Some days you feel like a nut… a look at undisclosed principalship

There was a TV ad for Mounds and Almond Joy candy bars that said, “Some days you feel like a nut, and some days you don’t.” With the two advertised bars, you had a choice.

While teaching adjusting classes I often refer to the hazard of undisclosed principalship. Early in my career I met with an insured, knowing only that her insurer was “the MEEMIC.” What did I know? Maybe it was like GEICO or AMICA. When she opened the door I told her I represented the “Meemic.” She looked at me and said, “You dolt! That stands for the Michigan Educators and Employers Mutual Insurance Company. I’m a teacher from Detroit. Do you mean to stand on my doorstep, young man, and tell me that you represent my insurance company and you don’t even know the name of it?” Well, some days you really do feel like a nut!

I felt like a nut this past month, having fallen for a computer ransomware scam that cost a lot of money. I have insurance (remember, the Homeowners “Theft” coverage includes certain computer-related fraud), but as the author of textbooks with entire chapters on fraud and cyber theft, to have been victimized myself, well…I felt like a nut!

Related: Responding to the shift from ransomware to crypto-mining

Undisclosed principalship

“Principalship” means for whom one is working. It is a frequent cause of insurance litigation, especially in commercial liability contracts, but also occurs in personal lines. There are often multiple interests, including co-insureds, banks, reinsurers, a self-funded entity with a high deductible, and all those “additional insureds,” but only in certain circumstances. The adjuster must disclose to those involved all the interests represented and understand why.

Insurance adjusting is a matter of following a few brief outlines. However, the process seems to have changed from investigation, evaluation and resolution of first coverage then liability and damages, to negotiating and disposing of damages before investigating and evaluating coverage or liability.

Coverage investigation is a complex and detailed process requiring more than a computer’s confirmation that a policy exists and is in effect. The investigation and evaluation means being certain that the policy actually applies to the loss. The policy tells the who, what, where, when, why and how much coverage the policy provides. Just knowing “who” requires hours of research. Who is an “additional insured,” can differ by jurisdiction and endorsement language!

When coverage applies is another issue, especially in “claims made” forms like D&O. If the attitude of the insurer is, “Just pay the claim; don’t worry about it!” fraud becomes easy. At a seminar I taught in San Antonio, were a number of property adjusters who wondered why “liability” would concern them. Don’t they consider their right of subrogation? What about liability factors under contracts or statutory requirements? Those are liability issues, too.

Someone commented about property claims: “It’s not a tape measure and clipboard job anymore; the computers take care of all that!” No more climbing on roofs to check factors such as dimensions or causation. The idea is speed. In catastrophic losses, adjusters have too many claims to take time fiddling with tape measures. Put data in a computer, press the buttons, and out comes the settlement check.

But if something important is missing, someone will end up “feeling like a nut!”

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.