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Recent Seventh Circuit Court of Appeals Sides with Majority Rule that Insurance Adjusters Owe No Duty to Insureds; No Bright-Line Test in California

Claims adjusters owe no duty to their insureds in most jurisdictions. As is often the situation, California is a special case. In the recent decision of Lodholtz v. York Risk Services Group, Inc. 2015 WL 542815 (February 11, 2015)(“Lodholtz”), the Seventh Circuit for the United States Court of Appeals affirmed a judgment of dismissal in favor of the claims adjuster defendant. Applying Indiana law, the Lodholtz Court ruled that the claims adjuster owed no legal duty to its insured for its allegedly negligent handling of the underlying state court action. The Court concluded that “an adjuster is an agent of the insurer and therefore has no direct relationship with the insured.” (Citing Troxell v. American States Insurance Co. (1992) 596 N.E.2d 921, 925 n. 1.)

In support of its conclusion, the Lodholtz Court noted that Indiana’s law on the subject was consistent with the rule in the majority of jurisdictions. The Court provided a useful summary of state-court decisions:

To summarize, the state courts of Alabama, Arizona, California, [citing Sanchez v. Lindsey Morden Claims Servs., Inc. (1999) 72 Cal.App.4th 249], Connecticut, Florida, Louisiana, Missouri, New York, North Carolina, Oklahoma, South Carolina, Texas, and Vermont have held that a claims adjuster does not owe a duty of care to the insured. Similarly, a federal court has applied the laws of Rhode Island and reached the same conclusion. In contrast only Alaska and New Hampshire recognize that an adjuster owes a duty of care to the insured. …

(Lodholtz, n. 11 [underline added].) Although it included California among the states that follow the majority rule, the Lodholtz Court noted that California courts were “… more willing to hold that an insurance adjuster may be liable to the insured under alternative theories.” (Id., citing Bock v. Hansen (2014) 225 Cal.App.4th 215 (“Bock”)) [“a cause of action for negligent misrepresentation can lie against an insurance adjuster.”]

Thus, California represents a special case. While California has followed the majority rule, the recent Bock case departs from that rule. The California Supreme Court declined to review the Bock case, so the conflict within California will remain unresolved, at least for the time being.

We expect more decisions in this evolving area of the law. Ericksen Arbuthnot will follow the developments in this and other areas of the law affecting the insurance defense community.

Greg Mase is a partner in the San Francisco and Los Angeles offices. He can be reached at or 213.489.4411 or 415.362.7126.