The Dilemma: An adjuster has established an honest opinion of a claim with the maximum indemnity value in the range of 80 percent of policy limits. An offer of settlement within that range has been rejected—with a lawsuit filed instead of a counteroffer. The adjuster believes defense costs, in addition to the highest value of the settlement range, will exceed policy limits. Ethically, should the adjuster offer policy limits to try to settle the claim without incurring projected defense costs?

The Industry Responds: Claims professionals immediately recognized additional information would be necessary for a final ethical decision. Among the information respondents wanted to know were: 1) Is this a first- or third-party claim? 2) Was the suit filed because of a statute of limitations or as a practice of the claimant's attorney? 3) How close was the offer to the upper end of the settlement range? 4) Is it a bodily injury or property-damage claim? 5) What are the potential “bad faith” implications of the claim?

Answers to these questions naturally affect the ethical response of the adjuster. For example, most states impose a higher duty on insurers when the insured is also the claimant. And filing a claim to meet a statute of limitations is a significantly different situation than a claimant filing to force a greater offer.