All posts by zalma

The Need for Professional Insurance Claims Handlers

Insurance is Needed to Maintain a Modern Society

Almost every business, every homeowner, every property owner lack sufficient assets to cover a contingent or unknown event, an accident, a tort lawsuit, a fire, or other casualty. Insurance, by spreading the various risks of loss among many, allows a business, property owner, or individual to cover the risks of loss and avoid bankruptcy.

“Insurance is a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event.” [California insurance Code Section 22]

Since insurance is a contract of the utmost good faith insurance claims adjusters were created to assist the insured to present and prove a claim to avoid and recover from a casualty. It is the obligation of the insurance adjuster – acting for the insurer – to do nothing that will deprive the insured of the benefits of the contract of insurance. To do so, the adjuster must treat the insured fairly and in good faith and do so with the knowledge and experience necessary to act as a professional insurance adjuster.

If the insurance industry is to survive it must train and maintain a staff of professional insurance claims people, recognize that it is the claims person who keeps the promises made by the insurance policy, and that if those promises are not kept the insurer and the insurance industry will fail. No matter how many dollars of premium are collected by the insurer, if its claims people are not professional, the premiums collected will be insufficient to keep the insurer in business.

I started in the business of insurance 50 years ago. I was trained to be a professional claims adjuster and that training was an important component of my ability to become an effective, competent, professional insurance coverage lawyer and author. How that happened began in 1967 when I sought work after leaving my term with the U.S. Army.

The Creation of a Professional Insurance Adjuster

Fifty years ago, I had completed three years in the U.S. Army as a counter intelligence investigator and, seeking employment that allowed me to use the skills I learned, found work in the insurance industry. After a few interviews I was hired as an insurance claims trainee by the Fireman’s Fund American Insurance Company. I knew nothing about insurance although I had purchased insurance for my automobile. Like most people I had never read an insurance policy.

The Fireman’s Fund knew, back in 1967, that an insurance policy was a group of promises. It knew that it needed to keep each and every promise made by the insurance policy and that only an experienced, professional and excellent claims staff could keep those promises.

The Fireman’s Fund expected nothing of me other than an ability and desire to learn. They wanted me to become a professional insurance claims adjuster and, unlike most modern insurance companies, the Fireman’s Fund was willing to take the time and money to properly train me.

The Beginning of My Training

My first week on the job I was sat at a desk with a copy of a book by Paul I. Thomas called “Adjustment of Property Losses” which was, then, the bible of the claims industry. For my first week on the job, paid the munificent sum of $550 per month, I read the book. When I didn’t understand something, I was told to ask a supervisor who would take the time to explain to me the meaning of the comments made by Mr. Thomas in his text. The supervisor was patient and understood that I was totally ignorant about insurance and, if the training program was to be successful, it was necessary to take the time to educate me.

After spending the time to read all of the book, taking notes, asking questions, and learning about insurance claim handling I was put under the care of a working, experienced, workers’ compensation insurance adjuster and hearing representative. I spent a week with the adjuster visiting multiple scenes where a worker was injured. I also sat next to the adjuster who represented Fireman’s Fund at hearings before the Workman’s Compensation Appeals Board (before its name was changed to the Workers’ Compensation Appeals Board) while he argued facts and law to the WCAB judge. As a result, I received a basic understanding of what a Workman’s Compensation adjuster did.

The next week I was assigned to a property adjuster. I went with the adjuster to the site of dwelling fires, thefts, vandalism, and almost every other type of casualty that could befall a piece of real or personal property. I learned how an adjuster creates a scope of loss, how to measure and diagram a loss scene, how to calculate the amount of damage, how to deal with contractors, how to obtain true values of personal property and how to depreciate property to arrive at actual cash value.

My third week on the job I was assigned to a surety adjuster who explained to me, as we drove to job sites, how he was responsible for completing a freeway overpass after the contractor became bankrupt; what it was that he did to take over the business of the person for whom Fireman’s Fund stood as surety, and how the moneys paid were recovered from the insured and the security he posted to obtain the surety contract. I learned that a surety adjuster needed multiple skills including how to be a CEO, CFO, and job site manager of a construction site.

At the end of the third week I started my studies at a night law school where I was instructed about contract, tort, and real estate law. Knowing nothing about the law I was a blank slate and moved right into what I was learning when I was assigned to ride with a bodily injury adjuster who took me with him to meet with insureds who had been in accidents and injured a third party to gather the facts of the accident and determine if the insured, under the law of torts, was liable for the injuries of the third person. If he determined the insured could be liable he would immediately contact the injured person, take a statement, and then attempt to negotiate a settlement. If the claimant had retained a lawyer I sat with the adjuster as he met with the lawyer and tried to quickly reach a settlement. In those days contributory negligence was a total defense so negotiation was relatively easy since any negligence on the part of the claimant would be a total defense. If settlement was not possible then we would travel to a defense lawyer’s office and assign the defense to a lawyer on our approved list.

My first month as a trainee only required me to observe, listen, and say nothing until I was alone with the training adjuster who was ready to answer all the questions that came to me.

I thought I was ready to work as an adjuster. Fireman’s Fund, correctly, disagreed. They had me sit for a month at a desk with experienced adjusters and supervisors for another month listening and learning.

The Home Office Training School

I was then told that I was required to travel to San Francisco to attend the Fireman’s Fund Home Office Training School. It was difficult for me because I would miss some evening law school classes, but earning a living with a new wife and soon to have a child on the way, I made do and flew from San Francisco to Los Angeles to attend some, but not all of my evening classes.

I was amazed when I reached the classroom in the Fireman’s Fund Home Office building. I was given a large three ring binder that was the text for the training and included, if I recall accurately:

  • Homeowners policy wording.
  • The California Standard fire policy.
  • A Comprehensive General Liability Insurance Policy form.
  • An automobile liability policy.
  • An automobile comprehensive and collision policy.
  • A jewelers block policy.
  • A personal articles floater policy.
  • A warehouseman’s policy.
  • A motor truck cargo policy.
  • A surety bond.
  • A banker’s blanket bond.
  • Multiple endorsements.

In addition to the policy forms that we were instructed to study when we reached our hotel rooms after class the text, borrowing from the Thomas book, also included:

  • Instructions on the parts of a structure.
  • Details on how a frame dwelling is constructed.
  • Details on different types of roofing materials.
  • Details on different types of wall covering.
  • Uses of lath and plaster.
  • Use of Sanitas (a smooth white thin cloth wall covering that was placed over the plaster) to cover lath and plaster and allow smooth paint surfaces without cracks.
  • Use of wall paper and how to evaluate the amount needed to cover a wall.
  • Details on types of outside surfaces including stucco, brick, stone, etc.
  • How fires start.
  • How to detect the use of accelerants to destroy property by arson.
  • How to write an estimate for repair or replacement of damaged property and calculate the amount of loss using books containing construction unit costs.
  • Details on the parts of an automobile and how to evaluate the parts needed to repair an automobile after an accident.

The course included a large section on tort law, negligence, contributory negligence, and how to determine liability and complete an investigation into a third-party liability claim. This included:

  • The basic law of negligence.
  • The basic law of intentional torts.
  • The basics of a liability claims investigation including:
    • Taking a recorded statement of the insured and claimant.
    • Taking a written statement of the insured and claimant if they refuse to be recorded.
    • The use and operation of the disk recorder that we would be required to take with us for the purpose and how to save the plastic disks upon which the statement was recorded.
    • Visiting the scene of the accident and documenting the scene with:
      • photographs,
      • hand drawings,
      • use of a measuring wheel to obtain accurate measurements for a scale drawing of the accident scene.
    • How to secure physical evidence.
    • The use of experts including:
      • Engineers,
      • Professional photographers, and
      • Accident reconstructionists.
    • How to find witnesses.
    • How to conduct a thorough claims investigation.

The course then spent a great deal of time on investigation techniques. I had been trained by the Army in such techniques but the course provided me with reminders of various techniques available and how to apply what I had learned as a counter-intelligence agent, to insurance claims investigation.

The last week was spent studying contract law and how to interpret and apply the terms, conditions and limitations of the insurance policy that applies to the claim investigated.

Throughout the month of training – even before the tort of bad faith had become a serious issue – I, and my fellow trainees, were taught incessantly that the insurance policy was a contract of the utmost good faith and that, although we were only to pay claims that the policy agreed to pay, it was our obligation to conduct an investigation seeking how to pay a claim and not how to deny one. We were to deal fairly with insureds and claimants and to do nothing that would deprive the insured of the benefits of the policy issued to the insured.

More Training

After completing the Home Office Training School program and two months of law school I was certain I was ready to be an adjuster and allowed to work to adjust claims. Again, I was wrong. Fireman’s Fund insisted that I was properly trained before I was allowed to deal with an insured.

I spent two more months with experienced adjusters in the field learning more about what an adjuster does and being allowed to deal with parts of a claim, take a statement from an insured or a witness, and watch as the experienced adjuster resolved the claim. I was surprised that he had a checkbook and could write a check on his own to resolve a claim without seeking authority from someone else.

My investigation skills were honed and directed toward insurance issues rather than the requirements of the U.S. Army, and taught how to gain information needed to resolve a claim.

Finally, after months of training, I was allowed – under close supervision – to deal with minor claims over the telephone. I would handle low impact, minor injury accidents, small kitchen fires, thefts of two or five items. Before I could agree to settle a claim that I had investigated over the telephone, I needed to meet with my claims supervisor, explain the results of my investigation and evaluation of the claim, and obtain approval of my recommendations.

After a year of close supervision, I was granted some small discretionary authority and allowed to resolve claims on my own without first obtaining approval from the supervisor.  I was expected, however, to consult with the claims supervisor or claims manager whenever I was uncomfortable with the claim or what was needed to resolve a claim.

I’m Finally an Official Claims Representative

After a year on the job and a thorough review of my training period I was determined to be a fully trained adjuster and given a business card showing I was a Fireman’s Fund Claims Representative. For the next year I worked chained to a desk dealing with first and third-party claims and adjusting and investigating them by telephone. I used location based telephone directories to identify independent witnesses by telephoning neighbors and businesses near the accident or loss location. Remember, there were no computers, no GOOGLE, no MapQuest, no cell phones. Everything was done in person or by telephone.

I was good at what I did and my law school training gave me tools that the experienced adjusters did not have.

Fireman’s Fund made me a field claims representative. I was given a company car, a ladder, a portable Edison Disk Recorder – for statements – a tape measure and a wheeled devise for measuring large sites, and assigned to adjust claims and become part of the professional claims staff.

I had been a professional investigator during my Army career I was able to schedule my time efficiently.  As a result of my experience and law training I was able to resolve more claims, efficiently and fairly than my colleagues. I learned, with the help of a professional reconstruction contractor, how to estimate damages and prepare a complete scope of loss that could be followed by any reconstruction contractor. I overcame my fear of heights by climbing on roofs to determine whether the damage was caused by wind, rain, old age or, in at least one case, a racoon.

Regardless of my experience and competence I, and my employer, expected that I would continue my training every day I was employed. I would study the Fire, Casualty and Surety Bulletins (FC&S), legal opinions from coverage counsel, reports on new case law that was important to the claims business, and everything I learned in law school as it related to my work. I had available the school’s law library to do research needed to deal with a claim I was working.

As a fully trained and experienced adjuster I was given mostly a free hand to resolve claims and was sufficiently proficient and effective until I passed the California Bar Exam and became a lawyer.

Modern Adjuster Training

The 2017 hurricanes and wild fires have made it clear that there is a shortage of experienced and professional insurance claims adjusters.  For the last decade or two insurance companies have attempted to increase profits by cutting back on expenses. As a result, home office training schools, like the one I attended, have been shuttered and are almost non-existent. Training programs like mine are as rare as snow in Palm Springs, California. Young college graduates are hired and sent out as insurance adjusters with little or no training. Experienced and professional adjuster like those I learned from, have been laid off or fired to save their salaries and replaced with recent college graduates who can be retained for half as much money.

Removing experience claims personnel, closing down adjuster training programs, and limiting the amounts paid to the claims staff, increased the profits of the insurers for the short term. Insurance, however, is not a short-term business. It is gauged, not on a quarter of a year but a quarter of a century. Insurers must think in the long term, not short-term gains.

Excellence in Claims Handling

The promises made by an insurance policy are kept by the professional claims person. Keeping a professional claims staff dedicated to excellence in claims handling is cost-effective over long periods of time. A professional and experienced adjuster will save the insurer millions by resolving disputes, paying claims owed promptly and fairly, and by so doing avoiding litigation.

Claims professionals resolve more claims for less money without the need for either party to involve counsel. A happy claimant satisfied with the results of his or her claim will never sue the insurer. Young, inexperienced, untrained adjusters make serious mistakes, offend the claimant, and drive the claimant to a lawyer who will sue the insurer seeking both contract and tort damages including punitive damages.

Claims where an insured or claimant is represented by counsel costs more to resolve than those where counsel is not involved. Prompt, effective, professional claims handling saves money for both the insured and the insurer. The professional claims person fulfills the promises made when the insurer sold the policy quickly, fairly and efficiently.  The inexperienced, unprofessional, untrained adjuster will deny a claim based on a poor reading of the policy, will fail to properly investigate, or will not recognize a fraudulent claim, all to the extra and unnecessary expense of the insurer.

When an insurer compromises on staff, profits, thin as they may have been previously, will move rapidly into negative territory. Money saved on the expense side of the ledger will be overcome by the expense of defending lawsuits seeking contract, tort and punitive damages. The shareholders of the insurer will quickly question why they invested in the business of insurance. Insurance company management will lose their jobs and wonder why they ever became involved in the insurance business. Those who stay in the business of insurance will either adopt a program requiring excellence in claims handling from every member of their claims staff, or they will fail.

Insurance is a business that must, like all other businesses, make a profit to survive. Those insurers without a professional claims staff must change—this time for the better—if it is to survive as a profit making business.

Insurance is not a charity. Insurers who have done so must rethink the firing of experienced claims staff and reductions in training to save “expense.” Only with an excellence in claims handling program and philosophy can an insurer avoid charges of breach of contract and the tort of bad faith.

The excellence in claims handling philosophy requires the maintenance of insurance claims professionals who:

  • can read and understand the insurance policies issued by the insurer.
  • understand the promises made by the policy and their obligation, as an insurer’s claims staff, to fulfill the promises made.
  • are competent investigators.
  • have empathy, and recognize the difference between empathy and sympathy.
  • understand medicine relating to traumatic injuries and are sufficiently versed in tort law to deal with lawyers as equals.
  • understand how to repair damage to real and personal property and the value of the repairs or the property.

A Proposal to Create Claims Professionals

To avoid claims of breach of contract, bad faith, punitive damages, unresolved losses, and to make a profit, insurers must maintain a claims staff dedicated to excellence in claims handling like the old Fireman’s Fund where I learned about insurance. By so doing they will not avoid all conflicts with insureds, claimants and Departments of Insurance, but they will avoid most. The professional adjuster recognizes that they are obligated to assist the policyholder and the insurer to fulfill all the promises made by the insurer in the wording of the policy fairly and in good faith.

To create a claims staff dedicated to excellence in claims handling every insurer must, at least:

  • Find and hire as many insurance claims professionals as are available.
  • Be ready to pay a fair salary, with benefits and a company car, to the professional adjusters on staff.
  • If professionals are not available, the insurer must train all members of the existing claims staff to be insurance claims professionals.
    • If not available in the company obtain training from:
      • local colleges,
      • Insurance training organizations,
      • Insurance web based training,
      • Text books,
      • The FC&S Bulletins, and
      • The CPCU Society and other insurance organizations.
  • Training each member of the claims staff annually on the local fair claims settlement practices regulations.
    • Training can be obtained from local independent insurance adjusting firms, independent law firms, and on line.
  • Using sufficiently knowledgeable people to supervise each claims handler closely to confirm all claims are handled professionally and in good faith.
  • Explaining to each member of the claims staff the meaning of the covenant of good faith and fair dealing and that it is the philosophy of the insurer that every claim be handled in such a manner that nothing is done to deprive the insured of the benefits of the policy to which the insured is entitled.
  • Demanding excellence in claims handling from the claims staff.
  • Being ready to dismiss any claims handler who fails to treat every insured with good faith and fair dealing.

If any experienced claims professionals exist on the insurer’s staff, the insurer must cherish and nurture them and use their experience and professionalism to train new claims people. Do not refuse reasonable requests for an increase in salary and lose the adjuster to an independent adjusting firm or a law firm.

To keep the professional claims staff operating efficiently and in good faith they must be honored with increases in earnings and perquisites.  The insurer must make clear to all employees that it is committed to immediately eliminating staff members who do not provide excellence in claims handling and must be ready to publicly and quickly fire those who do not provide excellence in claims handling.

When the claims staff is made up of claims people who treat all insureds and claimants with good faith and fair dealing and provide excellence in claims handling, litigation between the insurer and its insureds will be reduced exponentially.

Those insurers who decimated their professional claims staff to save expense must recognize that there is no quick and easy solution to the lack of a professional claims staff providing excellence in claims handling. The training takes time; learning takes longer, and the insurer must be willing to take the time needed to train claims people by spending the time Fireman’s Fund spent on me.

