Appeals Court Rules Insurance Adjusters Can Claim California Overtime

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Los Angeles, CA A California Court of Appeal in July 2012 ruled in favor of insurance adjusters claiming California overtime pay. The case originated from a class-action lawsuit filed by a group of adjusters against Liberty Mutual and its subsidiary, Golden Eagle Insurance.

Courts--and the California labor law--have typically held that adjusters are professional employees and therefore exempt from overtime pay??"even if they worked 60 or 70 hours per week. But increasingly, claims personnel, including insurance adjusters, are saying that their duties are those of glorified administration clerks, mainly due to technology and micromanaging and that they are adjusters only in their title.

Insurers in the case, Frances Harris et al. v. Superior Court of Los Angeles and Liberty Mutual Insurance Co., argued that adjusters are exempt administrators because they do not produce the company's product. According to court documents, the product is the transference of risk, not claims adjusting, and therefore not entitled to overtime compensation.

The court, however, found that Liberty Mutual shows claims adjusting as "an important and essential part of transferring risk. If the employers never paid any claims, then they would not be transferring any risks." Further, the court found that the adjusters were misclassified and entitled to overtime pay because the are not primarily working in a management capacity. The court argued that, if adjusters are exempt, every office worker, including secretaries at a law firm, is exempt.

Just days later, a South Carolina judge granted a conditional class certification allowing property claims adjustors to sue Farmers Insurance Exchange for allegedly not paying overtime (MacGregor, et al. v. Farmers Insurance Exchange). In July 2001, a California jury awarded a class of Farmers Insurance Company adjusters $90 million in overtime pay, according to Claims Magazine (May 2011).

(In October 2006 a 9th Circuit ruling rejected a Farmer's Insurance Exchange Class Action, arguing that all Farmers' adjusters are exempt because they exercise discretion and make independent judgments.)

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