Adjuster risk management tools - Part 5 – The perils of adjusting
Adjusters are responsible for applying the policy to a loss.
In previous months, we explored hazards that lead to the peril of litigation and “bad faith,” only briefly mentioning other common perils faced by individual adjusters. This month we will look at other frequent dangers. Some perils are ancient; fire, wind, flood and injuries have existed as long as there has been an insurance industry.
Our modern way of doing business creates new perils. Armies of attorneys create our contracts (including insurance policies) and analyze every word in the event of a claim. Insureds and corporations constantly enter into contracts, and adjusters must often decipher the intent. This requires obtaining complete copies of the contracts and policies (not just the cover sheet or declarations), with all the attached addendums, endorsements and other documents. A complex construction accident may involve as many as a dozen different contracts, and each can be important.
Joe works for Subcontractor A and is injured through the negligence of Bill, who works for Subcontractor B. Joe sues general contractor C and developer D, but there are multiple issues to resolve. First, Joe will be entitled to workers’ compensation, but from whom? Second, Joe has a tort claim, but against whom? Are there indemnification and hold harmless agreements in the contracts? Are certain parties added to other parties’ liability policies as “additional insureds”? If so, do any statutes apply to additional insured agreements? Many states have such statutes.
Public enemy #1
Cellular telephones with “apps” are ubiquitous; it is easy to call someone and discuss the claim. As noted in March’s column, this can lead to unclear communication. What the adjuster “said” and the other party “heard” are often quite different. Even if the hearer heard correctly, if what the adjuster said was incorrect, that misunderstanding can create a waiver and estoppel. “Face to face” meetings and written confirmation of what was agreed upon are needed in any complex claim. Telephone conversations or text messages may be okay for organizing a party, but have no place in claims adjustments.
The cyber world
Computerized phones make communication faster, but not always as accurate as is necessary. Anything on any computer is vulnerable to hacking. We constantly hear of major companies being hacked and their data stolen. The data was still there in most cases (unless it was deleted or changed by the hackers), but now the hacker has all the information that data represented: names, addresses, social security numbers, credit data, claim reserve data, and policy information including policy limits.
From an insured’s viewpoint, the limits of a primary liability policy are often insufficient for the perils faced by that insured, who may also purchase one or more umbrella policies and additional layers of excess insurance. In the event of litigation, the primary insurer (or a partially self-funding insured) has the duty of defense until policy limits (or the retention) are exhausted.
That insurer and its adjuster have a duty to find out if there are other applicable coverages, to ensure that the insured has placed them on notice, and then to cooperate with those excess insurers if the claim is likely to exceed the primary limits or retained loss. There are additional problems with “long tail claims” where loss covers many different policy periods, and some of those policies contain exclusions applicable to the claim.
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.
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