the Caruths’ allegations failed to “adequately describe the cause of their loss.” In particular, the district court said, the Caruths failed to specify how Ms. Morgan’s inspection was substandard.

Moreover, the district court continued, the Caruths failed to “identify a single statement or misrepresentation” that could support a cause of action under Sections 541.060 or 541.061. The district court pointed out that the Caruths only asserted that Ms. Morgan “represented that certain damaged areas of the [p]roperty would be covered by the [p]olicy” and that her actions had resulted in “unreasonable delays in the investigation, adjustment and resolution of the [insurance] claim and [the] failure to promptly pay the claim after receipt of evidence that the claim should be paid and failure to pay the claim when liability had become reasonably clear.”

These allegations, the district court ruled, did not specify how Ms. Morgan delayed the resolution of the Caruths’ claim but amounted to “mere conclusory statements.”

In sum, the district court concluded, the Caruths had not pleaded “enough facts to state a claim” that was “plausible on its face,” and it dismissed the Caruths’ complaint against her, without prejudice.

The case is Caruth v. Chubb Lloyd’s Ins. Co. of Texas, No. 3:17-CV-2748-G (N.D. Tex. April 9, 2018). Attorneys involved include: For William W Caruth, III, Minnie A Caruth, Plaintiffs: Michael S Carnahan, LEAD ATTORNEY, Carnahan Thomas, Southlake, TX; Joseph C Edwards, Dallas, TX; Scott M Keller, Law Offices of Scott M Keller, Dallas, TX. For Chubb Lloyd’s Insurance Company of Texas, Cynthia Morgan, Defendants: Jennifer Gossom Martin, LEAD ATTORNEY, Lisa M Wilson, William Nicholas Terrell, Wilson Elser Moskowitz Edelman & Dicker LLP, Dallas, TX.


Steven A. Meyerowitz, Esq., is the Director of FC&S Legal, the Editor-in-Chief of the Insurance Coverage Law Report, and the Founder and President of Meyerowitz Communications Inc. As FC&S Legal Director, Mr. Meyerowitz, a member of the team that conceptualized FC&S Legal, provides daily analysis and commentary on the most significant insurance coverage law decisions from courts across the country and news regarding legislative and regulatory developments. A graduate of Harvard Law School, Mr. Meyerowitz was an attorney at a prominent Wall Street law firm before founding Meyerowitz Communications Inc., a law firm marketing communications consulting company.