Adjuster settling with claimant is practicing law
(Continued - Page 2)

In September 1998 the Joneses tried to return the money by writing Allstate a check for $25,000. Allstate returned the check. The Joneses then sued Allstate, alleging that the release could bar their product-liability claim and would eliminate joint and several liability. The Joneses moved for summary judgment, asking the court to hold that Allstate engaged in the unlicensed, negligent practice of law by drafting release and settlement instruments, misrepresenting the terms of these instruments, and advising the Joneses to sign them. The trial court granted the Joneses’ motion. Allstate sought discretionary review before the Supreme Court.

The Supreme Court noted that Klein’s conduct, even if she did nothing more than enter objective data onto preprinted legal forms, constituted the practice of law. The Court held that insurance adjusters, when preparing documents that affect the legal rights of third-party claimants and advising third parties to sign them, must comply with the standard of practice of an attorney. Allstate thus owed the Joneses a duty like that owed by an attorney to an unrepresented third party. When the lawyer knows or should know that the unrepresented person misunderstands the lawyer’s role in the matter, the lawyer must make reasonable effort to correct the misunderstanding.

The Jones Court concluded that Klein had led the Joneses to believe that she had their best interests in mind but simultaneously appeared disinterested in the outcome of the settlement. The Court recognized that Allstate had a stated goal of decreasing legal representation in claim processes, so that Allstate sought to settle claims before a claimant hired an attorney. The Court found that Allstate’s claims adjuster fell below an attorney’s standard of practice in several ways: she advised the Joneses to sign the release; she did not advise them of legal consequences in doing so or refer them to independent counsel; she did not disclose to the Joneses that she had an interest that conflicted with theirs; and she followed Allstate’s policy of discouraging attorney involvement in the claim process.

The Lee Smart Quarterly is a publication of the law offices of Lee, Smart, Cook, Martin & Patterson, P.S., Inc. for clients and others. It is intended as general information only and is not to be construed as legal advice. You should consult an attorney if you have any specific legal questions.

Editor: Jeffrey P. Downer	Eml: jpd@leesmart.com
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