Editor's Note: This is the second article in a six-part series on adjuster ethics. Read Part 1: For adjuster ethics, the “I's” have it!
While none of them are dumb, the Central Intelligence Agency does not select their operatives solely on the basis of IQ. Lots of super-smart people have little common sense and would make terrible spies. The CIA isn't about “intelligence quotient,” it's about information. Intelligence is needed to obtain, evaluate and act upon information, but the key is accuracy. Bad intelligence gets people killed or insurers sued.
The same is true for claims adjusters. We may be super smart, an A+ graduate, or we may be an intellectual drop-out. It is how we gather the information about the claims we are assigned that determines if the settlement or denial will be ethical. Information needed for a claim can involve coverage, liability or damages. Each of these must first be investigated, then evaluated, and finally negotiated or resolved.
First must be the investigation of coverage. Does “the who, where, when, why, what and how much” of the claim match the policy? If not, liability doesn't matter, nor do damages. Liability may result from a tort or a contract or a statute. If there is no liability, then there is no claim. It's a simple formula, but lawsuit after lawsuit across the nation involving insurance companies shows that getting it right isn't easy. In reviewing court cases, some situations seemed so obvious one wonders why either a proper denial was not negotiated, or why the insurer refused to pay.
|Assumption and trust
In auditing claim files one often reads, “The agent confirmed that there was coverage.” Really? Was that the agent's responsibility? Perhaps the agent confirmed that a policy was in effect, but that does not confirm that the coverage applies to the claim at hand. That must be investigated, evaluated and even negotiated by the adjuster. Adjusters cannot trust someone else's word on coverage, and cannot “assume” that coverage applies without investigation. The same is true for liability, regardless of the type involved. Both personal and commercial insurance policies are complex and confusing.
Anyone studying them for years may still have to look at the policy itself to see what is and is not covered. Consider a construction claim involving some form of general liability coverage which may or may not be applicable to the owner, the developer, general contractor, subcontractors, suppliers or even the architect. Subcontractor A's employee injures subcontractor B's employee. There may be workers compensation, but chances are B's employee will involve a lawyer and the owner, architect, developer, the general contractor and their spouses will be sued. It's the adjuster's job to figure out who's covered and who isn't.
Related: Is that claim covered?
(Photo: Bigstock)
|No easy answers
“A” owns a truck which he rents to “B,” who loans it to “C” for a specific purpose, and “C” injures “D “while using the truck for reasons other than that for which “B” loaned it to him. Can you “assume” that “A's” coverage applies?
Joe leases a house from Sam. Unknown to Sam, Joe sublets a bedroom to Bill, who is a smoker. Bill accidently sets Joe's house on fire. Joe has a Dwelling policy. Does the adjuster need to review the rental agreement?
John and Jane Smith live in a wooded canyon; a wildfire spreads and the Smiths and their neighbors are ordered to evacuate. They go to a hotel at $200 a night, but it takes six weeks for the fire department to get control of the fire. The Smith neighborhood was undamaged. Will the insurer pay for the additional living expense under the “governmental action” clause in Smith's policy? The answer may depend on whether the state of origin recognizes the “efficient proximate cause” rule in insurance, or the interpretation of the “Civil Authority Prohibits Use” clause.
It takes intelligent investigation of all the factors of coverage, liability and damages to determine the correct answers. It ethically requires accurate information.
Ken Brownlee, CPCU, is a former adjuster and risk manager based in Atlanta, Ga. He now authors and edits claims-adjusting textbooks. Opinions expressed are the author's.
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