What Is a First Party Property Adjuster?
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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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Jury’s Findings Interpreting Insurance Contract Affirmed
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Madelaine Chocolate Novelties, Inc. (“Madelaine Chocolate”) appealed the district court’s judgment following a jury verdict in favor of Great Northern Insurance Company (“Great Northern”) concerning storm-surge damage caused by “Superstorm Sandy” to Madelaine Chocolate’s production facilities.
In Madelaine Chocolate Novelties, Inc., d.b.a. The Madelaine Chocolate Company v. Great Northern Insurance Company, No. 23-212, United States Court of Appeals, Second Circuit (June 20, 2025) affirmed the trial court ruling in favor of the insurer.
BACKGROUND
Great Northern refused to pay the full claim amount and paid Madelaine Chocolate only about $4 million. In disclaiming coverage, Great Northern invoked the Policy’s flood-exclusion provision, which excludes, in relevant part, “loss or damage caused by ....
Failure to Name a Party as an Additional Insured Defeats Claim
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Contract Interpretation is Based on the Clear and Unambiguous Language of the Policy
In Associated Industries Insurance Company, Inc. v. Sentinel Insurance Company, Ltd., No. 23-CV-10400 (MMG), United States District Court, S.D. New York (June 16, 2025) an insurance coverage dispute arising from a personal injury action in New York State Supreme Court.
The underlying action, Eduardo Molina v. Venchi 2, LLC, et al., concerned injuries allegedly resulting from a construction accident at premises owned by Central Area Equities Associates LLC (CAEA) and leased by Venchi 2 LLC with the USDC required to determine who was entitled to a defense from which insurer.
KEY POINTS
Parties Involved:
CAEA is insured by Associated Industries Insurance Company, Inc. ...
Exclusion Establishes that There is No Duty to Defend Off Site Injuries
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Attack by Vicious Dog Excluded
In Foremost Insurance Company, Grand Rapids, Michigan v. Michael B. Steele and Sarah Brown and Kevin Lee Price, Civil Action No. 3:24-CV-00684, United States District Court, M.D. Pennsylvania (June 16, 2025)
Foremost Insurance Company (“Foremost”) sued Michael B. Steele (“Steele”), Sarah Brown (“Brown”), and Kevin Lee Price (“Price”) (collectively, “Defendants”). Foremost sought declaratory relief in the form of a declaration that
1. it owes no insurance coverage to Steele and has no duty to defend or indemnify Steele in an underlying tort action and
2. defense counsel that Foremost has assigned to Steele in the underlying action may withdraw his appearance.
Presently before the Court are two ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
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This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
A Heads I Win, Tails You Lose Story
Post 5062
Posted on April 30, 2025 by Barry Zalma
"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime."
Immigrant Criminals Attempt to Profit From Insurance Fraud
People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.
The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...