Can insurance adjusters bind their companies to arbitration agreements in Utah? Jenkins v. Percival Explained

The Utah Supreme Court’s decision in Jenkins v. Percival addresses critical questions about insurance adjusters’ authority to enter arbitration agreements and the requirements for enforcing such agreements under Utah law.

Background and Facts

Julie Jenkins and her children were injured when a wheel came off defendant Gerald Percival’s truck and struck their car. During settlement negotiations with USF&G Insurance Company, Jenkins’ counsel allegedly reached an oral agreement with the insurance adjuster to arbitrate Jenkins’ personal injury claim while settling the children’s claims. The adjuster later revoked the arbitration agreement, prompting Jenkins to file a motion to compel arbitration, which the trial court denied for lack of a written agreement.

Key Legal Issues

The case presented two primary issues: (1) whether an insurance adjuster has authority to bind the insurance company to an arbitration agreement, and (2) whether Utah law requires written arbitration agreements or permits enforcement of oral agreements through equitable doctrines.

Court’s Analysis and Holding

The court held that insurance adjusters possess authority to bind their companies to arbitration agreements as part of their settlement authority, noting that “the adjuster’s authority is prima facie coextensive with the business intrusted to him.” However, such agreements cannot expose the insured to liability beyond policy limits without the insured’s consent, as this would violate constitutional rights of access to courts.

Regarding the writing requirement, the court interpreted the Utah Arbitration Act as mandating written agreements, finding that only “written agreement[s]” are “valid, enforceable, and irrevocable” under Utah Code Ann. § 78-31a-3. Nevertheless, the court recognized that oral arbitration agreements might be enforceable through equitable doctrines like part performance when parties substantially rely on the oral agreement.

Practice Implications

This decision emphasizes the importance of memorializing arbitration agreements in writing to ensure enforceability under the Utah Arbitration Act. For practitioners, the case highlights that while insurance adjusters can commit their companies to arbitration, careful attention must be paid to policy limits and the insured’s rights. When oral agreements are alleged, practitioners should document substantial acts of reliance that might support equitable enforcement, though such claims face significant evidentiary hurdles.