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Roe-Midgett v. CC Services

January 4, 2008


Appeal from the United States District Court for the Southern District of Illinois. No. 04 C 4051-David R. Herndon, Chief Judge.

The opinion of the court was delivered by: Sykes, Circuit Judge


Before FLAUM, MANION, and SYKES, Circuit Judges.

Plaintiffs Paula Roe-Midgett and Paul Decker sued their employer CC Services, Inc. ("CCS") for overtime wages under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 207(a)(1). CCS contracts with insurance companies to provide claims processing services for auto, home, commercial, and farm policies. Roe-Midgett and Decker were employed as claims adjusters at different levels of CCS's claims-processing hierarchy. Suing individually and on behalf of four classes of claims adjusters, the plaintiffs contended that CCS improperly classified them as administrative employees exempt from FLSA overtime requirements under 29 U.S.C. § 213(a)(1).

Applying the Department of Labor's so-called "short test" for determining whether employees fall within the FLSA's administrative exemption, the district court concluded that the primary duties of all four claims-processing positions involved matters (1) "directly related to management policies or general business operations" and (2) "requiring the exercise of discretion and independent judgment." 29 C.F.R. § 541.214 (2003). Accordingly, the court held the employees were exempt from the overtime pay requirements of the FLSA and granted summary judgment for CCS.

On appeal the plaintiffs develop no substantive challenge to the district court's ruling as it relates to three of the four classes of employees: CCS's Field Claims Representative II, Field Claims Representative III, and Property Specialist positions. As to these employees, they argue only that material issues of fact preclude summary judgment for CCS. But they failed to identify any real factual dispute specific to these employees. Regarding the final group of employees-those occupying the position of Material Damage Appraiser II-the plaintiffs contend that the duties of this position do not directly relate to CCS's management policies or general business operations and do not require the exercise of discretion and independent judgment. We disagree.

Material Damage

Appraisers provide claims adjustment services for CCS's insurance company clients up to a $12,000 limit of claims settlement authority and represent the "face" of CCS to the countless claimants with whom they interact. They spend much of their time in the field without direct supervision. They conduct on-site investigations of first- and third-party automobile insurance claims; interview claimants, witnesses, and law enforcement personnel; estimate loss; determine whether parts should be repaired or replaced; negotiate with mechanics and body shops and draft final repair estimates; and settle claims up to the limit of their $12,000 settlement authority. These duties directly relate to CCS's business operations and reflect a sufficient degree of discretion and independent judgment to qualify for the FLSA's administrative exemption. Summary judgment was properly entered for CCS on all four classes of employees.

I. Background

CCS is engaged in the business of processing insurance claims for auto, home, commercial, and farm insurers. Headquartered in Bloomington, Illinois, and administered through 37 field offices, CCS's Claims Division settled roughly $600 million in claims in 2004. The claims-processing staff in each field office typically consists of Property Specialists, Field Claims Representatives, and Material Damage Appraisers ("MDA"), as well as other positions not relevant here.

MDAs draw an annual salary of $36,952 to $55,427 and primarily handle automobile claims. They do not make coverage or liability determinations, which are typically made by Field Claims Representatives or other claims agents. MDAs are responsible for investigating auto accident damage, making repair or replacement determinations, drafting estimates, and settling claims of up to $12,000 where liability has been established and coverage approved.*fn1 MDAs spend much of their time in the field without direct supervision. Moreover, because 70% of appraisals assigned to MDAs come from the home office and not the local field office, the field office supervisors do not exert much direct daily control over MDAs.

Investigating accident damage entails a physical inspection of the vehicle to ensure the actual damage and its cause correspond to the claimed damage and cause. The cause of the accident often dictates the applicable policy (i.e., comprehensive or collision) and deductible. MDAs may also interview claimants, witnesses, and where relevant, police personnel. If an MDA notes inconsistencies or otherwise suspects fraud, he relays his observations to a CCS superior in charge of final liability and coverage determinations.

After documenting and investigating vehicle damage on a given claim, the MDA prepares an estimate. The first step in this process is determining if the vehicle is irreparably damaged (a "structural total loss" in industry parlance) or if the cost of repair exceeds the vehicle's value (an "economic total loss"). The latter calculation is performed by inputting the vehicle's identification number and damage estimate into a software program that "red flags" potential economic losses. If an MDA suspects a structural total loss, he will relay that suspicion along with photos of the damage to a claims representative with final say as to whether the vehicle is a structural total loss.

If the vehicle is not a total loss, the MDA must decide which parts to repair and which to replace. For repaired parts, the MDA estimates the total labor costs based in part on his estimation of the man hours needed to complete the repair. In some instances body shops disagree with the MDA's projection, and the MDA negotiates for an adjusted hours estimate. MDAs might also adjust a repair estimate to account for "betterment," a concept intended to reflect the fact that parts that were in good repair cost more to restore to their original preaccident condition than parts already in disrepair at the time of the accident.

MDAs also estimate the cost of replacing any parts they deem beyond repair. They input a description of the part into a software program, which then generates an estimate based on labor costs and part price. In estimating the price for the part, the software detects the availability of used parts and automatically factors in that discount. The MDA may override the software and allow for new parts, but only after documenting the reasons for his deviation on a file summary sheet; all other deviations ...

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