Lawyer Mistake Doesn’t Justify Insurance Adjuster’s Late Filing

An attorney’s mistake as to whether a client needed to answer counterclaims filed against it isn’t “excusable neglect” justifying a late filing, the Fifth Circuit ruled Monday in a win for an insurance adjuster in a commissions dispute with his former company.

L.A. Public Insurance Adjusters Inc. should have realized it was required to answer Timothy Nelson’s counterclaims by a February 2019 court hearing at the latest, the court said in an unpublished split opinion.

But “rather than seeking to rectify the issue immediately, the company steadfastly maintained it was not required to file an answer,” the court said. This delay, combined with the prejudicial effect LAPIA’s late-filed answer had on Nelson, meant the court had to treat the insurance adjuster as having admitted the allegations that Nelson made that were unrelated to damages, the court said.

It reversed a district judge’s ruling in favor of the company.

“By permitting LAPIA to file its answer out-of-time, the district court allowed the company to pull an abrupt about-face nearly two years after its answer was originally due, inserting a new surprise defense into the proceeding that not only had not, but also could not have been previously raised,” the court said.

The underlying litigation stems from Nelson’s 79-day stint as an insurance adjuster for LAPIA. He was terminated in 2018 after a dispute over commissions, and LAPIA later sued him for making allegedly disparaging comments about its business.

Nelson brought counterclaims over the disputed commissions, and rather than filing a timely answer, LAPIA successfully moved for summary judgment more than a year later.

Nelson appealed, and LAPIA argued that it shouldn’t be “penalized for its former attorneys’ mistake” in failing to realize an answer was due. The U.S. Court of Appeals for the Fifth Circuit sided with Nelson, saying that LAPIA’s delay in seeking to correct the mistake, together with the prejudice experienced by Nelson, counseled against excusing the delay.

Judge James L. Dennis wrote the decision, which was joined by E. Grady Jolly.

Chief Judge Priscilla R. Owen dissented, saying the district court didn’t abuse its “considerable discretion” in determining that the late filing was the result of excusable neglect.

Owen Jones of Friendswood, Texas, represents LAPIA. Sturm Law PLLC represents Nelson.

The case is L.A. Public Ins. Adjusters, Inc. v. Nelson, 5th Cir., No. 20-20319, unpublished 6/14/21.