Jeffrey W. Stempel

Abstract

This article addresses the “other” intermediaries involved in administering insurance policies—specifically the “downstream” intermediaries who handle insurance claims. It focuses on managing general agents, third-party administrators, and independent contractor claims adjusters, who perform the essential, day-to-day tasks of the insurance industry and are generally less well compensated than commercial insurance brokers. Because these intermediaries are immune from judicial claims by policyholders, they have fewer incentives to perform their duties competently. The article argues that improving the claims process requires holding these intermediaries accountable for misconduct, at least in tort and potentially even for “bad faith” in a manner similar to insurers. It reviews the benefits of imposing accountability and proposes a workable standard under which an intermediary may be held liable when a policyholder alleges negligence or more serious wrongdoing.

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