The following are the first 5 of my Ten Commandments of insurance that should be followed by all claims adjusters working to fulfill the promises made by an insurer in an insurance policy. They are intended to provide direction to every person involved in insurance claims, for the benefit of insurers, and the public.
Claims Commandment I – Thou Shall Confirm Coverage
The first and foremost duty of a claims aduster is to confirm coverage. Simply reading a loss notice, allegations in a lawsuit, or the policy itself, is not enough to confirm that coverage is available for the insured. It actually requires a thorough understanding of the policy wording, the precise facts of the loss, and the law of the jurisdiction where the claim is filed. Don’t get caught out by assuming coverage exists until it is confirmed.
Claims Commandment II - Thou Shall Always Conduct A Thorough Investigation
An insurer has a duty to conduct an appropriate and careful investigation prior to making a decision on a claim. Failure to do so is a breach of the promises made by the insurer to provide defense and/or indemnity to the insured, and could also result in the insurer getting sued for the tort of bad faith. To conduct a thorough investigation the claims investigator should, at a minimum, read the loss notice and the policy, interview the person injured, obtain a recorded statement from witnesses, interview and take a statement from the claimant, or information from the client’s attorney, visit the scene of the accident and, obtain all relevant documents such as; the insured’s copy of the policy, police/fire reports, medical/financial records, the application for insurance, and other contracts between the insured and insured. In addition, it may be necessary to consult with experts such as engineers, legal counsel, medical professionals, etc.
Claims Commandment III - Thou Shall Communicate Often
Insurance claims are a service business to both the insured and the insurer, and adequate communication is essential. In some states, communications is required by regulation, such as the California Legislation [10 CCR 2695.4 (a)] The initial written communication with an insured in a first party property claim should advise the insured of all benefits, coverage, time limits, or other provisions of any insurance policy issued by that insurer that may apply to the claim. No claims person should ever misrepresent or conceal this kind of information. The claim handler is also under obligation to communicate with the state, police agencies, and/or prosecutors, as required. Importantly, in California as in most states, such communication is absolutely immune from suit.
Claims Commandment IV – Understand the Policy
Insurance policies are contracts and to understand insurance claims the claims adjuster must understand how all contracts, especially insurance contracts, are interpreted. Obviously, contracts of insurance should be written so that the terms are clear and understandable to a 'reasonable' person, such as the signatory and the insurance agent. There should be no ambiguity in the wording or structure of the contract. Where ambiguity exists, most states will apply the plain meaning test that asks what a reasonable person would understand. If you find any ambiguity, or determine the insured should be paid, the application of the reasonable expectations test will give a court the ability to construe the policy against the insurer and in favor of the claimant.
Claims Commandment V – Thou Shall Communicate With the Insured
The key to resolving insurance claims amicably is constant and substantive communication between the insured and the adjuster on a regular basis, which allows the insured and the adjuster to build rapport. The adjuster that fails to communicate regularly and substantively may have difficulty reaching agreement with the insured. The adjuster should build trust by demonstrating honesty, reliability, and fairness, and understanding the other person’s viewpoint. At least every 30 days some communication should pass between the adjuster and the insured, whether the communication is substantive or merely an effort to maintain rapport with the insured, and every communication should be noted in the file.
Actually, by Regulation, states require regular communication with the insured, and can punish the insurer if the adjuster fails to communicate. Note that these Regulations set minimum, not maximum, standards. The insured should also be provided with the adjuster’s contact information so that the insured can reach the adjuster to resolve any questions that may arise. If the insured has been sued by a third party, the adjuster should explain what is happening in the lawsuit, such as defense counsel’s responses to the suit, with an explanation of its meaning, and defense counsel’s plan of action to protect the interests of the insured.
Look for Part II of insurance Claim Commandments posted here.
Barry Zalma, Esq., CFE, has practiced law in California for more than 40 years as an insurance coverage and claims handling lawyer. He also serves as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud. Mr. Zalma serves as a consultant and expert, almost equally, for insurers and policyholders. He founded Zalma Insurance Consultants in 2001 and is the author of Insurance Claims: A Comprehensive Guide, Mold: A Comprehensive Claims Guide, and Construction Defects: Litigation and Claims.
Barry Zalma can be reached at any time at 310-390-4455 or by e-mail at zalma@zalma.com.