The excellence in claims handling program requires thorough training providing each member of the claims staff with a minimum of the following:

  • How to read and understand the contract that is the basis of every adjustment, including but not limited to:
    • The formation of the insurance policy.
    • The rules of interpretation.
  • Tort law including negligence, strict liability in tort, and intentional torts.
  • Contract law including the insurance contract, the commercial or residential lease agreement, the bill of lading, non-waiver agreements, proofs of loss, releases and other claims related contracts.
  • The duties and obligations of the insured in a personal injury claim.
  • The duties and obligations of the insurer in a personal injury claim.
  • The duties and obligations of the insured in a first party property claim.
  • The duties and obligations of the insurer in a first party property claim.
  • The Fair Claims Practices Act and the regulations that enforce it.
  • The thorough investigation:
    • Basic investigation of an auto accident claim.
    • Investigation of a construction defect claim.
    • Investigation of a non-auto negligence claim.
    • Investigation of a strict liability claim.
    • Investigation of the first party property claim.
    • The recorded statement of the first party property claimant.
    • The recorded statement or interview of a third-party claimant.
    • The recorded statement of the insured.
    • The red flags of fraud.
    • The SIU and the obligation of the claims representative when fraud is suspected.
  • Claims report writing.
  • The evaluation and settlement of the personal injury claim.
  • How to retain coverage counsel to aid when a coverage issue is detected.
  • How to control coverage counsel.
  • How to instruct coverage counsel on the issue to be resolved.
  • Dealing with a plaintiff’s lawyer.
  • Dealing with personal injury defense counsel.
  • Dealing with insurance coverage counsel.
  • How to retain and obtain information from experts needed to resolve a claim.
  • The evaluation and settlement of the property damage claim.
  • The Appraisal process.
  • Arbitration and mediation and the claims representative.

Conclusion

I have spent 50 years in the business of insurance and do not regret a single moment of my career. By writing, lecturing and conducting webinars I have attempted to help insurers and their claims staff become professional and provide excellence in claims handling. I am concerned that the lack of professional claims personnel will make it impossible for the insurers to deal with the hurricanes, wildfires, and other catastrophes because they don’t have available a sufficient staff of professional claims handlers.

Adjusting claims can often be difficult and emotionally draining on those insured. Catastrophes multiply the difficulty and emotions, requiring a professional claims handler to avoid disputes. Lack of adequately trained and experienced claims handlers can result in a windfall to the policyholders lawyers. Perhaps, if insurers are hurt sufficiently they will understand the need for acquisition, training and maintenance of a staff of professional claims handlers ready to provide excellence in claims handling.


© 2017 – Barry Zalma

This article, and all of the blog posts on this site, digests and summarizes cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Check in on Zalma’s Insurance 101 – a Videoblog – that allows your people to learn about insurance in three to four minute increments at http://www.zalma.com/videoblog

Look to National Underwriter Company for the new Zalma Insurance Claims Library, at www.nationalunderwriter.com/ZalmaLibrary  The new books are Insurance Law, Mold Claims Coverage Guide, Construction Defects Coverage Guide and Insurance Claims: A Comprehensive Guide The American Bar Association, Tort & Insurance Practice Section has published Mr. Zalma’s book “The Insurance Fraud Deskbook” available at  http://shop.americanbar.org/eBus/Store/ProductDetails.aspx?productId=214624, or 800-285-2221 which is presently available and “Diminution of Value Damages” available at http://shop.americanbar.org/eBus/Store/ProductDetails.aspx?productId=203226972 Mr. Zalma’s three new e-books  were recently added and are available at http://zalma.com/zalma-books/

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

 

 

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A Life Insurance Murder Case

CANDY & ABEL

Fiction © 2017 by Barry Zalma

CHAPTER 1

The corpse lay flat on the ground, arms spread to the side, legs crossed at the ankles with his face in a fish pond. Bright colored carp nibbled around his nose. The body was surrounded by yellow police tape as I approached.

Standing, just behind the yellow tape, snapping photographs with an old 35 mm metal bodied Nikon was an enormous bear of a man. He stood 6′ 4″ tall, weighed at least 350 lbs., yet moved about the crime scene with the grace of Nureyev. The huge man photographed everything around and about the body. He photographed every foot of space above the pond. He changed nothing.

As he kneeled in front of an aluminum camera case and changed lenses, I realized that this was the man I had come to meet, Marion Orpheus Montague, private investigator. I was a young lawyer, only three years out of law school and working with the prestigious Beverly Hills law firm, Guernsey, Lamb, Kropotian and Cohen, a 1200-lawyer international law firm whose named partners had been dead for twenty years.

It was a Saturday evening and the managing partner had called me at home instructing me to meet Mr. Montague at the scene of the death. I was to help him in protecting the interests of certain Underwriters at Lloyd’s, London who had insured the life of the corpse only two months before. The policy agreed to pay the beneficiaries $10 million and, if an accidental death, they would be required to pay $20 million. The senior partner’s description of Mr. Montague left me no doubt I had the right man.

I approached him as he screwed a close-up lens into his camera and began taking detailed photographs inches from the thing he focused upon. Every inch of the corpse and the area surrounding the corpse were covered in detail.

I approached him closely when he put another 36-picture roll into the Nikon and said: “Mr. Montague, I’m Louis Gold, an attorney that Underwriters have asked to accompany you on your investigation.”

“Okay, son,” Montague replied, his voice rising in a deep bass from the diaphragm hiding behind his corpulent belly. “But stay out of my way until I’ve completed photographing the scene and be sure to touch nothing.”

He went about his task efficiently and with great detail exposing seventy-two frames of 35mm color film as I stood by watching him change from a close-up lens to a panoramic lens and then a fish-eye so that nothing at the scene of the incident would be missed. When he was finished taking pictures, he meticulously replaced the camera lenses in the case, closed the case and extended his hand to me.

“Marion Orpheus Montague, at your service, sir.”

“Please call me Lou,” I replied while my hand disappeared completely in his enormous paw. “Although I’m required to wear wing tipped shoes and a pin striped suit, I was an enlisted man. I find I am uncomfortable with the title, ‘sir.'”

“Then, we’re off to a good start,” Montague replied. “My friends simply call me MOM, for my initials since they’re often uncomfortable with my given name.”

Thus, began a lifetime friendship between a lawyer and an investigator. Of course, as a young lawyer full of confidence who had not yet learned how little he truly knew, it seemed to me that the Underwriters had erred in sending this lummox. I was amazed they could trust this man with a woman’s first name and a head of thinning ginger colored hair and a full beard that was so thin the red of his cheeks glowed through. He was dressed in blue jeans, a long sleeved flannel shirt and a Los Angeles Dodgers baseball cap. He looked more like a New Orleans chef on vacation than a private investigator.

What convinced me that he was my equal, and probably more knowledgeable, were his piercing green eyes that seemed to never blink as he analyzed me from head to toe without hesitation.

What he saw was a 28-year-old male in fairly good physical condition who stood 6’ 2″ tall and weighed a solid 200 lbs. My body was only beginning to show the softness in the belly that a new wife, who aimed to please with exceptionally good cooking, would invariably cause. I wore black wing tips, a blue pin striped three-piece suit purchased for more than I could afford at Nordstroms, a stark white, starched dress shirt topped by a red silk power tie. I had a full head of tightly curled black hair and hid watery hazel eyes behind a thick pair of bifocals. It seemed, although I would never admit it, that I was playing the part of a young lawyer on the move upward. My demeanor at the sight of a most unusual death gave away my total lack of experience to a professional investigator.

“Well, young man,” MOM asked. “Did Underwriters explain to you why they wanted you here?”

Trying to appear professional I began to recite, in the tone my law school moot court professor told me was appropriate to impress a jury, what I knew:

“The deceased was Abel Worthington. This is his house. He was the president and CEO of Abel Injection Plastics, a manufacturing firm that specialized in injection molded resin furniture. His company started five years ago with $10,000 in assets and after selling his line of cheap garden furniture to Wal Mart, Target and the K-Mart stores, Worthington Furniture’s gross is now $420 million a year and growing.

A policy of Key-Man Life Insurance was purchased from the Underwriters, through Makepiece & Makepiece Insurance Brokers in Los Angeles, in the sum of $10,000,000. The premium was financed. Only the first installment on the premium had been paid to the lender who will probably demand a return of the unearned premium. Underwriters had been told that Worthington was in exceptional good health, 34 years of age, a nonsmoker, who traveled on business around the world almost 100 days a year.

The Underwriters were concerned because the death happened so soon after the policy was purchased. Underwriters hoped that a thorough investigation would determine that there was nothing suspicious about the death and that they were the entire truth at the time the policy was acquired.

The sole beneficiary of the policy is his sister, Candy.”

I was impressed with myself and proud of my professional recitation of the facts as I knew them. Then I made the error of looking over to the corpse just as the Coroner’s investigators removed Abel Worthington’s face from the water. As they did so, a large white and yellow Koi was pulled out of the water with its teeth clamped tightly on Worthington’s right eye. The fish, with the eye held in its teeth, fell back into the pond, never to be seen again. Whatever dignity I possessed was lost with that scene. I ran to a nearby planter surrounding a large jacaranda tree that I immediately fertilized with what remained of my lunch and dinner.

Restraining his laughter, MOM was kind enough to pull from his case a large wad of tissue and a bottle of spring water that I gratefully accepted to clean out my mouth.

After five minutes of wiping and sipping I regained my composure, loosened my power tie and sat on the planter facing MOM.

“I would truly appreciate it if you forget my breach of decorum.”

“Worry not. If you’re feeling better, I think it’s time we went to work.” MOM gave me his hand and led me back into the house where the beneficiary, Candy Worthington, Abel’s sister, awaited our sympathetic ministrations.

We introduced ourselves to the grieving sister who suggested we join her in a large snifter of Napoleon brandy. Her tears, if there had been any, had been cleared away, her makeup redone, and her hair combed. She stood a rather trim 30-year-old woman with auburn hair tied back in a severe bun. She wore a navy-blue business suit with a skirt hanging a demure one inch below the knee clearly custom tailored for her. The suit was set off with a bright yellow silk blouse and a gold herring bone chain circling her long neck.

The formality and severity of her dress failed to hide the fact that this was a beautiful woman. If she was suffering from grief, it was well hidden. Although she had a brandy snifter in her hand, she was not under the influence. Rather, she continually warmed the brandy with a circular motion of her left hand outlining the glass with five long, burgundy red, manicured nails.

With a soft contralto voice, she asked us to sit across from her on a seven-foot, cream-colored leather sofa:

“The police have asked me interminable, obnoxious and offensive questions. I can’t understand their methods. I would hope that you, as representatives of Lloyd’s of London, will be gentlemen.”

“We will do our best,” I replied in my most sincere lawyer’s voice. “Please, accept our condolences on your loss.”

“We hardly spoke. I saw very little of my brother. But thank you for your kind words. Now, what is it you want of me?”

“At this time, there is very little.” MOM responded. “I would like to see the business cards of the police officers and coroner’s investigators you spoke with so that I can contact them. She handed the cards to me and I handed them to MOM who dutifully wrote down all the information and returned the cards politely to Ms. Worthington.

“I do have a few questions whose answers will help us in our investigation, if you are willing. If you’re not able, we will understand and return tomorrow.”

“Ask your questions, I’m sure I’m in as good condition as can be expected now and will probably be worse tomorrow when the relatives start to get together. Ask your questions.”

“Who bought the life insurance policy?”

“I was the first person to speak with our broker about insuring Abel’s life.”

“When?”

“About two months ago, when that commuter plane crashed in the mountains between New York and Pittsburgh.”

“Did your brother frequent commuter airlines?”

“Yes, he keeps a ranch in Santa Ynez. He flew from Santa Barbara to LAX every Monday morning and from LAX to Santa Barbara every Friday.”

“You said you didn’t know your brother well, why insure his life?”

“I own 49% of the shares of the company. When our parents died four years ago, I inherited the shares. I know nothing about the business. The business will probably die without him. It is my sole source of support. I don’t understand business. I don’t work in the business. In fact, I hate it. I felt I needed a cushion to protect my interest if he should be silly and ride on a plane that flies into a mountain.”

“Were you the first to discover the body?”

“No, William, Abel’s valet discovered him lying in the pond at 9:00 this evening.”

“Where were you?”

“Sleeping, in my own bed in my house in Malibu. I was exhausted and retired early, at 8:00”

“What is your address?”

“133246 Big Rock Mesa Road.”

“How did you learn of the tragedy?”

“Albert telephoned me and I arrived here about noon.”

“Did you call anyone else?”

“Yes, as soon as I was dressed, I telephoned our attorney. He called the police and our broker to advise Lloyd’s.”

“How long did it take you to get here?”

“I must have been speeding. I took PCH to Sunset and Sunset into Beverly Hills and was at the house in less than 45 minutes, so I arrived approximately 15 minutes to eleven. When I arrived, the police were here spreading their tape around the pond.”

“Did the police say anything to you?”

“Yes, they said my brother was dead.”

“Anything else?”

“Only, just like you, they asked me where I was at the time the body was discovered and how I learned of my brother’s death.”

“And you told them exactly what you told us?”

“Yes.”

“And did they say anything else?”

“Only that it appeared to be an accidental death, although they found a bruise on the back of my brother’s neck which seemed inconsistent with the manner in which he fell.”

“Did they explain it any further?”

“No.”

“I’m sure Mr. Gold and I will have more questions for you,” MOM said to her in a most grandfatherly tone, “but they can wait until after the funeral. We will be in touch with you and hopefully we have convinced you that some investigators and lawyers are gentlemen.”

“You’ve been very kind. Thank you, gentlemen. Excuse me, but it’s almost midnight and I think I am going to retire to the guest room to see if I can get a little sleep.”

“Thank you for your cooperation.” I said, “We hope you can rest. If Mr. Montague or I can be of any assistance in this sad time of difficulty, you have our cards, please call.”

“Thank you again, gentlemen.”

“We can find our way out. It is time we left the lady alone.” MOM said, levering his bulk out of the wing chair in which he sat, and then leading me to the door.

After leaving the house, MOM and I met at the Bagel Nosh in downtown Beverly Hills. Over strong coffee and thick, chewy onion bagels piled high with cream cheese and lox, MOM and I discussed the future of our investigation. Sleep, at 1:00 a.m., after viewing the corpse and the Koi was out of the question.

“Did the coroner’s investigator give you any indication of the cause of death?” I asked.

“There was nothing he could say that I couldn’t see for myself,” MOM replied, while taking a large bite out of his bagel. I could do nothing but wait for him to finish his chewing before he continued. “There were no unusual marks, bullet holes, stab wounds, or other indications of an unnatural death, except for a small mark at the base of the skull.”

“What about those marks?”

“Blood, without a heart to pump it, tends to settle. I’m not a pathologist, but those marks don’t appear to be bruises to me.”

“So, are you saying his death a few weeks after the policy is purchased is serendipity for the sister. The time sequence raises many red flags.”

“The sister’s attitude, almost as if she is pleased her brother is dead, raises others.”

“You can’t think she killed him for the insurance money?” I responded with surprise.

“Ten to twenty million dollars can be a severe temptation for even the most honorable of people. I’ve seen cases of dearly loved husbands, wives and mothers who would kill for the insurance money. But I have an open mind and try to think the best of people until the evidence proves me wrong.”

“Well,” the lawyer in me retorted, “Gut feelings and experience are useful in every investigation. No matter how experienced or massive the gut, however, it’s not evidence we can use in a court of law.”

“Of course, that’s why you and I are sitting here, munching our bagels to work out a plan to find the evidence, if it exists. I’ve worked with the Underwriters at Lloyd’s for more than twenty years and I know they want to pay every legitimate claim promptly and fairly. They do take umbrage, however, at being cheated.

Since the money paid in claims comes from the pockets of the individual human beings who are the Underwriters, they are often more offended by an insurance criminal than the corporate minds that run American insurance companies. So, tell me where you think I should go from here with my investigation.”

I knew, when the question was posed, that MOM had a plan of action plotted out in his mind. I watched intently as he laid two more slices of lox on top of quarter inch of cream cheese he had just spread on his onion bagel. As he took a healthy bite, I responded:

“It seems we need to know more about the deceased and his sister, the beneficiary. I would like to see their entire civil and criminal litigation history in the Superior, Municipal, Federal and Bankruptcy courts; I want to read a copy of the company’s last report to shareholders and current financial statements. We need the personal financial condition of the beneficiary and the deceased. You should immediately pull all records in the state on real property owned, UCC-1 filings, partnership agreements and other corporations with which they might be involved. Then, a Dun and Bradstreet, Equifax and a TRW credit search should be run on the individuals and the company. The records you collect should give us a basic background on the individuals which we’ll need before you can interview the potential witnesses who can fill in the spaces that are left by the public records.” I took a breath, and, spreading some cream cheese and strawberry preserves on my water bagel tried to come up with more ideas so that MOM would not think of me as the beginner I really was.

“A basic start.” MOM replied, swallowing the last of his onion bagel and drinking a sip of his now cool coffee. “What witnesses do you think we should speak to since no one saw him die?”

“I’d start with the valet who discovered the body. I think. The person who finds a body, if murder is involved, should always be a suspect. You and I should then, as soon as possible, meet with the attorney who had the foresight to call his client’s broker immediately after learning of the death. It seems odd to me that he would call an insurance broker at the same time he called the police.

“In the typical tragic and unexpected death like this one the last person the relatives or the lawyer calls is the insurance broker. Since the policy does not require more than a report within a reasonable time they usually wait until after the funeral. I think the Underwriters would want to know why he was so concerned about her interests.”

“I agree.” MOM replied.  “Reporting the claim to an insurer before the body is removed from the scene of death is the third red flag raised in this case. I will speak to him first. I think I should bring you along so that you can speak to him ‘lawyer to lawyer.’ Some lawyers think it’s below their standards to speak to a mere investigator. Together we should be more effective than me interviewing him alone. I’ll try to arrange a meeting as soon as he gets in the office. I should be back to you with a time and place by noon. Who else do you think we should interview?” MOM asked, yawning.

