Law Bars Suit Against Public Adjuster

Homeowner	Law of Agency
Public Adjuster	Preservation of Property

In January 2007, Stefo and Adele Gubic's home and personal property were damaged in a fire. The Gubics were insured by Meridian Security Insurance Company. The construction and repair claim for the residence was settled for approximately $200,000; however, the parties disagreed on the value of the personal property, most of which had been stored in a nearby barn since the fire.

Meridian's adjuster, Jim Baugues, inventoried the damaged property soon after the fire. Meridian believed that most of the Gubics' property was salvageable and made plans to have it transported for cleaning. The Gubics hired public adjuster Joe Hoffman to assist with their personal property claim. Their agreement with Hoffman provided that he would be paid 10% of the amount the Gubics recovered, "regardless of who effect[ed] the adjustment or recovery."

After the Gubics entered into the agreement with Hoffman, the company Meridian hired to clean the Gubics' damaged property was told not to transport the property for cleaning. At Meridian's request, the Gubics provided an inventory of the personal property, and Meridian responded that it needed more information. Hoffman sent a letter to Meridian stating that the inventory complied with Meridian's requirements. Meridian offered to settle the claim for $32,247.25, but the Gubics rejected the offer and requested an appraisal. Meridian refused to conduct an appraisal and stopped paying the fees to store the Gubics' personal property.

On July 23, 2007, the Gubics filed a Petition for Umpire. Meridian scheduled an inspection of the property, but neither the Gubics nor Hoffman appeared at the inspection. Eventually, the property was photographed and disposed of.

Meridian responded to the Gubics' petition and filed a counterclaim for declaratory judgment. The Gubics amended their complaint, alleging various claims against Meridian. Meridian responded to these allegations by asking the court to find that the Gubics had engaged in fraudulent behavior.

Meridian's response also contained several allegations against Joe Hoffman. The insurer alleged that Hoffman had breached terms in the insurance policy, failed to act in good faith, engaged in spoliation of evidence and fraud, committed unauthorized practice of law, and tortiously interfered with Meridian's business and contractual relationship with the Gubics. Meridian also alleged that Hoffman should be required to indemnify Meridian for its damages. Hoffman responded by asking the court to dismiss all allegations against him. The trial court granted Hoffman's request; Meridian appealed.

On appeal, Hoffman argued that Meridian's claims against him were not actionable under Indiana law. The Court of Appeals of Indiana agreed. The court stated that the role of a public adjuster was defined by statute and that the Gubics had employed Hoffman to act as their agent. The court then noted that the law provides that "a principal is bound by the acts of an...agent if the agent acted within the usual and ordinary scope of the business" and "[a]n agent is not liable for harm to a person other than his principal because of his failure adequately to perform his duties to his principal, unless physical harm results from reliance upon performance of the duties by the agent, or unless the agent has taken control of land or other tangible things."

Applying these principles of agency law, the court found that Meridian's claims against Hoffman were not actionable under Indiana law because Hoffman had no contractual relationship with Meridian. The court noted that Meridian's claims were "simply coverage defenses," which Meridian could raise against the Gubics, and that Meridian had not alleged any compensable damages.

The decision of the lower court in favor of Hoffman was affirmed.

Meridian Security Insurance Company vs. Hoffman Adjustment Company-No. 45A03-0911-CV-538-Court of Appeals of Indiana-August 18, 2010-2010 Westlaw 3250173