Koch v. Bell, Lewis & Associates, Inc.

• Decision Date: 21 March 2006
• Docket Number: No. COA04-1532.,COA04-1532.
• Citation: 627 S.E.2d 636
• Court: North Carolina Court of Appeals
• Parties: James A. KOCH and wife, Kathleen T. Koch, Plaintiffs, v. BELL, LEWIS & ASSOCIATES, INC., Kenneth V. Travis, Southern Guaranty Insurance Company, and Southern Pilot Insurance Company, Formerly known As Jefferson-Pilot Fire & Casualty Company, Defendants.

627 S.E.2d 636

James A. KOCH and wife, Kathleen T. Koch, Plaintiffs, v. BELL, LEWIS & ASSOCIATES, INC., Kenneth V. Travis, Southern Guaranty Insurance Company, and Southern Pilot Insurance Company, Formerly known As Jefferson-Pilot Fire & Casualty Company, Defendants.

No. COA04-1532.

Court of Appeals of North Carolina.

March 21, 2006.

Appeal by plaintiffs from orders entered 8 June 2004 and 20 July 2004 by Judge Andy Cromer in the Superior Court in Guilford County. Heard in the Court of Appeals 18 August 2005.

Tuggle Duggins & Meschan, P.A., by J. Reed Johnston, Jr., and Rebecca A. Niburg, Greensboro, for plaintiff-appellants.

Horton and Gsteiger, P.L.L.C., by Urs R. Gsteiger, Winston-Salem, for defendant-appellees, Bell, Lewis & Associates, Inc. and Kenneth V. Travis.

Pinto Coates Kyre & Brown, P.L.L.C., by Richard L. Pinto, Greensboro, for defendant-appellees, Southern Guaranty Insurance Company and Southern Pilot Insurance Company, formerly known as Jefferson-Pilot Fire & Casualty Company.

HUDSON, Judge.

In 1995, R & H Stucco & Wall Systems, subsequently known as Quality Stucco Systems Inc. ("Quality") applied synthetic stucco cladding to the outside of plaintiffs' new home. In 1996, after they discovered that the cladding was defective, plaintiffs made a claim against Quality. Quality had liability insurance through defendants Southern Guaranty Insurance Company ("Southern") and Southern Pilot Insurance Company ("Southern Pilot"). Defendant Bell, Lewis & Associates ("Bell Lewis") served as the adjusters for defendant insurers. After plaintiffs filed their claim, defendant Kenneth V. Travis, a senior adjuster employed by Bell Lewis, contacted plaintiffs and informed them that the insurance companies would pay a portion of the cost to re-clad their home only if they agreed to use Quality to do so. Plaintiffs expressed reluctance to use Quality again and Travis assured them that Quality would apply durable stucco and do a good job. Plaintiffs agreed to allow Quality to re-clad their home and received $10,000 in return, and plaintiffs signed a general release of all claims. Quality replaced the synthetic stucco with hard coat stucco in 1997.

In 2001, plaintiffs discovered that the hard coat stucco applied by Quality had completely failed. A third-party inspection revealed that Quality had violated building code provisions and had failed to properly apply the base coat, seal the system penetrations, and install necessary elements of the stucco system. Defendant insurance companies refused to pay for any of plaintiffs' losses because Quality had not renewed its liability insurance.

In 2004, plaintiffs filed suit in Superior Court in Guilford County, alleging negligence, negligent failure to warn, negligent misrepresentation, and unfair and deceptive trade practices. Each cause of action concerned the representations made by Travis regarding Quality's ability to do the stucco work. Defendants Bell Lewis, Southern, and Southern Pilot were included under master-servant and principal-agent theories.

Plaintiffs argue first that the trial court erred in dismissing their actions. We disagree. Although the claims against Bell Lewis and Travis were dismissed pursuant to a 12(b)(6) motion, while those against Southern and Southern Pilot were dismissed when the court granted these defendants summary judgment, plaintiffs argue these assignments of error together in their brief. However, we will address them separately.

