Every profession has some motto and a few secrets hidden in a special place. For physicians, the essence of the Hippocratic Oath is “Do no harm.” Their black box is likely a black bag with a stethoscope and other tools. For attorneys, the motto may be “Litigate the issue!” and the black box is a case for briefs. We adjusters also have a black box, but it's most often in our head. Our tools are the policy, other contracts, a recorder, a camera, maybe a tape measure, a smart phone and a computer. It is what is in that black box that gives adjusters a basic understanding of what we do: it consists of six words and our motto is: “Never assume!”
Six words can adjust any type of claim: property, casualty, marine or life, and health insurance. Investigate, evaluate, and negotiate (or resolve) are the first three words. The next three are: Coverage, liability, and damages. These must be done in the proper order: Investigate the coverage first, and negotiate the damages last. The contents of this little black box will keep the adjuster out of trouble.
Until the coverage issues are investigated, evaluated and resolved, one cannot determine liability, because if there is no coverage, liability doesn't matter. Obviously it is not always that simple. If a coverage problem cannot be immediately resolved, it may be necessary to proceed and investigate the type of liability or the nature of the damages under a Reservation of Rights in order to determine if coverage applies. But that is part of the investigation of the coverage.
Waiver and Estoppel
The fastest way for an adjuster to get into trouble and end up paying claims not owed is to give the impression that coverage is in order, that there is liability, and the damages will be paid. But when it is determined that there is no coverage or no liability, the adjuster has made a big “oops!” Coverage defenses are waived and the insurer is estopped from using its defenses. Whether liability for damages is first-party or third-party, coverage is the most important factor.
How many adjusters can recite, word for word, the policy language for every policy under which they handle a claim? Those policies keep changing, and each may come with endorsements or conditions different from the “standard.” There is only one way to be certain that the coverage matches the claim and that is to look at the claim in light of the policy language.
Assuming that we understand the coverage and that it will apply to the loss, we adjusters can get ourselves and our principals into trouble. Joe works at the ABC Company. Joe is injured at work. A simple workers' compensation claim is submitted and paid – and then the adjuster learns that Joe actually works for an independent contractor. Oops!
Mary reports a claim to her auto insurance agent about an intersection accident. Jim's car was damaged and Jim has called the insurer to see where he can have his car repaired. The adjuster tells him where he can have his car repaired and authorizes a rental for the repair time. Then the police report is received and, by golly, it was Jim who was at fault. Oops! These are simple claims, but mistakes are easy.
Too Many Oopses!
We've all had “oops!” moments. Unless someone constantly monitors our files, we may get away with an occasional “oops,” but if they occur too often, some day that oops will be a disaster and our principal will end up in court trying to explain to a judge or jury what went wrong. The answer lies in that black box; the adjuster forgot to open it and look inside to see what was there. On airliners the black box – although orange or red – reveals mistakes that pilots may have made that caused a crash.
The adjuster's black box can do the same – but it can also prevent that crashing “oops!” It's low-tech, but it works, saving a lot of misery.
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