I wasn’t sure whether to caption this “Oh, How The Mighty Have Fallen” or “What A Difference A Decade Makes.”
Only ten years ago, in Bell v. Farmers Insurance Exchange, 87 Cal. App. 4th 805, cert. denied, 534 U.S. 1041 (2001), a California Court of Appeals sent shock waves through the insurance industry by affirming summary judgment against a major insurer on the issue of whether insurance claims adjusters were exempt from overtime. The surprise was due in part to the fact that insurance claims adjusters were given as specific examples of employees performing administrative exempt work under 29 C.F.R. section 541.205(c), and because numerous federal courts had held that they were exempt under federal law. To the extent, if any, that the opinion did not draw notice, the subsequent $90 million verdict against the company and later settlement well into the nine figures certainly did. As a result, insurers across the country and especially in California were inundated with wage and hour suits, and hundreds of millions of dollars changed hands.
We were honored to be counsel in one of the cases stemming the tide in Palacio v. Progressive Insurance Co., 244 F. Supp. 2d 1040 (C.D. Cal. 2002), a case later picked up by the United States Department of Labor, which again concluded that claims adjusters should be treated as exempt. See Opinion dated Nov. 19, 2002. Within only a few years, courts increasingly, again, began to recognize insurance claims adjusters as exempt. See, e.g., In re Farmers Insurance Exchange, Claims Representatives’ Overtime Pay Lit’n, 466 F.3d 853 (9th Cir. 2006), amended by 481 F.3d 1119 (9th Cir. 2007); Robinson-Smith v. Government Employees Insurance Co., ___F.3d___ (D.C. Cir. 2010).
Most recently, in an unpublished decision, the Fifth Circuit held that claims adjusters are, indeed, exempt. In Talbert v American Risk Insurance Co Inc.pdf Case. No. 10-20355 (5th Cir. Dec. 20, 2010), the plaintiffs brought a collective action under the FLSA for overtime pay, challenging their exempt status as administrative employees or, in one case, as an independent contractor. The district court granted summary judgment on the grounds that one of the named plaintiffs was administratively exempt and that the second was an independent contractor who was not even covered by the FLSA. Amazingly, the first plaintiff did not even have the title of “claims adjuster,” but that of an “assistant claims adjuster,” a title that would have been viewed as highly suspect in the wake of the Bell case. A Texas District Court granted summary judgment on both grounds, and the Fifth Circuit affirmed.
The Talbert case is remarkable for many, largely historical, reasons. In the wake of Bell, it would have been difficult to predict that even assistant claims adjusters would be deemed exempt, or that a federal circuit court opinion on the topic would be of so little note that it would designate such an opinion as “unpublished.” Still, many plaintiffs’ counsel developed expertise in handling wage and hour class and collective actions on cases against insurers and are using those skills to pursue claims against other industries.
The Bottom Line: Contrary to some of the significant early cases, the law is increasingly settled that insurance claims adjusters are exempt. The reversals of fortune involving that industry underscore the incredibly dynamic nature of class action employment litigation.
