What Is a First Party Property Adjuster?
Post 5006
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The First Person an Insured Meets from the Insurer is an Adjuster
An “adjuster” or “insurance adjuster” is, by statutory definition: “a person, co-partnership or corporation who undertakes to ascertain and report the actual loss to the subject-matter of insurance due to the hazard insured against.” [California Insurance Code Section 14021]
A first party property adjuster is a specialist in adjusting claims brought by a person or entity insured against certain identified perils or risks of loss to real or personal property.
Insurance companies create, by issuing an insurance policy, a contractual obligation to pay valid claims from those insured. To do so insurers understand that the person insured is not able to prove the cause and extent of loss without assistance. Therefore, insurers dispatch a person with special knowledge – the first party property adjuster – to separate fact from fiction, to establish cause and origin of the claimed loss, and determine sufficient information to enable the insurance company to determine the amounts necessary to indemnify the insured as the policy promised.
The adjuster is also present to distinguish the valid claim from a claim for which the insurance company is not liable under its policy, whether due to the terms and conditions of the policy or because of attempted fraud.
The Proof of Loss
Some policies, like those issued under the National Flood Insurance Program Act (NFPA) specifically state that the claimant must use his own judgment in estimating the amount of loss and that the assistance of an insurance adjuster is provided as a “courtesy only.”
The insured must, therefore, when dealing with a National Flood Insurance Program (NFIP), prepare and submit to the insurer servicing the government program, a proof of loss within 60 days after the loss. This requirement must be fulfilled even if the adjuster does not furnish the form or help the insured complete it.
The Reason for an Adjuster
Since the invention of the adjuster more than a century ago, the first person from the insurer that the insured meets when he or she suffers a first party property loss, is the adjuster. The claim adjuster was invented to smooth the claims process and be certain that the insured receives the indemnity promised.
How well the adjuster does his or her job will increase the reputation of the insurer and will not only keep the insured as a customer he or she will add additional customers by word of mouth.
Although most adjusters are not trained to be marketers their professionalism will act as the most effective marketing an insurer can receive better than any television ad.
The Duties Imposed on the Adjuster
Every modern claim adjuster must understand that it is his or her duty to aid the insurer provide the benefits promised by the policy.
An adjuster’s duties to the insured do not arise from the insurance contract. The adjuster is not a party to the contract. He or she is an employee or agent of the insurer.
For the adjuster to owe the insured a duty to act with reasonable care, a contractual relationship must exist between the adjuster and the insured.
The Reasons for Which an Adjuster May be Sued
Although not a party to the contract adjusters are sued in cases against insurers to defeat diversity and keep the case out of federal court. In a case where Allstate Insurance Company ratified the actions of an adjuster named Berry and her conduct and explained that Berry’s actions as Allstate’s in-house adjuster were at issue in a federal action. It was her conduct on Allstate’s behalf that the federal jury found to be reasonable. [Allstate Ins. Co. v. Kenick, 435 P.3d 938 (Alaska 2019)]
Every person in the business of insurance or who are insured by a policy of first party property insurance, must understand that an insurance adjuster is a person engaged in the business of insurance to investigate and resolve insurance claims. The first party property insurance adjuster limits his or her activities to the investigation and adjustment of first party property claims like fire, lightning, windstorm, hail, theft, etc.
The duty of the adjuster is to ascertain and determine the amount compensable by the policy of any claim, loss or damage payable under an insurance contract, and/or effecting settlement of such claim, loss or damage.
Although the employee adjuster does not owe a special duty to the insureds on which the bad faith tort could be based against the adjuster, he or she owes the duty to the insurer employer to treat the insured fairly and in good faith. Although the adjuster cannot commit the tort of bad faith the actions of the adjuster can create facts sufficient to allow the insured to establish that the insurer breached the covenant of good faith and fair dealing because the agent’s wrongful acts are the obligation of the insurer. [Gruenberg v. Aetna Ins. Co., 9 Cal.3d 566, 108 Cal.Rptr. 480, 510 P.2d 1032]
In Texas an adjuster, with regard to acts undertaken in the business of insurance, can breach the statutes requiring that the adjuster and insurer act in good faith and deal fairly with the insured. [Tex. Ins. Code § 541.002(2); Hornbuckle v. State Farm Lloyds, 385 F.3d 538, 544 (5th Cir. 2004); Liberty Mut. Ins. Co. v. Garrison Contractors, Inc., 966 S.W.2d 482, 486 (Tex. 1998), LLC v. Starr Surplus Lines Ins. Co. (S.D. Tex., 2018)]
Regardless of the jurisdiction the adjuster must conduct himself or herself in such a way that there will never be an issue that the insurer breached the contract directly or through the adjuster’s action. Although protected from individual tort liability in almost every state, an adjuster acting in bad faith that exposes the insurer to a bad faith judgment will probably cause the adjuster to lose his or her job.
Adapted from my book “The Compact Book of Adjusting Property Claims Fourth Edition” Available as a hardcover here. Available as a Kindle Book here. Available as a paperback here
(c) 2025 Barry Zalma & ClaimSchool, Inc.
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