Claims adjuster who engaged in the practice of law required to meet standard of care of a practicing attorney
June, 2002
A claims adjuster for Allstate Insurance Company ("Allstate") made representations to claimants who were not her insureds that she "represented" them. The adjuster was also personally involved in managing the consequences of the claimants' accident. The Washington Supreme Court held that, by these acts, the adjuster had engaged in the practice of law. Jones v. Allstate, 146 Wash.2d 291, 45 P.3d 1061 (May 9, 2002)
In Jones, Jeremy France ran a stop sign and broadsided the car driven by Janet Jones. Janet was seriously injured and ultimately incurred nearly $75,000 in medical bills. An inspection of the vehicle revealed that some of Janet's injuries might have been caused by a defective seatbelt.
France had an Allstate policy with a liability limit of $25,000. Christy Klein, Allstate's claims adjuster, was very attentive to the Joneses, delivering a "Quality Service Pledge" in which she called herself "your claim representative." Klein helped Janet's husband Terry pay bills and worked with the Joneses' insurance company to get underinsured motorist benefits for them. When Terry told Klein that he had met with some lawyers to discuss the seat belt issue, Klein told him that she could not "represent" him if he hired an attorney. Klein was "more helpful to [Terry] than his own insurance company."
Klein then sent Janet Jones a letter with a $25,000 check and a standard form release. The check stated "FINAL SETTLEMENT OF ANY AND ALL CLAIMS ARISING FROM BODILY INJURY CAUSED BY ACCIDENT ON 11/21/97." Klein attached a post-it note on the release stating: "Please sign and return to my attn." Janet signed and deposited the check. After Terry read the release, the Joneses became concerned and tried to return the money. Allstate rejected the money and said it considered the case settled and closed. The settlement and release precluded any claims the Joneses might have had against the car manufacturer based upon joint and several liability. The Washington Supreme Court held that Klein's actions constituted the practice of law. (The court did not reach the issue of whether Klein's conduct constituted the unauthorized practice of law.)
The next question was whether the Washington high court should allow such activity to continue. In the past, the court had resolved that question by "balancing the need to protect the public from the harm of the lay exercise of legal discretion with the provision of convenient and low cost services."
Based upon the facts before it, the court concluded that it would allow Allstate and its claims adjusters to engage in activities that constituted the practice of law, but, by engaging in the practice of law, they had to abide by "the standard of care of a practicing attorney." In particular, the court held that, to safeguard the public interest," "insurance claims adjusters, when preparing and completing documents which affect the legal rights of third[-] party claimants and when advising third parties to sign such documents, must comply with the standard of care of a practicing attorney."
The court found, however, that Klein's conduct fell below the proper standard of care because Klein advised the Joneses to sign a release of liability, did not properly advise the Joneses that there were potential legal consequences flowing from the signing of the settlement check and a release of all claims, did not refer them to independent counsel, and did not fully disclose her conflict of interest. Based upon that finding, the court remanded the case for consideration, in part, of the Joneses' claims against Allstate for civil fraud under Washington's Consumer Protection Act and for bad faith.