The waitress came by and poured a full cup of steaming hot coffee into MOM’s cup. As he gingerly brought it to his lips and took a small sip I responded: “The broker who sold this policy should be interviewed. We need to know why he placed this business at Lloyd’s. A healthy young man, like Abel, should have no difficulty buying life insurance from an American insurer.”

“That’s right, the California Surplus Lines law requires that the broker cannot even request insurance from Lloyd’s until three American insurers have refused to write the insurance.” MOM noted. “I can think of several major life insurance companies with offices here in Southern California who would have no qualms about issuing a $10 million key-man life insurance policy to chairman of the board of a major corporation. A CEO as young and apparently healthy as Abel should have been easy to market.”

“Anyone else?”

“I think we need to get the records of Abel’s primary care physician and any other doctors he has seen in the last five years.” I replied. “I also would like you to interview the primary care physician to find out if he has any knowledge of any conditions that might have caused the untimely death. Once those interviews are completed, they should lead us to further investigation culminated by a lengthy and detailed statement from the bereaved sister.”

We finished our midnight snack and drove to our respective offices, agreeing to meet again on the telephone at noon to discuss further investigation. By the time I arrived at my office a complete copy of the policy wording was on my desk. Before reading it, I dictated a detailed report of the evening’s events. The dictation was completed at 5:00 a.m., well before the secretaries and partners had thought about coming to work. Since it was 1:00 p.m. London time, I busied myself with other work until 7:00 when I telephoned the claims handler for the leading underwriters, Kevin Warhorse, confident he had returned from lunch by 3:00 p.m. I had met Kevin two years before when he was visiting our offices just before he testified effectively in the trial of a major lawsuit against Underwriters.

Kevin was somewhat drowsy, having just returned from a lengthy luncheon with some Australian barristers seeking his business. I briefed him on the facts of the case, what MOM and I had seen at the home, our interview with the beneficiary, Candy, and our preliminary plan of action. Faced with a potential, legitimate, $10 to $20 million claim on a policy where even the first year’s premium had not yet found its way to London, Kevin immediately became sober, wide awake and efficient.

“Underwriters agree your plan of action. I will put up an e-mail to you shortly. Is there anything you require of Underwriters?”

“Yes, I need the entire placing file of the Underwriters and the London broker. I have the wording of the policy you sent earlier and I need to study it. I would also like to retain, on Underwriters’ behalf, an independent pathologist to review the remains contemporaneously with the Los Angeles County Coroner (if they allow it) or after the coroner has completed his job if they don’t.”

“Agreed. We shan’t be happy if the evidence goes up in smoke in some high-priced crematorium.” Kevin replied.

“Finally, if the policy authorizes it, I would like to require that the beneficiary submit to an examination under oath. Then I can ask detailed and searching questions of her concerning the purchase of the insurance, the representations made as well as the details of the brother’s death. All of these requests will be in my report which should be prepared and on your desk first thing tomorrow morning when you arrive.”

“You will have an immediate response agreeing to your recommendations.” Kevin replied. “By the way, I spoke with MOM before you called and he told me that for a lawyer of your youth, you impressed him with your analytical mind.”

“Please convey my thanks to MOM.” I replied, blushing. “I hope I can live up to his comments.”

“Do you believe Underwriters were lumbered?”

“Lumbered? I am unfamiliar with the term.”

“It is English for being burdened.”

“At this stage of the investigation, Kevin, I can’t answer your question. The most I can say is that fact of the death and the report of the death to Underwriters is unusual and requires additional investigation.”

“I will leave the conduct of that additional investigation to you and MOM. Keep me posted.”

“Thanks, Kevin.”

“Cheers.”

“Have a good evening.” I hung up the telephone believing I had made a fool out of myself. I certainly proved that Britain and the US are, as George Bernard Shaw once said, “two great countries divided by a common language.” Vowing to learn enough English to be able to translate my American to words a British person can understand, I set to work.

CHAPTER 2

After the funeral Candy Worthington made herself available to be interviewed by me at her lawyer’s office. I had arranged for a certified shorthand reporter to be present to give Ms. Worthington the oath and take down everything said. MOM would be present to help me.

I prepared for the interview most of the day before and wrote out questions and areas of questioning I needed to cover. I sought advice from MOM so often that I was certain he considered me to be an incompetent pest. I was nervous but prepared to do my best in obtaining the truth from Candy Worthington.

While waiting to schedule the statement MOM used his considerable investigative talents and learned that although the business Abel Injection Plastics (AIP) was healthy Candy Worthington was in serious debt. She was three months behind on her mortgage payments, her Bentley Turbo-R Convertible was about to be repossessed by the bank and she had no source of income other than her brother.

Our interview of the lawyer, Samuel B. Snakgrass, was non-informative. He only admitted he was corporate counsel to AIP, had been called by Ms. Worthington on the night of the death and asked to call the police and the insurance broker. He claimed to know nothing else. He had no idea why Ms. Worthington asked him to call the police and the insurance broker. He explained that he just did what he was asked to do by his client.

There was no question that Candy Worthington would be a difficult person to interview. She was represented by competent counsel who had earned more than $500,000 a year from AIP each of the last five years. He would protect her from all but the most innocent questions. I would need to be quick witted and give the impression that I was a novice who could cause neither Candy nor her lawyer any concern.

Although a novice in the practice of law I was not a novice. I had served three years as an investigator with the Office of Naval Intelligence after college – thus avoiding the Vietnam era draft – and worked my way through law school as an insurance adjuster for a property and casualty insurer. Although I had gone to a small, night law school, the Guernsey firm took a chance on my practical experience carrying more weight than attendance at a prestigious ABA accredited law school.

On entering the polished oak paneled walls of the corporate conference room, MOM and I sat in soft leather swivel chairs behind a marble-topped, 20-foot-long, conference table that could seat 20. I started with my best, innocent, amateur routine.

“Thank you for letting us use the corporate conference room, Mr. Snakgrass” I exhaled with a voice that barely escaped my throat. “You have a most impressive office. Is that a Rothenberg I see on the wall?”

“Yes,” Snakgrass replied, preening. “He is an artist of great potential. I believe we at AIP were one of the first to hang his works.”

“As much as I enjoy your taste in art and would prefer to spend time viewing the rest of the collection, I must work.”

“When you are done today, I will be pleased to show you through the office and our collection of other modern and pop artists. I personally have two Warhol’s in my office.”

“I hope to complete this interview quickly and with as little strain on your client in this time of her sorrow so I can take the time for the tour.”

“You are welcome, Louis” Snakgrass replied with disdain, attempting to gain control by addressing me by my first name to show his contempt and superiority over a young lawyer fresh out of law school who could be easily impressed with a few paintings.

“You remember Mr. Montegue, the investigator retained by the Underwriters to help me.”

“Hello, Sam, good to see you again.” MOM said, stretching his hand out to swallow Snakgrass’ like a Python swallowing a mouse and returning the ploy of addressing the lawyer by his first name.

“Has Ms. Worthington arrived yet?” I asked, ignoring the control tactics MOM used more effectively than Snakgrass’ attempt on me.

“She should be here shortly. Just before you arrived, she called from her car to say she was delayed in traffic.”

Perhaps, while we wait for her to arrive, you could show me some of the documents I had requested.”

“Certainly.” Snakgrass then placed in front of me five inches of paper and said, calmly, “I believe these documents meet your requirements.”

As I began to look at the documents, Candy Worthington entered the room, dressed in a fashionably tailored dark gray suit with a skirt which reached one inch above the knee. Its drab color was set off by a lavender silk blouse four buttons open at the neck that was set off by a four carat, blood red, ruby dangling on a thin, 16 inch chain that set the ruby directly at the place where her handsome cleavage began. She was dressed to appear conservative, businesslike, and to distract and confuse a young and impressionable lawyer.

I introduced myself and began the interview immediately. After she took the oath I explained the importance of the oath and the penalties available for the failure to tell the truth. I advised her of the rules of testimony with a court reporter and how important it was to speak audibly since the reporter could not take down nods of the head or responses like “uh huh” and “Uh uh” since, in print, they are unintelligible from one another. She promised to try to abide by the rules.

For the first half hour I asked innocuous and unimportant questions concerning her life history, education, training, experience and background. I complemented her dress and worked to establish rapport with her. By this line of questioning I put her at ease and established in her mind that I was neither effective nor dangerous to her. The comfort level rose as I stumbled over the easiest questions. Ms. Worthington and her lawyer laughed at my self-deprecating comments on my own inability to phrase a question and, as I intended, they both relaxed their guard.

The interview then, without changing my tone of voice or posture, changed direction to that which was important to me and the Underwriters at Lloyd’s, London. I had the results of an extensive and detailed investigation. I knew more about AIP and Ms. Worthington than she and her lawyer knew. By not changing my tone or demeanor I convinced Ms. Worthington and her lawyer that nothing had changed and the next questions were as innocuous as those that had gone before. Neither noticed the change as I asked:

“Have you read the insurance policy?”

“You must be joking?”

“No, I really need to know.”

“I tried to, yesterday, so I could speak to you intelligently about it, but I didn’t understand a word in the document. I had a very good liberal arts education but the policy seemed to be nothing more than gibberish.”

“You did understand that part of the policy that said, if the Underwriters asked you, they could require you to submit to questioning by a representative of the Underwriters, like me, didn’t you?”

“Not really. Mr. Snakgrass informed me that you had the right to question me before the insurance company could be asked to pay $20,000,000.00.”

“Thank you for your candid response. The Underwriters try to write their policies so they can be read, but, unfortunately they often hire lawyers to write them. What is clear to a lawyer is often not understood by a non-lawyer.”

“When you bought the Key-Man life insurance on the life of your brother, did you ask your broker to explain the policy to you.”

“Yes.”

“What did he say to you?”

“That if my brother died, I would get $10,000,000.00 unless the double indemnity clause came into effect if he died accidentally and the, I would receive $20,000,000.00.

“Anything else.”

“Other than the amount of the premium he really didn’t say anything else I remember. It was very fast and efficient.”

“Did your broker ask you to sign an application?”

“I believe he did.”

“Did you read the document before you signed it?”

“No, I trusted my broker.”

“Well, is it true that your name is Candy Worthington?”

“Yes, and no. Actually, my name is Candace Shirley Worthington.”

“Was your broker aware of your true name?”

“I doubt it, I haven’t used ‘Candace’ since I was six.”

“Was your brother’s true name Abel Worthington.”

“Yes.”

“Was your brother aware that you had purchased a Key-Man policy on his life?”

“No. He was a very superstitious man. If he knew I had done so he would have been very angry.”

“Did anyone at AIP know that you had purchased a key-man policy on your brother’s life?”

“No.”

“Why not?”

“To tell you the truth, Abel and I were the only stockholders. He was in absolute control of the business. If I told any of the officers or employees they would have told Abel and he would have made me cancel the policy as a jinx.”

With that response I sensed MOM stiffen in his chair beside me. He swiveled his chair so that he could have a clear view of Candy as she sat, cross-legged on the other side of the table. MOM and I both knew that a witness, under oath, that finds it necessary to preface an answer with “to tell the truth” after taking the oath to tell the unvarnished truth may be speaking falsely. I noted also, that as she spoke her answer her eyes flickered to a position approximately seven inches above and to the left of my head, seemingly looking straight at me and yet not making any eye contact.

“So, at the time of his death only you and your broker knew about the policy?” I continued, without comment or movement that showed I had detected her apparent prevarication.

“That’s correct. The broker told me, because of my holdings in the company, I had … what he called a clear … ‘insurable interest’ in my brother’s life. There was no reason for Abel to know I bought the policy.”

“At any time after buying the policy did you tell anyone you had such a policy?”

“No, there was no one I could tell who would not pass the information to Abel.”

“Where did you store the policy after it was delivered to you?”

“I put it in my safe-deposit box at First International Bank, downtown.”

“Has it been in the bank since you acquired the policy?”

“No, I took it out yesterday to give to you since you asked for it. Doesn’t the insurance company have a copy?”

“Actually, they do not. They would be buried under paper if they kept complete copies of all the policies they issue. They only keep data about the policies they issue. I asked for the original policy so I could learn that the information I have from the Underwriters is correct.”

“Was yesterday the first time you took the policy out of your safety-deposit box since you received the policy?”

“Yes.” Candy replied, picking up a pencil and tapping it on the table.

“Are you becoming fatigued?” I asked. “This is not an inquisition. We can take a break anytime you want.”

“I would appreciate that,” Candy said, “I do need some time to powder my nose.”

“Certainly, let’s go off the record and take a 15 minute break.”

Candy and Snakgrass left the room in apparent good spirits. MOM and I expressed our concerns.

“Such a good looking and educated woman,” MOM said, the words rumbling from deep in his considerable diaphragm. “I wonder why she lied to you about the people who knew about the policy.”

“That was my concern, as well MOM.” I replied. “She asked Snakgrass to report the death to the broker almost immediately after the death of her brother. He had to know to follow her instructions.”

“Yes, that’s why I did some background on counsel. I just got the results this morning. Although his offices are quite impressive here at AIP, it seems his income has gone almost entirely to preparing this fancy show. His overhead presently exceeds his income. I think you might want to delve into Ms. Worthington’s relationship with Snakgrass.”

“That seems to be a logical place to continue my interview. Do you have any other investigation results I should know about?”

“None that I haven’t already shared with you. But her testimony raises a question. I’ll make a call.” MOM went to the conference room telephone and spoke quickly to his office as I left to use the facilities.

I ran down the hall to the Men’s Room that seemed more like a Roman Bath or a room William Randolph Hearst transplanted from his mansion at San Simeon. I felt almost like I was desecrating an alter to use the marble pieces for the purpose for which they were designed.

CHAPTER 3

Refreshed, the interview began anew with both Ms. Worthington and I more comfortable and ready for each other. MOM was still whispering into the telephone as I resumed my questioning.

“Is Mr. Snakgrass your private counsel?”

“He is today.”

“Has he represented you before?”

“No, he is AIP’s corporate lawyer and the only lawyer I know.”

“Did you consult with him about the purchase of the insurance?”

“No, I told you, Abel would have been upset if he learned about the policy.”

“But lawyers must keep the confidence of their client’s, you weren’t concerned that Mr. Snakgrass would disclose to your brother something you told him, as your lawyer, in confidence?”

“I am not sophisticated with regard to lawyers. I had never had a reason to retain a lawyer before you asked for my testimony. All I know about lawyers is what I learned from watching Perry Mason on television.”

“When did you decide it was important to have a policy of insurance on the life of your brother?”

“It was when that plane crashed in the hills of Pennsylvania. I knew my brother used commuter airlines regularly and I was afraid he might fly into a mountain. I knew nothing about the business. If he should die stupidly in a tiny plane I would lose everything. I live very comfortably and I simply did not want my stupid brother to lose it all for me by flying in one of those commuter planes that don’t even have a toilet aboard.”

“Who did you consult with once you made the decision.”

“The Yellow Pages.”

“How?”

“I looked for a life insurance broker in the phone book whose office was near my house in Malibu. I went to his office, told him what I needed and he obtained the policy for me.”

“What did you tell the broker in Malibu?”

“That I needed a policy on the life of my brother to carry me over in the control of a $10,000,000.00 business if anything should happen to him.”

“Did he ask you any other questions?”

“No.”

“Did he tell you what it would cost?”

“Not then, later.”

“When he told you the premium was $60,000.00 a year, were you surprised?”

“Yes, I thought it would cost more?”

“Did you pay the premium in full?”

“Of course not, I financed the premium?”

“Why?”

“Because my brother taught me, when the business first started, that we should never use our own money for business, we should always use ‘other people’s money.'”

“How much did you pay down?”

“$12,000.00.”

“Did you make any payments?”

“No. My brother died before the first payment was due.”

“Where did you get the money?”

“From my checking account. My earnings from AIP are $20,000 every month.”

“You could have paid the premium in full, then?”

“Of course.”

“What were your regular, monthly expenses at the time you acquired the policy?”

“What do you mean?”

“Did you pay a mortgage holder on the house in Malibu?”

“Yes, $3,600 every month.”

“How about your Bentley?”

“The lease payments were $2,300 a month, it’s an older car.”

“Did you have to pay on any other continuing obligations?”

“Yes, my credit cards, the mortgage on the house in Arrowhead, the membership in the California Club, the fees for the Riverside Country club, and the lease on my Ferrari.”

“Were they all paid to date?”

“Yes.”

“Do you consider yourself financially well off?”

“No. I consider myself rich. I have never, since AIP came into existence wanted for anything or ever been short of money.”

MOM had resumed his seat. He gave the impression he was bored so it seemed to Snakgrass and Ms. Worthington that he thought I was getting little useful information. He reached into his Aluminum briefcase, pulled out a sheaf of papers, looked carefully at the first two, and while I was attempting to formulate my next question, tapped me on the shoulder. He handed the papers to me and whispered in my ear to study them carefully. He also whispered that he what he had learned on the telephone.

I studied the papers — they were blank. I nodded knowingly to MOM and, taking the hint from his whispers, decided to try a few ultimate and decisive questions that should only be answered “yes” or “no.” I looked up from the papers, then down to them again as if I was drawing my questions off the page, and asked:

“Isn’t it true that at the time of your brother’s death you were three months behind on the mortgage payments for your house in Malibu?”

“No.”

I looked down at the papers again and then to MOM. He looked up at the ceiling and emulated a very tired and disappointed sigh, looking like a sad Buddha with a fuzzy beard. After a pregnant pause, I asked:

“Isn’t it true that you had notice from the lender that it would repossess your Bentley if you missed one more payment, just a week before your brother died?”

