Some claims just aren't fair...but settlement practices should be
Fairness is claims means investigating and paying them in a timely manner.
Whether one is religious or not, the ancient verse, “The last shall be first and the first shall be last,” may sound familiar. The statement comes at the end of a parable or story about a vineyard owner who hired men at an agreed pay rate to work all day. At noon he hired more, and about an hour before quitting time he hired even more workers. Then he had the supervisor pay all of them the full day’s wage.
Those who had worked all day thought they should make more than the people who had just worked for an hour. However, they got what they’d bargained for, and were told they shouldn’t be jealous of those who got paid for a full day while only working an hour.
The hurricanes that damaged Houston, the Virgin Islands and Puerto Rico last summer were not fair. All of Florida lost power and got unfairly wet. The rest of us had sunny weather. It’s not fair!
Mexico gets earthquakes; California and the West get forest fires and earthquakes, too. It is simply unfair! The guy who buys his coach airline ticket weeks ahead pays a little less than the guy who buys first class at the last minute, but the last guy gets off the plane first. Just seems unfair, doesn’t it?
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The “Fair and Equitable” clause
Most state unfair claims settlement practices acts require insurers to settle claims in “good faith” where liability is “reasonably clear,” in a manner that is “prompt, fair and equitable.” However, “liability” has to be either contractual – covered under the policy or by some other contract – or at law, such as a workers’ compensation or tort statute.
“Tragedy’s hand might be unpredictable, but the road to recovery is forged in the language of your homeowners insurance policy,” wrote Ronda Kaysen in The New York Times. She goes on to point out that a 2014 Consumer Reports study found that of the 6% of homeowners who had filed a claim for $30,000 or more, 41% reported complaints, including “disagreements over damages or coverage, delays, or slow payouts.” Undoubtedly the same will be true for the 2017 storm claims as well. Somebody gets paid first, and almost half are last, despite those “Unfair Claims Practices” statutes.
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Faith, loyalty and fairness
First party claims are supposed to be paid “in good faith,” according to those statutes. How is “good faith” determined? Just opening the claims checkbook and shelling out the money isn’t good – it would be “inequitable,” overpaying some and under-paying others.
Faith requires more than blind faith, simply believing there was the loss that the insured alleges. There has to be an active understanding and investigation of the loss, and a relationship with the insured, as well as trust.
Based on media accounts, it seems as if “loyalty” is missing in today’s marketplace. Insurers that do not pay their claims “fairly, promptly and equitably,” show no loyalty to their customers. Employees seem to express little loyalty to their employers, some spending half the workday on their mobile devices texting, playing video games or searching social media.
Employers do not express much loyalty to their workers anymore, either. There are no firm promises of “job security” unless one is in the Army or Navy. There might be benefits with some jobs, but none with others. What is fair? Maybe the worker with no benefits can find something on an Affordable Care Act health insurance pool – or maybe not. That isn’t fair either!
The new guys who may be the “last” to get hired may also be the “first” to be placed on the unemployment line, perhaps by a computer or robot that can do the same job without benefits. So “the first shall be last, and the last shall be first” again seems to be true. But darn it, it just ain’t fair!
Ken Brownlee, CPCU, (kenbrownlee@msn.com) 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 own.