The Doctrine of Privity, Chapter 2 - Pulling back the curtain

The Doctrine of Privity – Chapter 2, P&C insurance company paid engineering firms

The Doctrine of Privity – further defined; a legal interpretation in contract law where contracts are only binding on the parties signing the contract. The idea is that, contracts are private agreements among the signatory parties (e.g., a contract between an engineering company and a P&C insurance company) which should have no bearing on others who are not involved in making the contract (e.g., insured policy holders). While the doctrine makes sense in certain situations, over time it has proved to be problematic and numerous exceptions to the doctrine of privity are now well accepted.

Now more than ever, 3rd party forensic engineering firms who conduct hail damage inspections for insurance companies and repeatedly deny legitimate damage are included in those numerous exceptions mentioned in the first paragraph, for reasons that should become clear upon further reading.

Pulling back the curtain…

We’re all familiar with the scene from “The Wizard of Oz” where Toto pulled back the curtain and revealed the “Great and Powerful Oz” to be nothing more than some guy who had self-serving interests to protect and had, for a time, succeeded in protecting those interests by fooling the “Citizens of Oz” that he was, indeed, all powerful and not to be confronted or questioned. In this writing, the “Great and Powerful Oz” refers specifically to the owners of P&C insurance company paid 3rd party “forensic” engineering firms who contract with P&C insurance companies to conduct roofing, siding and related hail damage inspections on the properties of the “Citizens of Oz”.

The “Citizens of Oz” refers to the 75,000,000 + voting, tax paying citizens (AKA a jury pool) who pay out billions of dollars in property & casualty insurance premiums each and every year with the expectation that their insurance companies properly and fully pay their legitimate property damage claims. Note: Public Adjusters represent and serve insured property owners. Insurance adjusters (staff or independent adjusters (IA’s) sometimes referred to as catastrophe adjusters or CAT’s) represent and serve P&C insurance companies.

Here’s essentially how the inspections process works after a storm comes through a city and causes hail damage to a large number of properties. An insured property owner files a hail damage claim with their P&C insurance company. Typically, an “independent” insurance adjuster (IA) employed by a 3rd party insurance adjusting firm contracted with and paid by the insurance company inspects the property for damage, starting with the roof.

When there is a question on the part of the insurance adjuster or property owner as to whether or not damage is present and claimable at the property being inspected, P&C insurance may order a re-inspection of the property in question or send a forensic engineer employed by a 3rd party engineering firm contracted with and paid by the insurance company to conduct a “scientific forensic” inspection of the property. On completion of his/her inspection, the forensic engineer will then submit his/her opinion as to whether or not damage is present and claimable to the insurance company.

Unfortunately for thousands of insured property owners across the country every year, many of those 3rd party engineer’s inspection reports – their supposedly “scientific” opinions, result in, according to wide ranging research that includes the opinions of several experienced insurance company paid CAT adjusters, an improper claims denial rate as high as 94%.

When a property owner with legitimate hail or other damage (or their attorney) complains to their insurance company, the insurance company says they relied on an expert (3rd party engineer with an important sounding title). Since the engineers and the engineering companies they work for are contracted with the P&C insurance company and the insured’s are not a party to that contract, the P&C insurance companies as well as the engineering companies have, at least in the past, been able to hide behind the Doctrine of Privity.

In the past, the above would likely have been sued out as a bad faith breach of contract claim against the non-paying insurance company. As such, since the engineering firm was not a party to the contract between the insurance company and the insured, they believed themselves to be immune from being held liable and accountable for their improper actions. Denial of the existence of legitimate damage by an engineering firm however, would rightly and properly be deemed a “breach of a societal duty not to affirmatively mislead or advise without factual basis.” In other words, a “fraudulent misrepresentation that constitutes a breach of duty of honesty imposed by society, and not contractual duties” that removes the Doctrine of Privity and its assumed protections from the picture.

Larry Burtis – 3RSystems, LLC

View my Pro Se resume at

Disclaimer: Other than offering my experienced opinions as a matter of reference, I do not give accounting, tax, insurance, investment or legal advice. If you need such advice, I recommend that you consult with a licensed professional practicing in the area of your concern.

What’s your point? Are you recommending to anyone that had an unfavorable engineering report they sue the engineering firm?

Not at all. I’m simply pointing out the fact that insurance company paid forensic engineers who we both know have a history of denying legitimate wind and hail damage claims worth many millions of dollars every year can no longer do so with impunity.

Okay, thanks for the info. I’m more of a take action type, I am mostly interested in information I can use to be more profitable and effective. You know I don’t need any more convincing that the insurance companies try to screw everybody every chance they get.

1 Like