“No.”

MOM and I passed knowing looks at each other. I went on to my next question and Candy Worthington sat unmoving, as if carved from stone, in her chair.

“Isn’t it true that your brother had cut off your $20,000 a month?”

“Of course not, why would he do such a thing?” I paused, carefully passed the pages behind each other and gave the appearance I was studying the papers. MOM crossed his hands over his belly and said nothing.

“Isn’t it true that you had received no money from AIP for six months before your brother’s death?”

“Where did you get such a silly idea. As God is my judge, the business was doing fine and I was receiving money regularly.”

Now I was sure she was becoming unraveled.

As a famous Old Bailey Judge once said to a man in the dock who tried the same ploy by saying “as God is my judge, I’m not guilty” the judge replied: “He isn’t, I am, you are.”

Whenever a witness draws on the almighty to confirm the truth of his or her statements I become more certain that person is not truthful. So, I sat silent for two minutes, just looking directly at the frozen in place Ms. Worthington before I asked:

“Isn’t it true that you borrowed” I paused again, looked down at the paper before continuing “$12,000 from your lawyer, Mr. Snakgrass, to pay the down payment on the policy?”

I knew she was in trouble. I knew she thought I knew much more than I knew, so I bluffed, hoping that my guess was correct and that Snakgrass was involved somehow in the purchase of the policy.

“No.” She answered as beads of perspiration began to form on her upper lip.

“Can I confer with my lawyer.”

“Of course. Off the record.” I replied.

CHAPTER 4

Snakgrass and Candy left the room and conferred for a few minutes. I took a deep breath. MOM had confirmed that what appeared to be a bluff was based upon logical inferences from the testimony to that point. I also knew from MOM that the selling agent remembered that the check used to purchase the policy was drawn on the account of Samuel B. Snakgrass, Esq.

They returned as if they had been discussing the weather. Snakgrass said:

“Proceed, counsel.”

“Isn’t it true,” I pushed, based on the information I received from MOM. “The check that was used to pay the premium down payment was issued on Mr. Snakgrass’ account?”

“How did you know that?”

“It is not my job to answer questions Ms. Worthington, only to ask them. You denied he was involved in the purchase at all. Do you want to change your testimony. Why didn’t you tell me the truth about the check?”

“I instruct the witness not to answer on the grounds the question invades the attorney client privilege and is argumentative.” Snakgrass shouted, making himself heard for the first time. “Don’t answer that question.”

“Do you intend to follow your lawyer’s instructions?”

“Of course.”

“You recognize, of course, that your refusal to answer any relevant and material question posed by the Underwriters can be construed as a failure of cooperation sufficient to allow the Underwriters to deny the claim?”

“No I did not.”

“They can’t, the attorney client privilege is inviolate. I am shocked, Louis, that you would even attempt to violate the privilege and intimidate my client.” Snakgrass was perspiring profusely. Dark stains were beginning to form under the arms of his suit coat jacket. He was agitated and his cheeks flared red.

“I had no such intention Mr. Snakgrass. Let me go to another question.

“Ms. . Worthington,” I continued. “Isn’t it true that you only decided to buy a life insurance policy on your brother’s life after meeting with your attorney and after he agreed to give you the money to pay the down payment on the premium finance agreement?”

“I object on the same grounds – don’t answer that question.” Snakgrass snapped.

“Well, isn’t it true you were in severe financial difficulties at the time you bought the policy?”

“I don’t know what you mean by ‘severe.'”

“I mean, you couldn’t pay your bills. That’s true, isn’t it?”

“Yes, that was temporarily true.”

“Why temporary?”

“Because there was a dividend due that would clear all my debts.”

“Has it been paid yet?”

“No. Everything came to a stop when Abel died.”

“When we started this examination I advised you that it is a crime in California to wilfully deceive an insurer – do you remember that?”

“Yes.”

“What do you think would be an appropriate punishment for a person that lied to an insurer about a claim?”

This is silly, counsel” Snakgrass snapped. “What relevance could such a question have to your investigation. I object.”

“Understood – but it is, in my opinion, quite relevant. What is your answer, Candace?”

Snakgrass, incredulous, nodded affirmatively and Ms. Worthington answered:

“I think they should not be allowed to collect on the claim. They are not violent criminals so I would not want them put in jail with murderers and rapists. Probation and a fine would seem fair.”

All of my doubts about the claim were resolved. Candace Worthington was attempting to perpetrate a fraud against the Underwriters at Lloyd’s, London.

“Isn’t it true that you bought the policy because you knew your brother would be dead before the first payment was due?”

“Of course not! I thought you were a nice man. You are horrible to even suggest such a terrible thing.”

Snakgrass rose slowly to his full six foot six inches. In a stentorian voice worthy of his $6,200 Armani suit, he shouted: “This interview is terminated. That question was the most obnoxious and offensive act of bad faith I have ever heard in my entire career. Counsel, your professional life is ended. I intend to immediately sue your client and you personally for slander, libel, and bad faith breach of the covenant of good faith and fair dealing.”

“I look forward to it counsel. Remember, however, that you and your client have a duty to respond truthfully to me and the Underwriters. Your client has sworn falsely in this statement on sufficiently material facts that Underwriters can declare the policy void whether the answer to my last question is ‘yes’ or ‘no.’ I am not a policeman. I am not a prosecutor. I just want to know the truth.”

Candy Worthington began to cry. Tears stained her lavender silk blouse. “Oh, why bother, Sam. They know. They know I intended to kill Abel as soon as I could get a policy issued. They know you helped me.”

“Shut up, you stupid bitch! I told you not to talk anymore. You are still on the record.”

“I don’t care. I don’t want the money. Your idea was that we could get all the money and the company. It isn’t worth it. I hated my brother. He was a bastard and deserved to die. That’s why I put the Poison in his tea pot. I know when its over.”

“I only have one more question: Do you withdraw the claim you have made to the Underwriters at Lloyd’s, London for the benefits of the policy you purchased on the life of your brother?”

“Don’t answer that question.” Snakgrass shouted.

“Shut up, Sam.” Candy responded. “Yes, I withdraw my claim. My brother’s death was not due to a cause that was the subject of the insurance policy.”

“Thank you, I have no further questions. Ms. Reporter, send the original transcript to counsel so that Ms. Worthington can read, correct and sign it. Make an extra copy and send it to the Los Angeles District Attorney’s Office and one more copy for the Fraud Division, California Department of Insurance.”

Candy was convicted of Manslaughter and attempted insurance fraud. She was sentenced to three years in state prison, suspended, subject to five-year’s probation. She is now living a rather sedate life in Malibu on the earnings of AIP which continued as a successful business under the guidance of its CFO who was promoted by the board to CEO to replace Abel.

I was still young and full of vigor and did not know enough to know I couldn’t expect to receive a confession. My innocence and inexperience resulted in a result for the Underwriters that made them life-long clients.

MOM and I ended the day with a Stolichnaya on the rocks and fried zucchini at the bar in the basement of AIP’s office building. We have been close friends and colleagues ever since.

Many cases have been successfully pursued but never again did MOM and I obtain a confession on the record.


© 2017 – Barry Zalma

This article and all of the blog posts on this site digests and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business.

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

Check in on Zalma’s Insurance 101 – a Videoblog – that allows your people to learn about insurance in three to four minute increments at http://www.zalma.com/videoblog

Look to National Underwriter Company for the new Zalma Insurance Claims Library, at www.nationalunderwriter.com/ZalmaLibrary  The new books are Insurance Law, Mold Claims Coverage Guide, Construction Defects Coverage Guide and Insurance Claims: A Comprehensive Guide The American Bar Association, Tort & Insurance Practice Section has published Mr. Zalma’s book “The Insurance Fraud Deskbook” available at  http://shop.americanbar.org/eBus/Store/ProductDetails.aspx?productId=214624, or 800-285-2221 which is presently available and “Diminution of Value Damages” available at http://shop.americanbar.org/eBus/Store/ProductDetails.aspx?productId=203226972 Mr. Zalma’s three new e-books  were recently added and are available at http://www.zalma.com/zalmabooks.html

Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/zalma,  on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

 

 

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Insurance Claims In a Catastrophe

If your house was damaged or destroyed by a wildfire, accidental fire, windstorm, flood, hurricane or earthquake, as a result of state declared catastrophes and you had a fire, homeowners, flood insurance, tenant’s homeowners or condominium policy you will be dealing with an insurance adjuster to gain indemnity for your losses. You should recognize that dealing with an insurance adjuster in a catastrophe is usually fairly easy. The adjuster and the insurer are under pressure from local, state and federal governments to quickly resolve the multitude of claims resulting from the catastrophe.

Insurers dealing with a catastrophe will usually be in a very generous mood. They will be seeking good publicity by taking care of victims of the catastrophe quickly and fairly. To make the claims process go easily the insured person must understand that both the insured and the adjuster have duties when damage caused by fire, windstorm, flood or other insured perils are discovered.

The full article is available at https://www.fastcase.com/blog/insurance-claims-in-a-catastrophe/

 

Insurance Claims In A Catastrophe

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The Claims Commandments

Claims Commandments

© 2017 – Barry Zalma

This series of fifteen claims commandments is an effort to provide direction to every person involved in claims handling for insurers and the public whose duty it is to fulfill the promises made by an insurance policy.

Claims Commandment I

Thou Shall Confirm Coverage

How to Confirm Coverage

When I was a young adjuster I worked for the Fireman’s Fund Insurance Company. Occasionally confused insureds and brokers would report to the Fireman’s Fund a claim meant for Fireman’s Insurance of Newark. The claim would often be adjusted and paid before anyone realized an error had been made.

When a loss or claim is reported to an insurance company the first task required of the insurer and its claim personnel is to confirm the existence of a policy. The task today is much simpler than it was when I was an adjuster where we had to pull out the actual underwriting file and review the daily report. Now, coverage can be confirmed by computer.

If the insurer’s computer system shows that a policy was in effect at the time the insured reported that a loss occurred the first step of confirming coverage was completed. Next, if available digitally, the entire policy must be accessed including the declarations page and all policy wordings, all endorsements and modifications to the standard policy language.

The claims person needs to have available a specimen of the policy as it would have been delivered to the insured so that it can be read, reviewed and understood to enable the claims person to explain the available coverages to the person(s) insured.

If the entire policy is not available electronically or cannot be recreated by the underwriting department the agent or broker should be asked to provide a complete copy of the policy to the adjuster. If the agent or broker does not have it a copy should be obtained from the insured.

Once the policy is obtained and available for review the claims person must read and understand the policy coverages and compare those to the wording of the policy to confirm that one of the policy coverages promises to indemnify the insured against the risk of loss of the type reported.

For example:

  • If the policy is a property policy that insures the insured against the risk of loss of a dwelling by fire, lightning, windstorm and hail, and nothing more and the insured reports a claim for damage caused by earthquake the existence of a policy is confirmed but the existence of coverage is not.
  • If the policy is a liability policy like a Commercial General Liability (CGL) policy and the insured reports that the mailman was bitten by the insured’s pit bull terrier during the policy period, coverage is confirmed. However, if the policy contains an exclusion for losses caused by dog bite or pit bulls, coverage is confirmed with a exclusion that might be applicable.
  • If the policy is a CGL and the insured reports he was sued for slander by a business competitor during the policy period coverage is confirmed and there is available defense under the “Personal Injury” coverage part.
  • If a policy is a National Flood Insurance policy in effect at the time that a water main breaks and floods the insured’s house, coverage is confirmed that the policy exists and a determination must be made to determine if the loss falls within the terms and conditions of the policy.
  • If a policy is a CGL and the insured reports he was sued for intentionally punching a business competitor in the nose, coverage is confirmed that the policy was in effect but questions must be answered to determine if there is evidence that indicates there was no intentional act or that the insured was acting in self defense, or some other other not intentional act.
  • What these examples show is that the existence of a policy can be confirmed and it can be easily confirmed that it was in existence at the time of the loss. What cannot be established from the loss notice and policy wording is whether the coverage applies to the loss that was reported.

Communications with the Insured

Once coverage is confirmed the claims person must read the policy and the initial written contact with the insured should advise the insured all benefits, coverage, time limits, or other provisions of any insurance policy issued by that insurer that may apply to the claim presented by an insured.

The letter should include, as a bare minimum, information like the limits of liability of the policy, any deductibles or self-insured retentions, advice concerning any specific exclusions or conditions that apply to the facts established by the notice of loss, a written notice that a proof of loss is required within 60-days of the letter with an attached proof of loss form, a requirement for the production of necessary documents, a reservation of rights (if called for because of a potential coverage problem like an exclusion that might apply), and any other information the insured needs.

The claims person should also be prepared to supplement the initial letter whenever he learns of different facts or additional coverages available to the policyholder or the insured.

Failure to properly, and in writing, advise the insured of the policy provisions, the requirement for documents, the problems with coverage based on the initial report of loss, can place a claims person inadvertently in violation of the state’s fair claims practices statutes and regulations and expose the insurer to litigation for bad faith claims handling.

More Required

Confirmation of coverage requires more than simply checking a computer. It requires an understanding of the policy wording, the facts of the loss and the law of the jurisdiction to determine if coverage for a particular loss is available to the insured. Simply reading the loss notice, allegations in a lawsuit, and the policy is never enough.

Conclusion

The first and foremost duty of a claims person is to confirm coverage. It is a beginning of claims handling and cannot, on its own, fulfill the obligation to confirm coverage before the adjustment begins.

Claims Commandment II

Thou Shall Always Conduct A Thorough Investigation

Investigation is a search for truth. It is an art form where facts are established. It has been defined by the state of California, for example, as follows:

“Investigation” means all activities of an insurer or its claims agent related to the determination of coverage, liabilities, or nature and extent of loss or damage for which benefits are afforded by an insurance policy, obligations or duties under a bond, and other obligations or duties arising from an insurance policy or bond. [California Code of Regulations, 10CFR2695.2(k)]

Notice provisions in insurance policies serve the important function of allowing the insurer the opportunity to make a timely and thorough investigation of the insured’s claim. American States Insurance Co. v. National Cycle, 260 Ill. App. 3d 299, 310-11, 631 N.E.2d 1292, 197 Ill. Dec. 833 (1994); Twin City Fire Insurance Co., 266 Ill. App. 3d at 7.

Courts will not subject an insurance company to a choice between liability under a bad-faith-failure-to-investigate theory for publication of a denial of coverage without an adequate investigation, and liability for a constructive denial imposed after it has conducted a more thorough investigation that confirms an earlier determination of no coverage, on the theory of delay coupled with a wrongful intent. Rather, courts required that an insurer complete a thorough investigation before it makes a decision with regard to a claim for defense or indemnity under an insurance policy. Initial conclusions based on a bare reading of a law suit or initial investigative interview are not enough.

Although an insurance company is entitled to make a thorough investigation to determine whether there is coverage under its policy of insurance, the company acts at its peril in refusing to defend its insured in that, if it is subsequently determined that the company erroneously denied coverage, the company will be liable for damages for breach of its agreement under the policy. Therefore, insurers should conduct their thorough investigation as soon as possible and if a defense is required before the investigation can be completed provide a defense to the insured under a reservation of rights.

When an insurer denies or delays payment of policy benefits due to the existence of a genuine dispute with its insured as to the existence of coverage liability, the insurance company will not be liable in bad faith even though it may be liable for breach of contract. One court gave the following instruction to a jury:

                        In determining whether or not an insurance company had a genuine dispute as to whether or not a loss was covered, you may consider among the following: (1) Whether the insurance company was guilty of misrepresenting the nature of the investigation; (2) Whether the insurance company adjusters and investigators lied during their depositions or to the insured; (3) Whether the insurance company dishonestly selected its experts; (4) Whether the insurance company experts were unreasonable; and, (5) Whether the insurance company failed to conduct a thorough investigation.” [McCoy v. Progressive West Insurance, Co., 90 Cal.Rptr.3d 74, 171 Cal.App.4th 785 (Cal.App. Dist.2 02/04/2009)]

An insurer has a duty to conduct an appropriate and careful investigation prior to making a decision on a claim. However, if after conducting a thorough investigation of the facts and circumstances giving rise to a claim, the insurer can reasonably conclude that the claim is debatable or questionable, a there can be no bad faith even though it refused to pay the claim incorrectly.

How to Conduct a Thorough Investigation

The investigative interview is a structured conversation between a trained and experienced interviewer and an person who has no training in the interview. It is not an interrogation. It is not the stuff of spy films, police investigations, or prisoner of war camps. Interviews happen everywhere. Interviewing is performed by almost everyone. Since interviewing is an art the most effective interview is one performed by someone with knowledge of the art.

Investigation to gather information is an artistic endeavor. The art is supplemented with scientific technique obtained from criminal investigators and professional psychologists but is performed by individuals without thinking about what it is they are doing. The art of the investigation must be honed until it becomes second nature much as a skilled typist does not think where to put his or her fingers while typing.

The art of uncovering the truth by a professional draws heavily from the police sciences. The police science of interrogation draws heavily upon human nature and the skills of the conversationalist. Because the interrogation is formal, in a confined space and conducted by a person in authority like a police officer or a lawyer examining a witness under oath in court, the techniques used are more formal and controlled than an insurance investigation.

Insurance investigators are compelled to get the information they need by intelligence, wit, skill and experience. They put people at ease. The skill of the professional causes the person being investigated to want to give information to the investigator. The most important skill of the professional is to cause the person being investigated to want to give information to the professional that the professional needs.

