A recent ruling by a federal court states that claim adjusters are not eligible to receive overtime based upon the duties they perform as part of their daily routines.

According to the Ninth U.S. Circuit Court of Appeals in San Francisco, "insurance adjusters generally meet the duties and requirements for an administrative exemption, whether they work for an insurance company or other type of company, if their duties include activities such as interviewing insureds, witnesses and physicians; inspecting property damage; reviewing factual information to prepare damage estimates; evaluating and making recommendations regarding coverage of claims; determining liability and total value of a claim; negotiating settlements; and making recommendations regarding litigation."

Essentially, the court ruled that since adjusters are not involved strictly in administrative matters while working for insurance companies, they do not qualify for overtime.

"We hold today that all of the adjusters in this case are exempt," read the court's opinion. "The district court's factual findings establish that, regardless of the type (personal injury v. property) or size (large v. small) of the claims they handle, the adjusters are required to: use discretion to determine whether the loss is covered, set reserves, decide who is to blame for the loss, and negotiate with the insured or his lawyer. If the Department of Labor should choose to distinguish between adjusters based on the type or value of the claims they handle, it is free to amend the regulations and tell employers how to do that. Unless and until that happens, we are obligated to follow [existing laws]."

The ruling overturned a previous decision made in 2003, which eventually led to a judgment award of $52.5 million for 1,700 employees at Farmers Insurance in early 2005. At the time, the award was the largest judgment in a case involving the Fair Labor Standards Act. It involved Farmers employees in Colorado, Illinois, Michigan, Minnesota, New Mexico, Oregon, and Washington.

Since the ruling was made in a federal court, it does not reverse any decisions made at the state level, where exemption eligibility may be narrower.

To read the complete judgment and opinion, please click here.

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Overruled: Claim Adjusters Denied Overtime

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