Breaking Bad Advice

It’s natural to seek advice. From restaurant recommendations to asking a friend for a reference to a reputable contractor, we like to seek the counsel of those we trust. However, it is important to remember that not all advice is created equal, and sometimes advice is just plain bad. In a recent case handled by Smith Freed Eberhard, the plaintiff chose to act on the bad advice of a public adjuster. Through a series of strategic depositions and a well-argued case, we were able to win a summary judgment and show the plaintiffs that they should have known better than to follow bad advice.


The Plaintiff-Insureds suffered a total loss fire that destroyed their home, garage, and personal property. Soon after the loss, they connected with a public adjuster who directed them to avoid the local independent adjuster and prevented them from giving information to the insurance company. Despite this interference, the independent adjuster created an estimate for the dwelling loss and a generous Actual Cash Value (ACV) for the very old home was paid. Advances for personal property were paid, alternative housing was secured, and additional living expenses were paid. More than 7 months after the loss, the insureds had failed to produce an inventory of their personal property. When they finally provided that list, the ACV exceeded the policy limits and included many items that an older, empty nest couple on a low income wouldn’t be expected to have. Since the insured’s had failed to provide financial information, proof of ownership, or any other evidence that they had the claimed items, the adjuster called Smith Freed & Eberhard to schedule an Examination Under Oath (EUO).

The insureds lawyered up, and the EUOs were delayed. Once those were completed, it was clear that the insureds had been acting as the “storage unit” for their five generous children and that one child still lived with them, which explained the additional property. The insurance company agreed to issue payment on the personal property. The company also felt that 11 months was sufficient time to replace the home, and cut off Additional Living Expenses (ALE) around this time. However, on the same day as the EUOs, the insureds filed suit.

The insureds claimed a breach of the duty of good faith and fair dealing and asked for pre-payment on the Replacement Cost Value (RCV) of the dwelling, on which construction had not even begun, continuation of ALE payments in perpetuity, construction of a brand new driveway, and attorney fees.


Due to the fact that the company had already paid all that was owed under the policy, despite the delays and noncooperation of the insureds, an aggressive stance was most appropriate. We deposed the contractor, who admitted the house could have been replaced in 10 months, and certainly not more than 14 months. Their realtor, who was also deposed, agreed that there were alternative homes to purchase. Next, the zoning director was up. The zoning director agreed that a new road was not required by any law. The insureds admitted they didn’t complete the personal property inventory simply because they didn’t want to do it any faster. Once all the evidence had been collected, we filed for summary judgment. The plaintiffs filed cross motions, apparently in an attempt to confuse the judge into believing that payments were evidence of breach.


At the hearing, the judge had clearly spent time reading the complex and thorough briefing. He was on the defense’s side for nearly all of the issues. He agreed that RCV on the dwelling was not owed, but wanted assurance that if he dismissed the plaintiff’s claims, that they could still recover RCV on the dwelling if it was ever completed (nearly two years after the loss, the dwelling was still not complete!) The insurance company offered to enter a tolling agreement on that issue only, and the judge granted summary judgment.

The insurance company successfully avoided paying attorney fees for the plaintiff’s lawyer. The outcome also sent a message to the public adjuster that advising clients that they should fail to cooperate doesn’t pay off. The judge even found that the insurance company was prejudiced by the insured’s failure to cooperate, a rare finding in Oregon. The case was resolved by summary judgment just over a year after filing, and before the plaintiff’s even completed their replacement home. This case goes to show that sometimes an insured should break with the bad advice that they are given, and instead choose to cooperate with their insurance company.

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