To conduct a thorough investigation the claims investigator should, at a minimum, the following:

  • Read the loss notice and policy of insurance.
  • If a lawsuit has been filed read the lawsuit in conjunction with the policy wording.
  • Interview the person insured — preferably in person.
  • Obtain a recorded statement from the person insured concerning the facts of the loss.
  • Interview and obtain a recorded statement from every independent witness.
  • Interview and obtain a recorded statement from the claimant if suit has not been filed.
  • If suit has been filed interview the attorney for the claimant about the factual basis for the suit.
  • View the scene of the incident.
  • Obtain all documents that have relevance to the claim, like:

○          The insured’s copy of the policy.

○          The police or fire report, if any.

○          Medical records.

○          Financial records.

○          The application for insurance.

○          Contract(s), if any, between the insured and the claimant.

○          All other records that might be relevant to the claim and policy.

  • Consult with necessary experts like:

○          Investigative engineers.

○          Coverage counsel.

○          Defense counsel.

○          Medical professionals.

○          Architects.

○          Forensic accountants.

○          All other experts that might be relevant to the claim and policy.

If it appears that there is coverage for the claimed loss advise the insured of the insurer’s decision.

If it appears that there is no coverage consult with management to review the facts gathered by the thorough investigation before a decision is made.

Conclusion

Failure to conduct a thorough investigation is a breach of the promises made by the policy of insurance to provide defense and/or indemnity to the person insured. Failure can also result in the insurer being sued for the tort of bad faith.

Insurers must, to comply with current law conduct:

  • A detailed investigation of the facts of the loss and policy acquisition.
  • A determination of the expectations of the insured and the insurer at the time the policy was acquired.
  • A determination of the purposes for which the policy was acquired.
  • An examination of all communications between the insurer and the insured or their representatives.
  • If the investigation is not conducted, the insurer faces suit for the tort of bad faith.

The thorough investigation requirement first enunciated by the California Supreme Court in Egan v. Mutual of Omaha Insurance Co., 24 Cal. 3d 809, 620 P.2d 141, 169 Cal. Rptr. 691 (Cal. 08/14/1979) is essential when attempting to interpret a disputed policy of insurance.

In Egan, the Supreme Court concluded that “an insurer cannot reasonably and in good faith deny payments to its insured without thoroughly investigating the foundation for its denial.”

Claims Commandment III

Thou Shall Communicate Often

Insurance claims is a service business. The claims person provides a service to the insured and the insurer. Communication is essential to providing the service promised by the insurance policy.

In some states, like California, communications is required by regulation:

                        Every insurer shall disclose to a first party claimant or beneficiary, all benefits, coverage, time limits or other provisions of any insurance policy issued by that insurer that may apply to the claim presented by the claimant. When additional benefits might reasonably be payable under an insured’s policy upon receipt of additional proofs of claim, the insurer shall immediately communicate this fact to the insured and cooperate with and assist the insured in determining the extent of the insurer’s additional liability. [10 CCR 2695.4 (a)]

This means that the initial written contact with an insured in a first party property claim should advise the insured of all benefits, coverage, time limits, or other provisions of any insurance policy issued by that insurer that may apply to the claim presented by a first party insured.

When a claims person receives any communication from an insured, third party claimant, or a representative of the insured or claimant regarding a claim that reasonably suggests that a response is expected, should immediately after receipt of that communication, furnish the claimant with a complete response based on the facts as then known by the claims person. Some regulations allow the claims person up to 20 days to respond. Good claims handling requires an immediate response. If the response is oral rather than written it should be noted in the claims person’s file or log.

Upon receiving notice of claim, every insurance claims person should immediately do the following :

  • Acknowledge receipt of such notice to the claimant or insured.
  • If the acknowledgment is not in writing, a notation of acknowledgment must be made in the insurer’s claim file and dated.
  • Provide to the claimant or insured necessary forms, instructions, and reasonable assistance, including but not limited to, specifying the information the claimant must provide for proof of claim;
  • Begin any necessary investigation of the claim.

The investigation must be a “real,” meaning the claims person or investigator must actually contact the claimant, the witnesses and start collecting the documents needed to complete the claims investigation. Investigation and must be started immediately after receiving notice of claim.

Merely reading a policy wording and notice of claim is not the beginning of an investigation or an investigation at all.

Upon receiving proof of claim, every insurance claims person should  immediately accept or deny the claim, in whole or in part.

The amounts accepted or denied shall be clearly documented in the claim file unless the claim has been denied in its entirety.

Some states allow up to 40 calendar days to respond.

If more time is required to determine whether a claim should be accepted and/or denied in whole or in part, the claims person should provide the claimant or insured written notice of the need for additional time.

The written notice should specify any additional information the insurance claims person requires in order to make a determination.

The written notice should state any continuing reasons for the insurer’s inability to make a determination.

Thereafter, the written notice should be provided at least every thirty calendar days until a determination is made.

If the determination cannot be made until some future event occurs, then the claims person should comply with this continuing notice requirement by advising the claimant and/or insured of the situation and providing an estimate as to when the determination can be made.

Effective diary systems are also essential to professional claims handling or the Regulations will be violated with regularity.

Every claims person must conduct and diligently pursue a thorough, fair and objective investigation and should not persist in seeking information not reasonably required for or material to the resolution of a claim dispute.

The claims person’s obligation is not limited to communication with the insured or the claimant.

The claims person and the insurer have an obligation to communicate with the state, police agencies, or prosecutors. In California, and most states, such a communication is absolutely immune from suit. Pursuant to section California Civil Code Section 47(b), a privilege is stated that bars a civil action for damages for communications made “[i]n any (1) legislative proceeding, (2) judicial proceeding, (3) in any other official proceeding authorized by law, or (4) in the initiation or course of any other proceeding authorized by law and reviewable pursuant to [statutes governing writs of mandate],” with certain statutory exceptions.

The privilege established by this subdivision often is referred to as an “absolute” privilege, and it bars all tort causes of action except a claim for malicious prosecution. “The absolute privilege in section 47 represents a value judgment that facilitating the “utmost freedom of communication between citizens and public authorities whose responsibility is to investigate and remedy wrongdoing” is more important than the “‘occasional harm that might befall a defamed individual.’” (See Imig v. Ferrar (1977) 70 Cal. App. 3d 48, 55-56 [138 Cal. Rptr. 540].)”

To fulfill Commandment III the claims person must communicate promptly and often with the insured, the claimant and the insured (if a third party claim) and counsel for each. In doing so the claims person establishes a rapport with the insured and/or claimant and will make resolution of the claim easier. No claims person should ever misrepresent or conceal benefits, coverages, time limits or other provisions of the policy from the insured or the claimant.

Claims Commandment IV

Thou Shall Understand The Policy

Insurance policies are contracts. To understand insurance claims the adjuster must understand how all contracts, and specifically insurance contracts, are interpreted. Rules of contract interpretation have developed over the last 300 years and are applied by courts with the intent to fulfill the desires of all parties to the contract.

People and judges who are not conversant in insurance and the interpretation of insurance contracts believe that the insurance policy is difficult to read and understand.

As one court said in Delancy v. Rockingham Farmers Mutual, 52 N.H. 581 (1873):

                        This [policy], if read by an ordinary man, would be an inexplicable riddle, a mere flood of darkness and confusion … should some extremely eccentric person attempt to examine the involved and intricate net in which he was to be entangled, he would find that it is printed in such small type and in lines so long and crowded as to make the perusal of the document physically difficult, painful and possibly injurious.

The following rules govern the construction of contracts of insurance:

  • If the terms of a promise are in any respect ambiguous or uncertain, it must be interpreted in the sense in which the promisor believed at the time of making it, that the promisee understood it.
  • If a written contract is so worded that it can be given a definite or certain legal meaning, then it is not ambiguous. However, if the language of a policy or contract is subject to two or more reasonable interpretations, it is ambiguous.
  • When a policy is interpreted, the provisions of an endorsement control the interpretation over the body or declarations of a policy when the two are in conflict.

For example, if the language written to limit an insurer’s liability to the appraised value appears on the declarations page, while the valuation  condition that provides for an actual cash value adjustment appears on a form endorsed to the contract, the endorsement’s language would  control the interpretation of the contradictory language of the policy.

However, the fact that the two sentences could have been written more clearly, did not mean that they were ambiguous.

Consider the reasonable expectations of the insured but, when doing so, include the understanding that every insurer is presumed to be acquainted with the practice of the trade he insures.

More than 150 years ago the US Supreme Court in Hazard’s  Administrator v. New England Marine Insurance Co., 33 U.S. 557 (1834) adopted the rule.

                        It concluded that “no injustice is done if insurers are presumed to know their insureds’ industry because it is part of their ordinary business.”

In MacKinnon v. Truck Ins. Exch., 31 Cal.4th 635 (2003), the California Supreme Court first stated the primacy of the “reasonable expectations” test when interpreting insurance policies. It decided that the reasonable expectations of the insured required coverage to exist for an ordinary act of negligence even if it involved pollutants.

Where the language of the policy is clear, the language must be read accordingly, and where it is not, it must be read in the sense that satisfies the hypothetical insured’s objectively reasonable expectations.

If you find the term is clear and unambiguous there will be no need to apply the reasonable expectations test.

If you find any ambiguity, or determine the insured should be paid, the application of the reasonable expectations test will give a court the ability to construe the policy against the insurer and in favor of payment of the insured’s claim.

Most states will apply the plain meaning test.

Long-established insurance law supports the conclusion that insurers are presumed to know and be bound by the meaning of the terms used and customs adopted in their insureds’ industries.

Insurers, and insurance claims professionals, faced with a need to understand and apply the wording of a policy of insurance must now conduct their investigation to include:

  • a detailed investigation of the facts of the loss and policy acquisition;
  • a determination of the expectations of the insured and the insurer at the time the policy was acquired;
  • a determination of the purposes for which the policy was acquired; and
  • an examination of all communications between the insurer and the insured or their representatives.

To do so the insurer must at least conduct a detailed interview of the insured, the claimants, the brokers, and the underwriters. When there is a dispute over the meaning of common terms, the court will often find it necessary to inform upon the understanding of persons in the particular business insured so that the judge must consult the opinions of experts.  The expert testimony can be helpful in establishing that the insured’s or the insurer’s interpretation of the term at issue is different from that advanced by the other was reasonable. In California, this may be sufficient for a party to prevail because although insureds are treated differently so that even if [the insurer’s] interpretation is considered reasonable, it would still not prevail, for in order to do so it would have to establish that its interpretation is the only reasonable one.

An insurance claims professional can never make, or recommend, a decision with regard to an insurance claim until he or she has read the entire policy as it relates to a loss, interpret the policy wordings in accordance with the rules of interpretation stated above, conduct a complete and thorough investigation to determine the reasonable expectations of the insured, and if unable to make a decision seek the advice of competent coverage counsel.

Claims Commandment V

Thou Shall Communicate With the Insured

The key to resolving insurance claims amicably is constant and substantive communication between the insured and the adjuster. Communication about the claim on a regular basis allows the insured and the adjuster to build rapport.

Building rapport is a fundamental aspect of human communication.  Being able to build rapport could be viewed as a basic element of social intelligence. The professional should first spend time establishing rapport and the confidence of the person being interviewed. there are four elements of building rapport.

People who wish to build rapport should strive to:

  • build trust, such as demonstrating honesty, reliability, and fairness, understanding another person’s views, such as making statements that the professional understands how the other person feels,
  • show respect, that is be polite and express gratitude, and
  • be the kind of person who others would like by stating a willingness to be empathetic and altruistic.

A claims situation where the adjuster fails to establish rapport with the insured is doomed to fail. Rapport is a relationship marked by harmony, conformity, accord, or affinity.

Rapport can be established by the professional complimenting the office decor if  possible to do so honestly. However, if the insured is relegated to a drab cubicle, rapport can be established by the professional commiserating with the difficulty of working in less than comfortable surroundings. The adjuster can gain rapport with the insured might also explain that his employer also forces the  adjuster to work in a similar situation.

The adjuster, to establish rapport, should delay questioning by making an attempt to find mutual interests and concerns with the person to be interviewed. The task of establishing rapport can take minutes or hours. It is imperative that to complete a successful adjustment sufficient time must be expended establishing rapport before the serious and detailed part of the interview begins. Regardless of the skill of the adjuster, if rapport is not established, the goal of the adjustment will not be reached.

Once rapport is established it is essential that the adjuster maintains rapport with the insured by setting up an ability to communicate regularly with the insured. The insured should be provided with the adjuster’s office telephone number, the adjuster’s cell phone number, and an e-mail address where the insured can reach the adjuster to resolve any questions that might come to mind.

The adjuster, even if not asked a question by the insured after rapport is established, should mark a diary to communicate with the insured at least once every thirty days even if the communication is nothing more than a telephone call that simply asks how the insured is doing. If possible, the adjuster should also fill in the insured on the progress of the claims investigation and any events happening.

Contact in person is preferable but case loads for most modern insurers does not allow for continuous personal contact. If such contact is not available the contact should be by telephone, mail, or e-mail.

For example, if the insured has been sued by a third party, the adjuster should explain what is happening in the lawsuit. When defense counsel files an answer to the suit the adjuster should deliver a copy of the answer to the insured, explain the meaning of the language in the answer, and what defense counsel expects to do next to protect the interests of the insured. Each communication should be noted in the file. At least every 30 days some communication must pass between the adjuster and the insured and noted in the adjuster’s file whether the communication is substantive or merely an effort to keep up the rapport between the insured and the adjuster.

For example, if the claim relates to a fire at the insured’s home, the adjuster, after establishing rapport should present to the insured a schedule of the time needed to determine the scope of damage, set a time for meeting with the insured, an independent contractor, and the insured’s contractor. The meeting should take place quickly with everyone ready to work. The adjuster, the experts and the insured should then agree on the scope of loss and the adjuster should explain how long it will take the contractors to create an estimate of repair. When the estimates arrive the adjuster should prepare a comparison of the estimates and meet with the insured to determine the differences between the two or more contractors. The insured and the adjuster should then agree on the contractor whose estimate covers the entire loss and a contract should be agreed to repair the house. As repairs proceed the adjuster should inspect the work and regularly advise the insured of the progress of the repair regularly until the repair is completed.

States, by Regulation, also require regular communication and will punish the insurer if the adjuster fails to communicate.

The Regulations set minimum, not maximum, standards. Adjusters should, and are expected to, exceed the minimum standards set by the Regulations. Insurers now find — in bad faith litigation — that trial lawyers will posit violation of the minimum standards set by the regulations as evidence of bad faith sufficient to allow a trier of fact to assess tort damages against the insurer. Since the Regulations are stated to be minimum claims handling standards, failure to comply will give a judge or jury the opportunity to contend that the failure to comply is evidence of tortious conduct sufficient to support a claim that the insurer committed the tort of bad faith.

The adjuster must be familiar with the Regulations in his or her state with regard to communications to the insured and work to exceed the requirements. The minimum standards set by the various states are just that: minimums. The adjuster who establishes and maintains rapport with the insured will resolve more claims quickly and without difficulty and will never face the wrath of a supervisor or auditor from the state.

The adjuster that fails to communicate regularly and substantively will have difficulty reaching agreement with the insured.

Claims Commandment VI

Thou Shall Document The Claims File

Most insurance regulators require that every insurer maintain claim files that are subject to examination by the regulator or by his or her duly appointed designees. The regulator requires that the claim files must contain all documents, notes and work papers (including copies of all correspondence) which reasonably pertain to each claim in such detail that pertinent events and the dates of the events can be reconstructed and the insurer’s actions pertaining to the claim can be determined. Similarly, insurance company management needs the same ability to determine that the claims people are doing what they expect to be done to keep the promises made by the insurance policy.

In simple language everything the claims person does should be recorded in the claims file whether kept in a computerized system or a paper file. Every document collected, every photograph taken, every video recorded, every letter written, every e-mail sent, notes of every telephone conversation, should be in the claims file. Every comment and note made in a claims file should be written as if it were addressed to “Dear Commissioner” or Dear Ladies and Gentlemen of the Jury.”

The information in the claims file must be maintained so that the claim data are accessible, legible and retrievable for examination so that an insurer shall be able to provide the claim number, line of coverage, date of loss and date of payment of the claim, date of acceptance, denial or date closed without payment. This data must be available for all open and closed files for the current year and for, at least, the four preceding years.

All file destruction practices should be reviewed to ascertain that no file will be destroyed less than five years after it is opened nor less than four years after it is closed. Insurers should also maintain procedures to never destroy a file if litigation has started or is anticipated until after the litigation is resolved.

A diary system for the destruction of old files should be established by the insurer and its claims personnel with a requirement to keep the files at least two years longer than the regulator requires as an extra precaution.

If the files are scanned into computer media, microfilmed, or recorded in a method other than paper backups off site of the files should also be maintained. The claims person must record in the file the date the claims person received, date(s) the document was processed and date the licensee transmitted or mailed every material and relevant document in the file and maintain hard copy files or maintain claim files that are accessible, legible and capable of duplication to hard copy. Files must be maintained, at least, for the current year and the preceding four years.

If date stamps are not in use the insurer should provide a date stamp to each claims person so that the date of each action will be recorded in the file. If the insurer is “paperless” all incoming mail and documents must have imbedded in the image a date showing when the document was received. A mail log should also be maintained to establish dates of mailing of each document.

If the insurer uses computer generated e-mail and logging the computer should be programmed to record the date and time of each entry in such a manner that the claims person cannot modify or change the dates of any entry. All e-mail communications must be saved for up to five years in a searchable database or in connection with the electronic claims file.

All electronic records must be kept in such a manner that would allow a complete copy of the electronically recorded record to be printed out in full so that it is available to produce to the regulator or the insurer’s supervisory personnel or in discovery if litigation occurs.

