Trial Court’s Award of Contractual Fees to Public Adjuster Overturned

Tred R. Eyerly | Insurance Law Hawaii | April 29, 2019

    A judgment awarding the public adjuster his compensation for work performed under contract was remanded for further proceedings by the Hawaii Intermediate Court of Appeals. Joslin v Ota Camp-Makibaka Ass’n, 2019 Haw. App. LEXIS 155 (Haw. Ct. App. April 5, 2019). 

    A fire destroyed the homeowners’ residence on September 19, 2013. The property was subject to the bylaws of the Association of Apartment Owners of Ota Camp. The Association had a policy with Alterra Excess & Surplus Insurance Company and submitted a claim for all units damaged in the fire. The Association’s adjuster came the following day to inspect the site.

   Separately, Robert Joslin, public adjuster, entered a contract with the homeowners to adjust their claim in exchange for twelve-percent of any insurance proceeds obtained. Over the next several months Joslin pursued insurance proceeds from Alterra on behalf of the homeowners. On December 18, 2013, Joslin filed a complaint with the Insurance Division arguing that Alterra had failed to timely make payments on the claim. 

    On February 10, 2014, Alterra’s third party administrator, Engle Martin & Associates, sent a check to Joslin for $231,940 made out to the Association, the homeowners and Joslin. 

    On February 10, 2014, Joslin sent a letter to the homeowners with the check for their signature. The letter stated that the check would be deposited into a client trust account, the fees would be removed, and a new check issued from Joslin. The letter included an invoice for services totaling $28,992.31. 

    The Association’s legal counsel sent an email to the property manager on February 14, 2014, stating that under the bylaws, the Association was responsible for the repair of the unit. Thus, if the Association signed the check over to the homeowners and they did not repair the unit, the Association would breach its duty and be liable to the new owners of the unit. The lawyer also wrote to Engle Martin, asking that the check be cancelled and reissued as payable to the Association as the sole payee. 

    Joslin then sued the homeowners and the Association, seeking a declaratory judgment that as a public adjuster, he had an equitable lien against the insurance proceeds, a finding that the Association was unjustly enriched, and that the homeowners breached their contract with Joslin. The circuit court granted Joslin’s motion for summary judgment in so far as he was entitled to have his commission paid from the insurance proceeds as a public adjuster under Haw. Rev. Stat. 431:9-230. Further, the homeowners breached their contract with Joslin and he conferred a benefit on the Association, but there was a genuine issue of material fact as to the amount of value actually conferred. Joslin was also awarded fees.

    The Court of Appeals found that Haw. Rev. State. 431:9-230 did not provide authority for Joslin to be paid commissions out of the insurance proceeds paid under the Association’s policy. Instead, the statute addressed an adjuster’s responsibilities as trustee “for all premium and return premium funds received or collected under this article. The plain meaning of “premium” meant the amount paid at designated intervals for insurance. Therefore the appellate court disagreed with the circuit court that Joslin was entitled to commissions based on Haw. Rev. Stat. 431:9-230.  

    Instead, the applicable statute was Haw. Rev. Stat. 514B-143 (f), which provided that “any loss covered by the property Policy . . . shall be adjusted by and with the association. The insurance proceeds for that loss shall be payable to the association . . .” Accordingly, the circuit court erred in granting Joslin summary judgment on the declaratory judgment claim. 

    The appellate court also found that genuine issues of material fact existed as to whether the Association was unjustly enriched by the actions of Joslin, including whether he conferred a benefit upon the Association by causing Alterra to issued a payment for $231,940 and whether the Association’s retention of the money resulting from Joslin’s labor and expertise without compensating him was unjust. There also remained genuine issues of material fact as to whether the Association was unjustly enriched by the activities of Joslin. 

    The court determined Joslin was not entitled to an equitable lien against the proceeds paid by Alterra because the funds had been interpleaded. The funds would be distributed by the Clerk of Court in accordance with the final judgment in the case.

    Finally, the award of attorneys fees to Joslin was reversed. Because he did not have a statutory right to receive his commissions from the insurance proceeds under the Association’s policy and the circuit erred in granting Joslin summary judgment on the declaratory judgment claim, the court also erred in awarding him fees.

    The case was remanded to the circuit court for further proceedings. 

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