Case Title: Hamill v. Pawtucket Mutual Insurance Co.

Citation: 179 Vt. 250, 2005 VT 133, 892 A.2d 226

Docket Number: 

State: vermont

Court: Vermont Supreme Court

Date: 2005-12-30T00:00:00Z

Document:
Hamill v. Pawtucket Mutual Insurance Co. (2005-025); 179 Vt. 250; 892 A.2d 226

2005 VT 133

[Filed 30-Dec-2005]


       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.

                                 2005 VT 133
  	
                                No. 2005-025


  Samuel Hamill	                                 Supreme Court

                                                 On Appeal from
       v.	                                 Windsor Superior Court


  Pawtucket Mutual Insurance Co., 	         June Term, 2005
  David Andrulat, Smith & 
  Carson, Inc. and Richard Dineley


  Theresa S. DiMauro, J.

  Howard B. Myers of Myers Associates, PLLC, and David Cullenberg of
    Cullenberg & Tensen, PLLC, Lebanon, New Hampshire, for Plaintiff-Appellant.

  Allan R. Keyes of Ryan, Smith & Carbine, Ltd., Rutland, for
    Defendants-Appellees Andrulat, Smith & Carson, Inc. and Dineley.

  PRESENT:  Reiber, C.J., Dooley, Johnson and Skoglund, JJ., and
            Allen, C.J. (Ret.),  Specially Assigned 

        
       ¶  1.  ALLEN, C.J. (Ret.), Specially Assigned.   In this appeal, we
  consider whether an insured homeowner whose residence allegedly became
  uninhabitable due to water damage, and later mold growth, has a cause of
  action in negligence against the independent adjusters hired by the
  homeowner's insurer to investigate the insured's initial claim.  We affirm
  the superior court's summary judgment ruling that the adjuster has no
  cognizable legal duty vis-a-vis the homeowner with respect to the type of
  damages claimed here, and that the homeowner's only remedy was against his
  insurer.

       ¶  2.  The parties stipulated to the following facts.  Sometime
  between February 10 and 12, 2001, while plaintiff Samuel Hamill was away on
  a business trip, a power outage occurred at his home, causing his pipes to
  freeze and then burst, resulting in flooding within the house.  Hamill
  discovered the damage when he returned to his home on February 13, 2001. 
  That same day he reported the loss to his insurance agent, who, in turn,
  notified his insurer, defendant Pawtucket Mutual Insurance Company. 
  Pawtucket contracted out the initial adjusting of the claim to the Vermont
  office of defendant Smith & Carson, Inc. (known at that time as CSB Group,
  Inc.).  The supervisor of that office, defendant Richard Dineley, assigned
  the claim to defendant adjuster David Andrulat.  Andrulat visited Hamill's
  home on two occasions in early March 2001 to assess the damage, but Hamill
  and Pawtucket could not come to an agreement on the value of the loss.  
  Pawtucket allegedly denied Hamill's claims in November 2001 following
  further brief inspections of the home during the previous month. Hamill
  asserts that the adjusters negligently investigated his claim, thereby
  depriving him of insurance proceeds and causing him to incur expenses that
  he would not otherwise have incurred.
   
       ¶  3.  In his second amended complaint, filed in April 2002, Hamill
  included counts of breach of contract, negligence, bad faith, and punitive
  damages against Pawtucket, and counts of gross negligence and punitive
  damages against Andrulat.  Hamill alleged that he presented Andrulat with
  estimates of between $150,000 and $200,000-excluding plumbing, heating,
  electrical, roofing, and masonry costs-to repair the water damage, but
  that, based on a brief visual inspection of the premises, Andrulat rejected
  the estimates, accused Hamill of insurance fraud, and offered to settle the
  matter then and there for $5000.  Hamill also alleged that after he
  rejected the adjuster's settlement offer, Andrulat did not get back to him
  for weeks, even though Andrulat knew or should have known that the
  water-damaged premises needed to be repaired immediately to prevent the
  possibility of mold growth.  According to the complaint, as the result of
  Andrulat's failure to carefully investigate Hamill's claims, to consider
  his repair estimates, and to make an immediate and thorough inspection of
  the subject premises, mold spread through the house, making it
  uninhabitable.  The complaint alleged that if Andrulat had acted reasonably
  in inspecting the premises and assessing the damages, the interior of
  Hamill's house would have been gutted and rebuilt before the mold had begun
  to grow.

       ¶  4.  In February 2004, Hamill filed a complaint against Dineley and
  Smith & Carson, alleging that they acted negligently and in bad faith by
  failing to supervise the investigation and processing of his insurance
  claim.  He sought both compensatory and punitive damages.  Shortly
  thereafter, Hamill settled his claims against Pawtucket.  On December 9,
  2004, after the complaints were consolidated, the superior court entered
  summary judgment in favor of defendants.  The court ruled that Hamill had
  not alleged a cognizable duty on the part of the adjusters with respect to
  his negligence action, and that if the adjusters acted in bad faith,
  resulting in additional damage to Hamill's home, his remedy was to include
  such claims in his breach-of-contract action against Pawtucket.  The court
  concluded that Hamill was claiming economic losses rather than direct
  physical loss to his property, and that such losses were not compensable in
  a tort action under the economic-loss doctrine, which generally disallows
  claims of economic loss to third parties absent privity of contract.
   
       ¶  5.  On appeal, Hamill argues that an independent insurance
  adjuster should be subject to liability for physical damage to an insured's
  property resulting from the adjuster's negligent conduct.  In his view, no
  sound public policy considerations justify denying his common-law
  negligence action against defendant adjusters.  Relying primarily on Morvay
  v. Hanover Ins. Co., 506 A.2d 333, 335 (N.H. 1986), in which the New
  Hampshire Supreme Court permitted insured property owners to file a
  negligence action alleging that agents hired by an insurance company to
  investigate a claimed fire loss breached their duty to conduct a fair and
  reasonable investigation of the claim, Hamill argues that defendant
  adjusters owed him a cognizable legal duty that supports his tort action
  against them because he was a foreseeably affected third party.  According
  to Hamill, the adjusters knew or should have known that their failure to
  act properly and promptly in investigating his claim would result in
  further damage to his property.

       ¶  6.  We do not find these arguments persuasive.  Generally, whether
  there is a cognizable legal duty that supports a tort action depends on a
  variety of public policy considerations and relevant factors, only one of
  which is foreseeability.  Langle v. Kurkul, 146 Vt. 513, 519-20,