The key for the claims person is, if in doubt about putting information into a claim file, always put the information in and never fail to record actions that relate in any substantial way to the file, the adjustment of the claim or the investigation conducted by the claims person.

Claims Commandment VII

Thou Shall Never Lie to an Insured

Insurance is considered a business of the utmost good faith. The principle of utmost good faith (uberrimae fides) was, I believe, first stated in the British House of Lords by Lord Mansfield in 1766 in a case where he concluded that the duty of good faith rests upon both the insured and the insurer and held the insurer to its knowledge at the time the policy was signed. The insurer, like the insurers, took the premium, knowing the condition of the security provided, and could not upon loss claim the insurer was deceived. [Carter v. Boehm, 3 Burr 1905 (1766)]

As the old maxim says “honesty is the best policy.” There is no excuse for an insurance claims professional to lie to an insured. Not only is a lie to an insured a failure to act with the utmost good faith, it is an action fraught with danger. Keeping up a consistent lie is almost impossible. All definite statements can be corroborated or proven false by further investigation. If a lie, the lie will be proved.

Lies to insureds — even when done for what the claims person believes is a good purpose — will always cause the insurer problems. Lies created on the run invariably include internal contradictions. A lie told to an insured can be, and most certainly will be, used by the insured to prove that the actions of the insurer were made in bad faith such that the insurer will be punished with punitive damages.

In Allison v. Fire Insurance Exchange, 98 S.W.3d 227 (Tex.App. Dist.3 12/19/2002) a major punitive damage award was obtained by a plaintiff who claimed that the adjuster lied to her about the authority to resolve a claim for mold damage. Although the case was reversed because of an excess verdict the lie cost the insurer a great deal of money when the case was eventually settled.

Claims people get into trouble when they fail to tell the truth to the insured about the following:

  • The check is in the mail.
  • There is no problem with coverage.
  • I will pay the fees of the lawyer of your choice.
  • The claim is being reviewed by senior management.
  • I need another 30 days to complete my investigations.
  • I need a copy of your policy.
  • I need you to go to all of the places where you bought the stolen property to get a receipt.
  • I will hire a contractor to rebuild your house.
  • I don’t have authority to settle your claim.
  • I don’t need to do an investigation to know your claim is not covered.
  • Any other statement that is not true.

California Insurance Code Section 790.03(h)(1) provides:

                        Knowingly committing or performing with such frequency as to indicate a general business practice any of the following unfair claims settlement practices:

Misrepresenting to claimants pertinent facts or insurance policy provisions relating to any coverages at issue.

Similarly, the California Code of Regulations, 10CFR 2695.4 provides:

    (b) No insurer shall misrepresent or conceal benefits, coverages, time limits or other provisions of the bond which may apply to the claim presented under a surety bond.

This should be self-evident. It is a statement of prudent and common claims handling. Although this Regulation seems to apply only to surety bonds it also applies to any type of insurance. Nothing can be gained by an insurer concealing or misrepresenting information about the policy or the surety bond. Claims staff should be warned that violation of this regulation will be grounds for discipline and almost certain loss of employment.

On the other hand, proving that insurers and insured play on a different set of rules, a mere oversight or honest mistake will not cost an insured his or her coverage; the lie must be wilful. [Claflin v. Commonwealth Ins. Co., 110 U.S. 81, 95-97, 3 S. Ct. 507, 515-16, 28 L. Ed. 76, 82 (1884)]

Claims Commandment VIII

Thou Shall Not Suffer Fraud to Succeed

Insurance fraud in the U.S. is epidemic. Insurance fraud continually takes more money each year than it did the last from the insurance buying public. Estimates of the extent of insurance fraud in the United States range from $87 billion to $300 billion every year. In truth no one really knows the extent of insurance fraud because most insurance fraud schemes succeed without the insurer even suspecting that it is being defrauded.

Insurers and government backed pseudo-insurers can only estimate the extent they lose to fraudulent claims. No one will ever place an exact number on the amount lost to insurance fraud but everyone who has looked at the issue know – whether based on their heart, their gut or empirical fact of convictions for the crime of insurance fraud – that the number is enormous. When insurers and governments put on a serious effort to reduce the amount of insurance fraud the number of claims presented to insurers and the pseudo-insurers drops logarithmically.

A report from the Insurance Services Office (ISO) noted:

  • Insurers consider fraud “a serious problem” but their companies’ anti-fraud efforts only “moderately effective.”
  • Sixty-eight percent say their companies’ anti-fraud programs address claims fraud “thoroughly,”
  • 19 percent say they address premium fraud “thoroughly,”
  • 25 percent say they address application fraud “thoroughly,”
  • Slightly more than one-third (37 percent) think the amount of fraud their companies have experienced has increased over the past three years.
  • Forty-two percent think that 21 percent or more of total claims contain “soft” fraud, but only 6 percent think that 21 percent or more of claims contain “hard” fraud.
  • They agree that fraud is most prevalent in the private passenger auto and workers compensation lines of business.
  • Eighty-two percent of the 353 insurers responding to the survey say they have an anti-fraud program at their companies.
  • One hundred percent of the large insurers, 91 percent of the medium insurers, and 64 percent of the small insurers have an anti-fraud program.
  • Sixty-three percent of the companies say that the state or states in which their companies do business require an anti-fraud plan.
  • However, only 13 percent of insurers doing business in these states (n=213) consider state requirements and guidelines “very useful.”

Because fewer than one-third of respondents answered questions about their companies’ expenditures, estimates of industry-wide spending on anti-fraud efforts are not reliable. The response rate suggests that insurers are unable to isolate anti-fraud expenditures in their budgets or unwilling to share what figures they have with other insurers and the general public.

What Do The Results of the Effort Against Fraud Really Show?

Insurance fraud prosecutions and investigations are anemic. What the reports do not tell is that most of those convicted were sentenced to probation. Few made full restitution and those who served time were few and far between. Insurance criminals are laughing at the insurance industry, the police agencies, the Fraud Divisions and the prosecutors. If they are one of the few criminally convicted, they face an average sentence of only five years probation and 60 days in jail. Jail time is usually served on weekends so that the convicted fraud perpetrators can still ply their fraudulent trade on weekdays.

For insurance fraud to be prosecuted the insurer must do the work to complete a thorough investigation that can be presented to a prosecutor because police, federal investigators, prosecutors and even Fraud Division investigators will do nothing until the case is presented to them in detail by an insurer. Every person involved in the business of insurance must understand that insurance fraud is the orphan child of the criminal justice system. Insurance fraud will never be totally defeated. It will be reduced and may be made unprofitable to the perpetrators when the public and prosecutors recognize that insurance fraud is a serious problem that effects their own financial condition.

Everyone involved in the business of insurance and everyone who buys insurance must make it clear that they are angry with what is happening to their insurance premium dollar. When I, and everyone who has ever purchased a policy of insurance, hear that $300 out of every $1,000 we pay in premium goes to a criminal we should all want to scream out the window, as did the character in “Network” — “I’m mad as Hell, and I’m not going to take this any more!”

What is Fraud?

Insurance fraud is a tort, a civil wrong. Black’s Law Dictionary, 6th Edition, defines fraud as:

An intentional perversion of the truth for the purpose of inducing another in reliance upon it to part with some valuable thing belonging to him or to surrender a legal right; a false representation of a matter of fact, whether by words or by conduct, by false or misleading allegations or by concealment of that which should have been disclosed, which deceives and is intended to deceive another so that he shall act upon it to his legal injury.

In simple language, fraud can be defined as a lie told for the purpose of obtaining money from another who believes the lie to be true. Civil insurance fraud exists if an insured makes a representation to the insurer that the insured knows is false; conceals from the insurer a fact he or she knows is material to the insurer; makes a promise he or she does not intend to keep; and makes a misrepresentation on which the insurer relies in issuing the policy, that results in the insurer incurring damage.

Investigating Fraud

The beginning of a thorough insurance fraud investigation is the interview. The interview can be informal, it can be recorded with an audio recording device, it can be recorded with a handwritten statement signed by the witness or it can be recorded by a certified shorthand reporter. The interview is a structured conversation. It is not an interrogation. It is not the stuff of spy films, police investigations, or prisoner of war camps. Interviews are everywhere. Interviewing is an art. Use of methods similar to those used by scientists conducting experiments is a more accurate description of interviewing.

Conclusion

Whenever fraud is suspected it is the duty of the insurer, its claim staff and its special investigation unit (SIU) to conduct a thorough investigation. If a preponderance of the evidence gathered reveals that a fraud has been committed: that there was a material misrepresentation or a concealment of a material fact, made with the intent to deceive the insurer, that the insurer was actually deceived, and that the insurer was damaged by the deception, the claim must be rejected.

If a preponderance of the evidence does not exist or establishes there was no fraud the claim should be paid.

Claims Commandment IX

Thou Shall Document the Claim File

Insurance claims handling is a person to person business where the claims handler, the insured and the claimant (if there is one) interact with each other. Because the interaction is not always perfect it is essential to document the interaction in the claims file whether hard paper or electronic and paperless. In addition to the fact that such documentation is good claims handling, it is required by most state insurance regulators. For example:

            (1)       maintain claim data that are accessible, legible and retrievable for examination so that an insurer shall be able to provide the claim number, line of coverage, date of loss and date of payment of the claim, date of acceptance, denial or date closed without payment. This data must be available for all open and closed files for the current year and the four preceding years;

            (2)       record in the file the date the licensee received, date(s) the licensee processed and date the licensee transmitted or mailed every material and relevant document in the file; and

            (3)       maintain hard copy files or maintain claim files that are accessible, legible and capable of duplication to hard copy; files shall be maintained for the current year and the preceding four years. [California Fair Claims Settlement Practices Regulations, 10 CCR 2695.3 (a)]

Adjusters, claims handlers and any other claims personnel who maintain “working” or “field” files, should be aware that those additional files are part of the file and records required to be kept by the Regulations and are subject to examination by the Commissioner.

The practice of being less cautious in the maintenance of “working” or “field” files should be discontinued. Every comment and note made in a claims file should be written as if it were addressed to “Dear Commissioner” or Dear Ladies and Gentlemen of the Jury.”

All file destruction practices should be reviewed to ascertain that no file will be destroyed less than five years after it is opened nor less than four years after it is closed. Insurers should also maintain procedures to never destroy a file if litigation has started or is anticipated until after the litigation is resolved.

A diary system for the destruction of old files should be established by the insurer and its claims personnel with a requirement to keep the files at least two years longer than the CDOI requires as an extra precaution.

If the files are scanned into computer media, microfilmed, or recorded in a method other than paper backups off site backup of the files should also be maintained.

If date stamps are not in use the insurer should provide a date stamp to each claims person so that the date of each action will be recorded in the file. If the insurer is “paperless” all incoming mail and documents must have imbedded in the image a date showing when the document was received.

A mail log should also be maintained to establish dates of mailing of each document. If the insurer uses computer generated e-mail and logging the computer should be programmed to record the date and time of each entry in such a manner that the employee cannot modify or change the dates of any entry. All e-mail communications must be saved for up to five years in a searchable database or in connection with the electronic claims file.

Further, all electronic records must be kept in such a manner that would allow a complete copy of the electronically recorded record to be printed out in full so that it is available to produce to the CDOI or in discovery if litigation occurs. Every computer record should be kept with on-site and off-site back-ups of the records.

Every insurance regulator will conduct audits of insurers doing business in their state. Failure to properly document files as required by good claims handling, statutes or regulations will find the insurer facing fines and bad reports on the ability of the insurer to properly complete the promises made by the insurance policy. Also, unfortunately claims people must spend a great deal of their time documenting the file because about three percent of all claims result in litigation against the insurer. It is essential to every litigation that the insurer has a record of everything they did to protect the insurer against false allegations of bad faith.

The professional claims person will log every telephone call, keep every e-mail and letter in the claims file, and document everything done to deal with the claim.

One way to protect the claims handler and the insurer is Barry Zalma’s E-Book: Zalma on California Claims Regulations – 2011. The E-book is available at http://www.zalma.com/REGS.htm

Claims Commandment X

Thou Shall Not Pretend to be a Lawyer

Some experienced and professional claims people know the law in their area of expertise better than most lawyers. Most claims people do not nor are they capable of pretending that they know the law. Whether the claims person knows the law of insurance contracts or tort law well, he or she is not a lawyer and should not do anything that even hints that the adjuster is acting as a lawyer.

Therefore, communications with an insured, dealing with coverage issues should be limited to the wording of the policy and the claim against the insured. If the case requires that legal authorities be cited to an insured or claimant to best communicate the position of the insurer the adjuster should retain the services of a competent coverage lawyer to write to the insured as the attorney for the insurer.

Many years ago some disreputable insurance companies rescinded policies of insurance as a matter of policy to avoid legitimate claims. The claims staff was instructed to rescind every policy that generated a large claim. When a competent policyholder’s lawyer sued on behalf of those whose policies were rescinded and took the deposition of the adjuster and destroyed the insurers’ position with a simple question: “Please spell rescission.” None could spell it correctly and those who could were stumped by the second question: “What elements must be proved to establish a valid rescission.”

A coverage lawyer would have no trouble answering the two questions. An untrained and inexperienced adjuster could not. The insurers who rescinded willy nilly we assessed punitive damages in addition to requiring them to pay the claims and most went out of business.

Adjusters should be adjusters and leave lawyering to lawyers.

Claims Commandment XI

Thou Shall Empathize With the Claimant

Everyone in a claim situation is unhappy, disturbed, shocked, injured either in body or emotionally and need help. The adjuster must recognize the difference between sympathy and empathy. Empathy is identification with and understanding of another’s situation, feelings, and motives. It is the ability to understand another person’s circumstances, point of view, thoughts, and feelings.

Sympathy, on the other hand, is the sharing of another’s emotions, especially of sorrow or anguish and includes pity and compassion. It is the fact or power of sharing the feelings of another, especially in sorrow or trouble. Sympathy must be limited to the needs of relatives or clergy, not a professional relationship.

The adjuster should avoid sympathy and work to convince the insured or claimant that the adjuster empathizes with the claimant’s situation. Empathy can be shown if the adjuster can honestly express one or more of the following similarities between the adjuster and the claimant:

  • They have similarities in their families;
  • They practice the same religious denomination;
  • They were also wounded in the war while serving in the US Military;
  • They have children of the same age;
  • They belong to the same club;
  • They engages in the same hobby;
  • They are fans of the same sports team, or
  • They have some interest in common.

When the claimant believes that the adjuster empathizes with the problems of the claimant or the insured the two will work together as a team to resolve the claim. With empathy, the adjuster can provide the service promised by the terms and conditions of the insurance policy.

The adjuster is the living embodiment of the insurance company: this is the person the insured meets when he faces a loss and needs help. It is the adjuster, and the help he or she gives the insured, that is the essence of the promise made by the insurer when the policy is issued. Without this service insurance becomes meaningless. The adjuster is the foundation upon which an insurer is built. If the adjuster is not professional, and does not provide the service promised by the insurer, the promise made by the policy is broken and the insurer will first lose customers and ultimately fail. Claims that are owed must be paid promptly and with good grace.

To do otherwise would be to ignore the purpose for which insurance exists: to provide service, protection, and security to the insureds. The property adjuster has a duty to:

  • help the insured prove the loss to the insurer;
  • help the insured understand the terms and conditions of the policy; and
  • conduct a thorough investigation to determine if a third person is responsible for the loss so that subrogation can be instituted to recover, in addition to the money paid by the insurer, the deductible or other non-covered portions of the loss.

Insurance claims professionals are people who:

  1. Can read and understand the insurance policies issued by the insurer.
  2. Understand the promises made by the policy and their obligation, as an insurer’s claims staff, to fulfill the promises made.
  3. Are all competent investigators.
  4. Have empathy and recognize the difference between empathy and sympathy.
  5. Understand medicine relating to traumatic injuries and are sufficiently versed in tort law to deal with lawyers as equals.
  6. Understand how to repair damage to real and personal property and the value of the repairs or the property.

An insurer whose claims staff is made up of people who are less than Insurance Claims Professionals will be destroyed by expensive and counter-productive litigation.

The liability adjuster represents the insurer and deals directly with the insured. When a claim is made, the insurer provides an adjuster to help the insured understand the policy and comply with its conditions. The role of the liability adjuster is slightly different to that of the property adjuster. The liability insurance adjuster has a three-fold duty:

  • to the insured, to protect him or her against exposure to liability to third parties as a result of an accidental tort that falls within the definition of “occurrence”;
  • to the claimant, to treat him or her fairly and, if liability exists, to resolve the claim promptly without ignoring the duty to the insured; and
  • to the insurer, before agreeing to resolve a claim, to establish that coverage exists for the loss under the terms and conditions of the policy, that the insured is liable to the third party, and the most reasonable resolution of the claim has been achieved.

The lesson for every claims person is to have empathy for the insured and the claimant recognizing that as a result the claims investigation will be completed with ease, the insured or claimant will assist the adjuster, and the claim will eventually be resolved with both the insurer and the insured will be satisfied with the result.

Claims Commandment XII

Thou Shall Stay With A Claim

Insurance is a personal service business. Although there is nothing in a policy of insurance that even mentions an insurance adjuster insurers found that they needed to help the people they insured to make it possible to resolve claims without animosity. The insurance adjuster is the only contact a person insured has with the insurer.

The claims adjuster is the person knowledgeable in insurance retained by an insurer for the purpose of assisting the insured in proving a loss to the insurer. A person who expresses to the insured the fidelity and good faith of the insurer. The adjuster determines the amount of loss, the cause of the loss, and the final settlement in cash value after all factors have been considered.

