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Second Circuit allows Insurance Claims Representatives to sue for unpaid overtime!

Insurance Claims, sue for unpaid overtime

The Second Circuit Court of Appeals has recently issued an opinion which should serve as a wake-up call to insurance companies around the country. Insurance companies routinely classify their claims employees as exempt, seeking the protection of a 2004 regulation stating that claims adjusters are exempt from overtime. While it can be true that claims adjusters who actually investigate, negotiate and settle insurance claims can be considered exempt administrative employees under the law, it is not necessarily true that all claims employees can be considered exempt adjusters.

In Harper v. GEICO, 2014 WL 5066492, the plaintiffs were a class of telephone claims representatives whose duties included interviewing insureds and witnesses about the facts of an accident and reviewing factual information to prepare damage estimates. They also used GEICO’s claims adjusting software to assess liability coverage and damages. GEICO claimed that these employees were claims adjusters and therefore exempt under federal law. They cited the 2004 regulation that provides:

Insurance claims adjusters generally meet the duties requirements for the 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.*2 Id. § 541.203(a).

Geico, like many insurance companies, sought to take advantage of this regulation and avoid paying overtime to its telephone claims representatives. The plaintiff argued that they did not perform all of the duties contained in the adjuster regulation and the few duties that they did perform were not done with sufficient discretion and judgment to render them exempt administrators under the Fair Labor Standards Act.

The district court agreed with Geico and granted its motion for summary judgment. The Second Circuit reversed.

Drawing all inferences in appellants’ favor, we find that the record could lead a reasonable jury to conclude that, to the extent that TCRs perform the tasks enumerated in § 541.203(a), they do so in too circumscribed and non-discretionary a manner to fall within that section’s vision of a presumptively “administrative” employee satisfying both duties requirements of § 541.200(a). Consequently, we must remand the case for trial to let a fact finder, having weighed the parties’ conflicting testimony, decide whether TCRs satisfy § 541.203(a) by performing enough of its enumerated duties in a sufficiently discretionary fashion.

This is an important ruling for several reasons. First, lots of insurance companies classify almost every member of their claims department as an exempt administrator. These companies believe that as long as an employee performs even one of the tasks listed in the regulation, they can be considered exempt adjusters. This ruling dispels that notion. The court wrote:

First, we note that several of the tasks enumerated in § 541.203(a) do not apply in this case. Unlike the traditional insurance adjusters described in § 541.203(a), TCRs employed at GEICO do not “inspect[ ] property damage.” 29 C.F.R. § 541.203(a). Rather, they conduct all their work from a set of cubicles inside GEICO’s offices. Nor do they “mak[e] recommendations regarding litigation.” Id. While TCRs may “stay firm” on an offer, effectively committing GEICO to litigate unsettled insurance claims, the record provides no evidence that they remain involved in the ensuing litigation.

Second, many courts have held that the “discretion and judgment” element of the administrative exemption is easily satisfied. The Harper court set a higher bar for insurance companies. It explained:

Accordingly, the Department of Labor has opined that junior claims adjusters failed to qualify as administrative employees where their level of supervision narrowly circumscribed their discretion in processing claims. See Dep’t of Labor, Wage & Hour Div., Op. Letter (Aug. 26, 2005), at 5–6. Analyzing a consecutive provision in § 541.203, this Court has also found that financial services employees—deemed to “generally meet” the duties requirements of the administrative exemption under § 541.203(b)—did not qualify as administrative employees where they performed such routine processing functions that they failed to affect the employer’s general business operations. See Davis v. J.P. Morgan Chase & Co., 587 F.3d 529, 535 (2d Cir.2009).

In the future, , insurance companies should not be so sure that every member of their claims department is an exempt administrator simply because he or she performs one or two of the tasks included in the 2004 claims adjuster regulation. More is required to show that a junior level claims representative is an exempt administrative employee under the law. Insurance companies including those in Hartford, Connecticut, the self-proclaimed insurance capital of the world, should re-examine their claims rep positions and make sure that they are not misapplying the adjuster regulation and denying hard-working employees overtime wages that they’ve