We review the trial court's grant of a 12(b)(6) motion to dismiss de novo. Grant Constr. Co. v. McRae, 146 N.C.App. 370, 373, 553 S.E.2d 89, 91 (2001). "The question for the court is whether, as a matter of law, the allegations of the complaint, treated as true, are sufficient to state a claim upon which relief may be granted under some legal theory, whether properly labeled or not." Id. (internal citation omitted). "[A] complaint should not be dismissed for insufficiency unless it appears to a certainty that plaintiff is entitled to no relief under any state of facts which could be proved in support of the claim." Id. (emphasis in original, internal citations and quotation marks omitted).

In order for plaintiffs to prevail on negligence claims, they must show both that defendants owed them a legal duty and that they failed to exercise due care in their performance of this duty. Barnes v. Caulbourne, 240 N.C. 721, 725, 83 S.E.2d 898, 901 (1954). This case presents a question of first impression for this Court: whether under North Carolina law an independent insurance adjuster (Bell Lewis and Travis) owes a legal duty to claimants (plaintiffs) who are not the insured (Quality) of the insurance company (Southern and Southern Pilot). Recognizing that there are no North Carolina cases on point, plaintiffs cite cases from other jurisdictions that they contend support their theory that they could recover as third-party claimants from independent insurance adjusters for negligence. Our review of these cases reveals that they do not support plaintiffs' position; indeed, none of them involve an independent adjuster's duty to a third-party claimant in the context of a negligence claim. Dussault v. Am. Int'l Group, Inc., 123 Wash.App. 863, 99 P.3d 1256 (2004) (insurer only owes duty to third-party claimant to refrain from intentional tortious acts); Railsback v. Mid-Century Ins. Co., 680 N.W.2d 652 (S.D. 2004) (insurer may not materially misrepresent its policy limits in settlement negotiations with third-party claimant); McGee v. Omni Ins. Co., 840 So.2d 1248 (La.App. 3d Cir.2003) (insurer must consider interests of insured and protect it from excess liability in handling claim); Farm Bureau Mut. Ins. Co. of Indiana v. Seal, 134 Ind.App. 269, 179 N.E.2d 760 (1962) (fraud claim against insurance company whose employee fraudulently induced plaintiff into signing a release is no different than any other action for fraud); Obad v. Allstate Ins. Co., 27 A.D.2d 795, 279 N.Y.S.2d 128 (1967) (complaint alleging bad faith by insurance company in procuring settlement sufficient to satisfy pleading rules).

Courts in a majority of jurisdictions have held that a negligence claim cannot be brought against an independent insurance adjuster by a claimant. Charleston Dry Cleaners & Laundry v. Zurich Am. Ins. Co., 355 S.C. 614, 586 S.E.2d 586, 589 (2003); Meineke v. GAB Business Servs., 195 Ariz. 564, 991 P.2d 267, 270 (App.1999); Sanchez v. Lindsey Morden Claims Servs., Inc., 72 Cal.App.4th 249, 84 Cal.Rptr.2d 799, 802 (1999); King v. National Security Fire and Cas. Co., 656 So.2d 1338 (Fla.Dist.Ct.App. 1995), Velastequi v. Exchange Ins. Co., 132 Misc.2d 896, 505 N.Y.S.2d 779, 780 (Civ.Ct. 1986). Cf. Bass v. California Life Ins. Co., 581 So.2d 1087, 1090 (Miss.1991) (adjuster not liable to insured for simple negligence, but can incur liability for gross negligence, malice, or reckless disregard). In so holding, courts have noted that because the relationship between an independent adjuster and an insurer is contractual, the adjuster is subject to the control of the insurer to which it owes a duty. In contrast, an independent adjuster has no contractual duties to an insured. Thus, as the Arizona Court held, "the relationship between adjuster and insured is sufficiently attenuated by the insurer's control over the adjuster to be an important factor that militates against imposing a further duty on the adjuster to the insured." Meineke, 991 P.2d at 270. We note that in Meineke, as well as the other cases cited above, the plaintiffs were the insured. Here, as ...