Adjusters are the representatives of the insurers who must fulfill the promises made by the underwriter when the risk was taken. They must determine that the decision to insure was based upon accurate facts and that the underwriter fully understood the risk he or she was taking. Underwriters weigh the hazards faced  by a particular property before agreeing to take on the risk of loss.

The adjuster is the foundation upon which an insurer is built. If the adjuster is not professional, and does not provide the service promised by the insurer, the promise made by the policy is broken and the insurer will first lose customers and ultimately fail. Claims that are owed must be paid promptly and with good grace. To do otherwise would be to ignore the purpose for which insurance exists: to provide service, protection, and security to the insureds.

To be an effective adjuster it is imperative that the adjuster establish rapport with the insured and continue with the insured from the first notice of loss until the conclusion of the claim to the satisfaction of the insured and the insurer. The rapport and continuity is lost when management changes the adjuster on a claim more than once.

To properly serve the people the insurer insures requires professional insurance claims handlers who are secure in their position and can spend the time necessary to assist an insured to resolve a claim even if that claim, like a third party liability claim, takes years to resolve.

Lesson

To fulfill this claims commandment insurers must staff their claims department with experienced, professional claims personnel who have chosen claims handling as a profession. The claims personnel must be people who can empathize with the insured and, if there is one, claimant.

The insurer must emphasize to its personnel that it requires continuous rapport with the insured and claimant and that it will never change the person in charge of a claim unless absolutely necessary. Claims people should make clear to the insured and the claimant that they will be with them from beginning until the claim is resolved.

Claims Commandment XIII

Though Shall Educate Yourself Continuously

Insurance and the law of insurance is continuously changing. As regular readers of Zalma on Insurance are aware new cases on insurance issues come from the courts daily. Facts and practices that are clear and unambiguous today will be ambiguous or wrongful tomorrow. Acts that are considered bad faith today will be considered to be good faith tomorrow.

The key to becoming a professional claims handler is education and information. For that reason the professional should, among other things:

  • Read Zalma on Insurance
  • Read the insurance trade journals daily, most of which are available for little or no cost, on line:

○          Bests Review.

○          Business Insurance.

            ○          Insurance Journal.

            ○          Claims Journal.

            ○          Claims Magazine.

            ○          American Agent and Broker Magazine.

            ○          National Underwriter.

            ○          Underwriters Insider.

            ○          Zalma’s Insurance Fraud Letter.

○          Dozens of others.

○          Join and participate in insurance or investigation related LinkedIn groups.

○          Join and participate in insurance or investigation related Yahoo groups or Google groups.

○          Subscribe to the newsletters of IRMI.

○          Subscribe to Findlaw’s summaries of recent insurance decisions.

○          Take insurance related continuing education classes.

○          Obtain an insurance related designation like CPCU, CLU, AIC, etc.

It is also necessary to comply with state regulations regarding licensing and continuing education. For example only, California now requires of adjusters:

          Hour Requirements

24 hrs biennially – Independent Insurance Adjusters and Public Adjusters

       Line Specific Requirements:

Courses must be in license type held.  If multi-licensed, any course is allowed.

          Ethics

4 hrs – Life/Health Agent and/or Fire/Casualty Broker-Agent, independent insurance adjusters and Public Adjusters

          Education Methods:

  •                         Classroom
  •                         Self-Study
  •                         Online

          Compliance Renewal Date:

Independent & Public Adjusters renewal date is 5/31 of even numbered years

         Carryover Hours:

Excess hours can be carried forward to next renewal period. Excess hours completed after expiration date do not carry forward to next renew period.

          Course Repetition:

Courses may not be taken more than once in each renewal period for credit

          Reporting Method:

CE credits are reported online daily to the CDI (classes within 30 days after course completion)

Licenses can be renewed online at www.insurance.ca.gov and click on the Online License Application.

          Exemptions to CE Requirement:

Agents who are 70 years or older and have had a California insurance license in good standing for 30 or more continuous years

          Non-Residents:

Exempt if licensee meets home state CE requirement, with the exception of nonresidents selling annuities or LTC.

To be a professional claims handler it is essential that you understand the covenant of good faith and fair dealing, the basis of insurance, how insurance works, and a high level of skill in the profession.

Claims Commandment XIV

Thou Shall Adjust

The claims handler has been called an “adjuster” for centuries because he or she is capable of adjusting to different situations. In modern practice and adjuster is:

                        The person knowledgeable in insurance retained by an insurer for the purpose of assisting the insured in proving a loss to the insurer. A person who expresses to the insured the fidelity and good faith of the insurer.

The adjuster is also a person who, “for any consideration whatsoever, engages in business or accepts employment to furnish, or agrees to make, or makes, any investigation for the purpose of obtaining, information in the course of adjusting or otherwise participating in the disposal of, any claim under or in connection with a proof of loss or engages in soliciting insurance adjustment business.”  [California Insurance Code § 14022.]

It is the obligation of the adjuster to determine the amount of loss, the cause of the loss, and the final settlement in cash value after all factors have been considered.

The adjuster must be capable of working with various people under multiple difficult situations, determine the dispute and resolve it in a manner that is acceptable to the insured or claimant and the insurer for whom the adjuster works.

The courts of many states have created a tort called “bad faith conduct of insurance contract requirements” (the “tort of bad faith”). Although bad faith is grounded in contract principles it is treated as a tort for the purpose of assessing damages. To understand the tort remedies available for bad faith conduct the adjuster must understand a fundamental principle of contract law that every contract imposes on each party a duty of good faith and fair dealing in its performance and its enforcement.

The adjuster provides the service promised by the insurance company. The adjuster is the living embodiment of the insurance company: this is the person the insured meets when he faces a loss and needs help. It is the adjuster, and the help he or she gives the insured, that is the essence of the promise made by the insurer when the policy is issued. Without this service insurance becomes meaningless. The adjuster is the foundation upon which an insurer is built. If the adjuster is not professional, and does not provide the service promised by the insurer, the promise made by the policy is broken and the insurer will first lose customers and ultimately fail. Claims that are owed must be paid promptly and with good grace. To do otherwise would be to ignore the purpose for which insurance exists: to provide service, protection, and security to the insureds.

To do the task the adjuster must be flexible and ready to work within the confines of the contract of insurance, the covenant of good faith and fair dealing, and simple good manners to work as a partner with the insured or claimant to resolve the claim to the satisfaction of both. If a claim is properly adjusted litigation between insurers and insureds and claimants will diminish and in many cases disappear.

Claims Commandment XV

Thou Shall Not Be Cruel

Insurers pay to the satisfaction of their insureds and claimants approximately 95% of all claims presented. However, there will always be claims made on policies that do not provide coverage. They can be as simple as:

  • A fight in a bar with an all inclusive assault and battery exclusion.
  • Earthquake damage to a house with no earthquake coverage.
  • A flood to a house with no flood insurance.
  • A landslide wipes away a house and lot where landslide is excluded.
  • An auto accident two days after the policy expires.
  • Vandalism damage to a car that is only covered by basic third party liability coverage.
  • A business intentionally pollutes a nearby waterway.

Advising an insured or claimant that there is no coverage on an insurance policy always falls upon the shoulders of an insurance adjuster. How the adjuster fulfills the task of advising a person that he is on his own and can expect nothing from the insurer can cause, or avoid, a lawsuit from the insured.

It is essential that the adjuster deal with the claim denial in pleasant, empathetic and kind fashion. The adjuster should never be brusk and cruel. The adjuster should never take joy in denying a claim although it is the adjuster’s obligation to comply with the terms and conditions of the policy.

Be kind. Be considerate. Be clear, concise, and advise the person whose claim must be denied, why his claim must be denied. That means the adjuster must provide the insured with the results of the adjuster’s investigation that reveals all of the facts relied upon, how they apply to the specific wording of the policy, and how the facts and the policy wording are interpreted by the courts of the place where the claim occurred. If possible the denial should be written and detailed and presented in person to the insured or claimant so that the adjuster is available to answer any questions raised by the denial.

No insurance policy covers every potential claim. Some casualties are either uninsurable or not insured. It is not only correct, honest and moral to explain a denial to the insured, in states like California, it is required by Regulation:

(1) Where an insurer denies or rejects a first party claim, in whole or in part, it shall do so in writing and shall provide to the claimant a statement listing all bases for such rejection or denial and the factual and legal bases for each reason given for such rejection or denial which is then within the insurer’s knowledge. Where an insurer’s denial of a first party claim, in whole or in part, is based on a specific statute, applicable law or policy provision, condition or exclusion, the written denial shall include reference thereto and provide an explanation of the application of the statute, applicable law or provision, condition or exclusion to the claim. Every insurer that denies or rejects a third party claim, in whole or in part, or disputes liability or damages shall do so in writing. [California Fair Claims Practices Regulations Section 2695.7(b)(1)]

The Regulations are clear but they fail to take into consideration the duty of the adjuster to deal with the insured with empathy and personal contact. It just requires a cold, written statement, that must contain difficult to understand legalisms. Fulfilling the Regulation to the letter is cold and cruel unless delivered by an adjuster, who, through the investigation process has developed a rapport and trusting relationship with the insured.

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The Examination Under Oath

A Tool Available to Insurers To Thoroughly Investigate Claims

The insurance Examination Under Oath (“EUO”) is a formal type of interview authorized by an insurance contract. It is taken under the authority provided by a condition of the insurance contract that compels the insured to appear and give sworn testimony on the demand of the insurer or find his, her or it claim rejected for breach of a condition. A notary and a certified shorthand reporter are always present to give the oath to the person interviewed and record the entire conversation.

The EUO is a tool used sparingly by insurers in the United States when a thorough claims investigation raises questions about the application of the coverage to the facts of the loss, the potentiality that a fraud is being attempted, or to assist the insured in the obligation to prove to the insurer the cause and amount of loss. Although rarely used the EUO is an important tool needed by insurers when there is a question of coverage.

The Reason for the Examination Under Oath

Courts that construe submission to an EUO as a condition precedent to recovery generally do not require the insurer to prove that it suffered actual prejudice from an insured’s unexcused refusal to submit to an examination. Lorenzo–Martinez v. Safety Ins. Co., 58 Mass. App. Ct. 359, 790 N.E.2d 692, 695–96 (2003). The EUO provides a mechanism for the insurer to corroborate the claim by obtaining information that is primarily or exclusively within the possession of the insured.

The adjuster, the independent adjuster, the Special Investigation Unit (“SIU”) investigator, the independent insurance adjuster and, in complex cases, the attorney retained to represent the insurer questions the person interviewed in a manner similar to a deposition in a legal proceeding. Because of the formality of the proceeding — it includes an oath, and the presence of a certified shorthand reporter — the task of establishing rapport with the person interviewed so that relevant information may be obtained from the insured is more difficult than in an informal interview. Unlike legal proceedings where questions are limited to those seeking a “yes” or “no” or brief answer the EUO seeks narrative responses from the person questioned.

The person taking the EUO, therefore, must be capable of transitioning from lawyer like questions in litigation to the broad, inquisitive, narrative seeking questioning. An EUO should never be conducted as if it is an adversarial activity but merely a fact seeking activity that is directed to the needs of an insurance policy and the need to prove a loss is either compensable or not.

Because the EUO is a tool for gleaning the maximum amount of information the EUO is an effective weapon against insurance fraud. This is because the person taking the EUO is knowledgeable about insurance and insurance law while the person being questioned is only aware of the claim presented and the fraud he or she may be attempting.

Often, however, the purpose of the EUO is not to stop fraud but to allow an insured the opportunity to prove his or her claim of loss in cases where evidence has been destroyed by a casualty or is otherwise unavailable.

The authority to take an EUO is provided by the insurance contract and exists, as a result of statutes, establishing a state mandated fire insurance policy that must be incorporated in every policy in the state that insures against the peril of fire. For example, the New York Standard Fire Policy provides as follows:

The insured, as often as may be reasonably required, shall exhibit to any person designated by this company all that remains of any property herein described and submit to EUO by any person named by this compa­ny, and subscribe the same; and as often as may be reason­ably required, shall produce for examination and copying all books of account, bills, invoices, and other vouchers… (Emphasis added)

Similarly, the 1991 edition of the Homeowners policy provides, in easy to read language:

“2.       Your Duties After Loss. In case of a loss to covered property, you must see that the following are done:

* * *

“f.        As often as we reasonably require:

            “(1)      Show the damage property.

            “(2)      Provide us with records and documents we request and permit us to make copies; and

            “(3)      Submit to EUO, while not in the presence of any other “insured” and sign the same.” [ISO form HO 00 03 04 91, PAGE 9 OF 10]

In Shaw v. State Farm Fire and Cas. Co., 37 So.3d 329, 35 Fla. L. Weekly D1020 (2010) Florida concluded that State Farm had every right to include the EUO provision in its contract as a condition precedent to payment or suit, just as insurance companies have done in Florid for over a century; State Farm had every right to expect and require that the EUO requirement be complied with by any person or organization making a claim or seeking payment so that State Farm can determine whether the claim Claflin v. Commonwealth Ins. Co., 110 U.S. 81, 3 S.Ct. 507, 28 L.Ed. 76 (1884)] is proper or fraudulent; and State Farm had every right to require and expect that this clause be complied with by assignees of PIP benefits who are no less capable of filing fraudulent claims than insureds. According to the Florida Court of Appeal, the insured and his assignees—the Appellants—do not have the right to take this valuable contract right and investigative tool away from State Farm through the mere expedient of an assignment.

Although the EUO is a formal proceeding it is not part of a judicial process. The EUO is not controlled by the rules of civil procedure. In most states it is considered a condition precedent to recovery under a policy of insurance. The EUO is not limited by any statute relating to civil discovery. Some states have enacted regulations that try to limit insurers taking of the EUO and place certain requirements upon the insurer to chill the desire to take an EUO.

Depositions and examinations under oath serve vastly different purposes. First, the obligation to sit for an examination under oath is contractual rather than arising out of the rules of civil procedure. Second, an insured’s counsel plays a different role during examinations under oath than during depositions. Third, examinations under oath are taken before litigation to augment the insurer’s investigation of the claim while a deposition is not part of the claim investigation process. Fourth, an insured has a duty to volunteer information related to the claim during an examination under oath in accordance with the policy while he would have no such obligation in a deposition. [Beasley v. GeoVera Specialty Ins. Co., Slip Copy, 2015 WL 2372328, 2015 WL 2372328 (E.D.La., 2015)]

An insurer’s right to ask questions at EUO is basically unlimited.

As early as 1884, the U.S. Supreme Court explained the purpose of the EUO, as follows:

The object of the provisions in the policies of insurance, requiring the assured to submit himself to an EUO, to be reduced to writing, was to enable the company to possess itself of all knowledge, and all information as to other sources and means of knowledge, in regard to the facts, material to their rights, to enable them to decide upon their obligations, and to protect them against false claims. And every interrogatory that was relevant and pertinent in such an examination was material, in the sense that a true answer to it was of the substance of the obligation of the assured. A false answer as to any matter of fact material to the inquiry, would be fraudulent. If it made, with intent to deceive the insurer, would be fraudulent. If it accomplished its result, it would be a fraud effected; if it failed it would be a fraud attempted. And if the matter were material and the statement false, to the knowledge of the party making it, and willfully made, the intention to deceive the insurer would be necessarily implied, for the law presumes every man to intend the natural consequences of his acts. No one can be permitted to say, in respect to his own statements upon a material matter, that he did not expect to be believed; and if they are knowingly false and willfully made, the fact that they are material is proof of an attempted fraud, because their materiality, in the eye of the law, consists in their tendency to influence the conduct of the party who has an interest in them, and to whom they are addressed. [Claflin v. Commonwealth Ins. Co., 110 U.S. 81, 3 S.Ct. 507, 28 L.Ed. 76 (1884)] (Emphasis added)

The position taken by the U.S. Supreme Court in Claflin has been upheld by every court that has considered it to date. For example, in Gipps Brewing Corp v. Central Manufacturers Mutual Insurance Co., 147 F.2d 6, 13 (C.A. 7, 1945) the Seventh Circuit stated:

We think there is no escape from the conclusion that these witnesses purposefully refused to answer ques­tions upon EUO which were materi­al to the inquiry. We see no basis for refusal to answer upon the ground that they were controversial or that the answers thereto might have been used for the purpose of impeachment. Such a limitation would seriously impair and perhaps destroy defendants’ right under this provision of the policy.  We would think that defendants had a right to examine as to any matter material to their liability, as well as to its extent. (Emphasis added)

            In light of the evidence cited by the defendants (of which these are only a few examples), a reasonable juror could conclude that the plaintiff breached the insurance policy by not carrying out her duties as the insured party, thereby rendering the policy void.[1]

Similarly, based on the undisputed facts, a court concluded that there could be no question that Thomas made false statements when he applied for coverage and during the claims process. Thomas (the insured), “made false statements … relating to this insurance” both before and after the loss. Under the express terms of the Policy, AFI therefore can void “[t]he entire policy[.]” Thomas contended, however, that he “had no intent to defraud at any stage of the insurance procurement or claims processes.” But effective with the repeal of former Michigan Compiled Laws Section 500.2832, the insured’s intent is no longer relevant when the insurer seeks to void a policy based on a false statement where the policy contains the language at issue here. [Thomas v. Armed Forces Ins. Exchange, Slip Copy, 2015 WL 2063064 (E.D.Mich., 2015)]

In Kisting v. Westchester Fire Insurance Co. 290 F. Supp. 141 (W.D. Wis, 1968) affirmed 416 F.2d 967 the District Court granted summary judgement because of the refusal of the insured to answer material ques­tions. The court stated:

It is well settled in other jurisdictions that noncompliance with a provi­sion in an insurance policy requiring the insured to submit to an EUO precludes recovery by the insured.

