The United States District Court for the Eastern District of Louisiana, applying Louisiana law, has allowed an insured’s claim against a third party adjuster (TPA) to survive a motion to dismiss, where the insured’s principal support for the claim was its alleged “belief” that the contract between the insurer and the TPA (which defendants declined to provide to the insured) contained a provision stipulating that the contract was for the benefit of insureds. Hammerman & Gainer, LLC v. Lexington Ins. Co., 2019 WL 2603637 (E.D. La. June 25, 2019).
The insured contracted with the state of New Jersey to assist with the administration of recovery efforts in the wake of Hurricane Sandy. New Jersey was displeased with the services provided by the insured and its subcontractors and refused to pay the full amount. The insured then attempted to reduce its payments to its own subcontractors, and the subcontractors sued the insured. The insured tendered the suit to the insurer, who assigned the handling of the claim to the TPA. On behalf of the insurer, the TPA denied the claim on the basis that it arose out of “an act that provided personal profit to [the insured].” The insured then sued both the insurer and the TPA.
The defendants moved to dismiss all of the claims against the TPA, arguing: (1) that no facts were pleaded to support the claim that the insured was an intended beneficiary of the insurer-TPA contract; (2) that the Louisiana Insurance Code does not allow for direct claims against TPAs; and (3) that the TPA could not be liable to the insured as a “mandatary,” as defined in the Louisiana Civil Code (an agent who receives authority from a principal under contract), because even if the TPA were a mandatary, there must still be a contract between the TPA and the insured, which there was not.
The court agreed that TPAs cannot generally be held liable for handling insurance claims absent allegations of fraud toward a claimant under Louisiana law. No fraud was alleged, so the direct claim was dismissed. The court also dismissed the “mandatary” claim, concluding that the insured was required to plead a contract between it and the TPA, which it did not do.
However, the court permitted the third-party beneficiary claim to proceed beyond the pleading stage. In support of this claim, the insured alleged that “[u]pon belief, the contract between [the insurer] and [the TPA] contains a clear provision and/or stipulation that the purpose of the contract is for the benefit [of the insureds].” The court recited that to survive the motion to dismiss the complaint need not contain detailed factual allegations, but rather must contain “enough factual matter to raise a reasonable expectation that discovery will reveal evidence as to each element of the asserted claims.” The court held that the insured had pleaded sufficient facts and met the standard.
The court had previously dismissed the same third-party beneficiary claim with leave to amend. Prior to reasserting the claim, the insured sought to obtain a copy of the contract between the insurer and the TPA. However, the defendants refused to provide it, arguing that they were under no obligation to comply with discovery requests while a motion to dismiss was pending. The court did not address the propriety of the defendants’ refusal to provide a copy of the contract under the discovery rules. However, in allowing the claim to survive the second motion to dismiss, the court referred to the fact that the defendants had refused to provide a copy of the contract.