Although a delay in receiving notice does not necessarily impair the insurer’s ability to investigate the claim. In contrast, an insured’s refusal to submit to an EUO significantly affects the insurer’s investigation of the claim. When the insurer, Progressive, requested the EUO in order to resolve the residency issue and make a coverage determination. The court refused to require Progressive to prove that it has been prejudiced by the petitioner’s refusal to submit to the EUO. [Krigsman v. Progressive Northern Ins. Co., 151 N.H. 643, 864 A.2d 330 (2005)]

An appearance at an EUO “is a condition precedent to the insurer’s liability on the policy” (Stephen Fogel Psychological, P.C. v. Progressive Cas. Ins. Co., 35 AD3d 720, 722 [2006] ), and defendant timely denied the claims at issue on that ground. As a result, upon searching the record (see Merritt Hill Vineyards v. Windy Hgts. Vineyard, 61 N.Y.2d 106 [1984]). Based on the precedent the court in First Class Medical, P.C. v. State Farm Mut. Auto, 55 Misc.3d, 141 (A) 2017 WL 1822145, 2017 N.Y. Slip Op. 50593(U), found that defendant is entitled to summary judgment dismissing the complaint with prejudice because of the failure to appear at EUO.

In Bowlers’ Alley, Inc. v. Cincinnati Ins. Co., 32 F.Supp.3d 817, 89 Fed.R.Serv.3d 50 (2014) the pleadings failed to establish that the defendant ever made a demand for an EUO to occur, specific or otherwise. The only references to an EUO that appear in the pleading papers are the defendant’s allusion in the July 17, 2013 letter referencing its intent to “ask our attorneys” about arranging an EUO, and the plaintiff’s subsequent response indicating that the plaintiff was ready to submit to an examination at any time, and demanding that the defendant schedule one promptly. Whether or not the subsequent communications between the parties will show that one or the other acted unreasonably in failing to schedule or failing to submit to an EUO is a question that cannot be answered until the record has been fully developed on this issue. The complaint asserts that the plaintiff fully complied with all of its duties under the policy, and, so far as they go, the documents attached to the complaint support that assertion. It is the obligation of the insurer to prove that a EUO was demanded and that the insured refused to appear at EUO.

Insurers use the right to EUO seldom and only when its investigation requires sworn testimony from an insured to make an intelligent and well-reasoned decision regarding the claim presented. It is an essential tool in those rare cases where fraud is suspected, where there is a coverage issue that requires a finding of the reasonable expectations of the insured, or when there is no other way for the insured to present the proof needed to allow an insurer to determine that an insurer is obligated to indemnify the insured and the extent of the indemnity owed.

(c) 2017, Barry Zalma

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Barry Zalma, Esq., CFE

Barry Zalma, Inc.

Insurance, Insurance Claims, Insurance Coverage and Insurance Fraud Consultant

Barry Zalma, Inc. makes available Barry Zalma’s more than 50 years of practical insurance claims experience to serve those who are faced with an insurance claim or coverage dispute. Mr. Zalma will assist its clients to resolve any insurance problem faced by lawyers representing insurers, lawyers representing policyholders, insurance claims management, insurance claims personnel, and those they seek to serve. The experience and skill of Mr. Zalma as a consultant can make the difference before a jury, other trier of fact, or mediator.

Barry Zalma founded Barry Zalma, Inc. in 1979 to help resolve every insurance claim problem faced by you or your clients. His experience and skill as a consultant can make the difference before a jury or other trier of fact. For more than 50 years as a claims person and insurance coverage attorney, Barry Zalma has represented insurers, advised insurers on claims handling, interpreted coverages and testified as an insurance coverage, insurance bad faith, insurance claims handling and insurance fraud expert on behalf of insurers and policy holders’ suing insurers. He now limits his practice to consultation.

Mr. Zalma is an internationally recognized expert on insurance, insurance claims handling, insurance coverage, insurance fraud, and insurance bad faith. Barry Zalma will promptly review your file materials and advise you about the viability of your decision to sue or the defenses you need to assert. He can help you narrow the scope of discovery.

Consultation with Mr. Zalma can save you or your client thousands of dollars in the defense or prosecution of an insurance dispute. Mr. Zalma will assist you in the effort to find a solution to an insurance claims dispute that is fair, intelligent, beneficial and economical.

Barry Zalma is available to provide advice to individuals and their counsel. Advice from Mr. Zalma is indispensable to the resolution of insurance disputes. Consultation from him can save you, your counsel or client hundreds of hours of investigative and legal work.

With comprehensive knowledge of insurance and insurance claims handling Mr. Zalma understands, and can help his clients explain in language a lay jury understands, how and why insurance claims should be resolved.

Mr. Zalma’s rates are all inclusive. Mr. Zalma’s hourly fee takes account of all incidentals from telephone calls and postage to computer time and word processing. As for third-party costs, ZIC passes along all discounts and vendor savings. The client pays what ZIC pays. Not a penny more. ZIC has made the billing process simple.


The Legend Award

By Barry ZalmaMr. Zalma is the first recipient of the Claims Magazine/Americas Claims Event Legend Award presented at the conference in Minneapolis, Minnesota in June 2016. To be considered for the award he must have made significant contributions to the claims sector of the insurance industry through education, professional development and perseverance. The award requires a professional who has been involved in or supported the industry for much of his or her career. Understanding the premise that improving an industry for one group or segment of the population improves it for all, this person has shared knowledge, resources and expertise for the benefit of an entire industry through education, written contributions, professionalism and more than 48 years in the insurance industry.


Arbitrator or Mediator

Mr. Zalma understands that litigation is expensive and does not always resolve a dispute. He is also available, therefore, to serve as an arbitrator or mediator for any insurance dispute. Because Mr. Zalma limits his services to insurance disputes and does not operate through a mediation or arbitration service the cost of his services are much less than the cost of an arbitrator or mediator from such a service.

Most people cannot define, let alone understand, insurance. Mr. Zalma, a native Californian, accepts the California definition of “insurance” which was codified as follows:

“Insurance is a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event.” [California Insurance Code Section 22]

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Major topics of study include, but are not limited to: the importance of insurance; how to acquire insurance and understand an insurance policy; the methods used by insurers to investigate claims, including first-party property claims; the various types of insurance that corporations need; the duties and obligations of a public adjuster; and how to present a claim that will be paid.

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Review From Professional

W. D. Smith, Jr., MBA, CPCU, CLU, ChFC, AIM, AIS, AI, State Farm Fire Core Property Claim Team Manager, reported about a training program I wrote:

“I must tell you that this is the most enjoyable course I have ever taken. I learned or was reminded of so much. I was moved. I was inspired. I will use insights from your course to educate and motivate my employees who handle and adjust claims in 34 states across the country. I will also be recommending your course to anyone who needs continuing education. In fact, please let me know if you have any other courses in the catalogue.

“As you can see from my signature line below, I’ve taken a course or two over the years. I just want you to know how much I appreciate the time, the care, and the love for (and understanding of) this industry that you demonstrated by writing such a fantastic course. The depth and breadth of knowledge and research were impressive to say the least. The fow was outstanding. The text was written thoughtfully, with appropriate respect, wonderful quotes, and with subtle humor…. All of this was a refreshing change from much of the insurance coursework that is typically available….

“Mr. Zalma, this course was simply OUTSTANDING! Thank you so very much for creating it!”


Contact

Barry Zalma, Inc.
4441 Sepulveda Boulevard
CULVER CITY CA 90230-4847
310-390-4455
Fax: 310-391-5614
zalma@zalma.com or bzalma@earthlink.net
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Updated October 1, 2017 and © 2017 by Barry Zalma

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this web site. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation. If you desire legal advice you may retain the services of Mr. Zalma after signing an engagement letter. No communication received will be held in confidence.
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Ignorance Can Be Cured

Stupid is Forever

© 2017, Barry Zalma

It is a certainty that the business of insurance will act in cycles. Premiums go up. Premiums go down. Catastrophes happen regularly and in some years there are no catastrophes. Insurers pay any claim presented to avoid litigation and investigation expenses. Insurers change and refuse to pay any case where they believe there is fraud.

Sometimes insurers are intelligent and conclude that the best way to make a profit is to maintain a staff of professional claims personnel who are dedicated to fulfilling the promises made by the insurance policy issued by the insurer, promptly, efficiently and in absolute good faith. To do so they maintain professional continuing education for the staff and insist that all claims be investigated thoroughly and all insureds be treated fairly and in good faith.

The expense incurred in keeping a professional claim staff becomes unbearable, human resources directors are instructed to eliminate expense and stop the training programs, fire the expensive and experienced claim staff, and hire in their place recent college graduates who are asked to deal with claims without training or experience.

The decimation of the professional claims staff is either due to corporate ignorance – that can be cured – or corporate stupidity which will remain until the corporation becomes insolvent.

Historic Basic Claims Training

In 1967 I was a young insurance claims trainee with a major insurance company. In my first month as an employee management sat me down at a desk and told me to read a classic insurance claims handling book written by Paul Thomas. Since I knew absolutely nothing about insurance reading the book gave me a basic understanding of insurance and insurance claims handling. I was then sent out to ride with experienced adjusters in every field of insurance written by the company from fire, casualty, comprehensive general liability, personal liability, all types of third-party liability, workman’s compensation (now renamed worker’s compensation), surety, fidelity, inland marine and motion picture insurance.

I was then allowed, under close supervision, to adjust minor claims over the telephone, for small injuries and minor theft claims. After three months of study, on the job training with experienced adjusters, and adjusting minor claims I was sent, at the insurer’s expense, to their Home Office Training School where I spent 30 days with other trainees for 9 to 5 classroom training on every aspect of insurance, insurance law, insurance policy interpretation, repairing damaged structures, medicine and evaluation of traumatic injuries, insurance contract interpretation, repairing of damaged automobiles, repair of damaged structures, and claims investigations techniques.

Since I had spent three years in the military as an Army Intelligence agent I had experience and skill as an investigator and was able to convert my experience and training as an investigator to become an effective claims investigator.

After I completed the Home Office training course I was sent back to the office in Los Angeles and allowed to deal with multiple insurance claims over the telephone with less strict supervision. After a year I was promoted to field adjuster and allowed to meet with the public because I had proved to management that I understood insurance, insurance claims, the duty of good faith and fair dealing, and could be trusted with the insurer’s assets.

I was admitted to the California Bar in 1972 and stopped being an adjuster. I did not, however, give up on insurance. Rather, I directed my law practice to nothing but insurance and insurance claims handling.

The Majority of Claims Training Today

Experienced adjusters who were trained as I was have been fired or laid off with regularity to cut down on the expenses of their relatively high salary and the low salary for which a novice adjuster can be paid.

Today, a new adjuster, recently graduated from a community college or four year college is given little or no training. Rather the new adjuster is given a check book, a cellular smart telephone with a digital camera, a digital recorder, and a company car. He or she is given discretionary authority to pay any claim up to $2500 without approval of management. As a result, if the adjuster is assigned 100 to 1000 claims a year he or she, knowing little or nothing about insurance and insurance claims handling, has the right to spend, without approval, as much as $250,000 to $2,500,000 – more than his supervisor or the company president. He or she is told they are adjusters and should resolve the claims provided to them by their supervisor. Only if they have problems with a claim are they to seek the advice of their supervisor who may only have two years of experience as an adjuster. Neither the new adjuster nor the supervisor had any formal training.

Insurance management, finding that the expense side of the ledger has moved downward, and the quarterly profit increased, believe that they are wise and have helped the insurer’s profit margin. They are wrong. They are, by forgetting that insurance profitability is determined over a quarter of a century, not a quarter of a year. They are destroying the insurer and depriving the insurer of the ability to keep the promises made by the insurance policies issued by the insurer.

The Problem

The short term expense savings is penny wise and dollar foolish. Because of their lack of education and experience a young and untrained adjuster has created litigation against the insurer who employed them by:

  • Writing in his file that the insured was obviously a fraud because (of any one of dozens of ethnic minorities).
  • Accusing an insured of arson-for-profit without evidence of any kind.
  • Denying a fire claim because it was set by a homeless person.
  • Denying a claim based on an exclusion and concealing from the insured the exception to the exclusion that made the loss one that was covered.
  • Denying a claim in writing by quoting only a portion of the policy wording and refusing to quote the language of the policy that made coverage clear.
  • Denying a claim because the damage was done by the insured’s negligence.
  • Accusing an insured of fraud because there were no receipts for stolen personal property.
  • Denying a claim for failure to submit a sworn proof of loss without first providing the form to the insured.
  • Deciding to pay the new owner of a property who was not named on the policy because he had an insurable interest.
  • Refusing to pay the named insured because he had sold the dwelling even though he kept an insurable interest by taking back a loan from the buyer.
  • Refusing to pay more than $1500 for a fire damaged Persian Rug when the limitation only applied to theft claims.
  • Refusing to defend an insured because a claim of defamation is an intentional tort.
  • Refusing to defend an insured because he did not like the insured.
  • Refusing to pay an independent lawyer because he charged too much.
  • Refusing to investigate a claim because it was reported a year after the loss occurred.
  • Refusing to return telephone calls from an insured because the adjuster was “too busy.”
  • Refusing to personally inspect the loss site because the adjuster was “too busy.”
  • Refusing to pay a claimant because he was not injured but had a disease only a horse could suffer.
  • Refusing to pay a claimant because of his or her race.

All of these, and many more, resulted in a suit against the insurer alleging breach of contract, breach of the covenant of good faith and fair dealing and resulted in verdicts providing the insured contract damages, tort damages, and punitive damages that far overshadowed the annual savings obtained as a result firing the insurer’s experienced claims staff. One judgment against an insurer for bad faith assessing tort and punitive damage can far exceed the annual payroll of the claims department.

This ignorance is not limited to insurance adjusters. Lawyers who should know better, who should understand how to analyze the wording of an insurance policy, do not. Insurance company lawyers are often referred to by lawyers working in large law firms, as “discount lawyers” who they believe deserve less than the respect that union leaders have for Walmart. That is because insurance companies, agreeing to provide regular business to a law firm, can negotiate low hourly rates from the law firms they retain to defend insureds and to advise the insurer. Of course, the law firms working to maximize profits, assign insurance claims to their least experienced and knowledgeable young associates who will be assigned to ghost write pleadings, discovery and opinion letters for a partner who will at most review the documents and usually simply sign them.

The young lawyers, although they charge low hourly fees, spend dozens – if not hundreds – of hours reinventing the wheel and learning their trade. The experienced lawyers and partners do little to help. When I was a young lawyer the law firm for which I worked gave me 250 litigation files and told me to start work explaining that if I had any questions the answers were in the firm’s law library (before computers, let alone computer aided research). I learned the hard way because no one would help me. Some clients paid the cost of my learning how to properly represent their interests.

Today I see even less from young lawyers whose advice caused an insurer to be sued. Their errors are too broad to list in detail but are as bad as the list of errors made by the adjusters. In fact, wanting to please their client, the young lawyers will adopt the adjuster’s opinions because they believe the adjuster – probably accurately – knows more about the subject than the lawyer. They will, rather, file a standard answer to the complaint they are asked to defend, serve multiple statutory forms of interrogatories, send custom draw interrogatories and requests for admission, and notice depositions of every person involved in the claim.

The ignorance that resulted in claimed savings by dismissing experienced claims people and refusing to pay the fees of experienced and knowledgeable claims counsel, can be cured. The stupidity that believes that the savings are appropriate and add to the insurer’s profits can never be cured.

If insurers wish to make a reasonable profit and actually keep the promises made by the policies they issue in good faith and deal with their insureds fairly and good faith they must give up on the short term savings on the expense side of the ledger. Rather, insurers need to create a program requiring excellence in claims handling. Insureds will be pleased, claims people will be confident, and litigation against the insurer will be rare and easily defended. If not they will continue to be an easy victim of fraud and they will be sued for bad faith regularly. Profits will dissipate and those who refuse to learn will become insolvent.

An Excellence In Claims Handling Program

To avoid claims of bad faith, punitive damages, and losses, and to make a profit, insurers must maintain a claims staff dedicated to excellence in claims handling. That means they recognize that they are obligated to assist the policyholder and the insurer to fulfill all the promises made by the insurer in the wording of the policy. The insurer that wants to create a claims staff dedicated to excellence in claims handling must, at least:

  • Hire insurance claims professionals.
  • If professionals are not available, the insurer must use the services of professional independent adjusters.
  • If professionals are not available the insurer must establish a system to train all members of the existing, and new members of the claims staff, to be insurance claims professionals.
  • Requiring each member of the claims staff to be trained annually on the local fair claims settlement practices regulations and SIU Regulations.
  • Employ insurance professionals who can intelligently supervise the work of each claims handler.
  • Supervise each claims handler closely to confirm all claims are handled professionally and in good faith.
  • Train, regularly, each member of the claims staff on the meaning of the covenant of good faith and fair dealing.
  • Require that the claims staff treat every insured with good faith and fair dealing.
  • Demand excellence in claims handling from the claims staff.
  • Let the claims staff know that failure to provide excellence in claims handling to those insured will result in immediate dismissal of any claims handler.
  • Be ready to have an executive of the insurer meet with an insured who was not treated professionally, apologize for the failure, advise that the offending claims person has been dismissed, and provide a means to fulfill the promise of good faith and fair dealing.

If any experienced claims professionals exist on the insurer’s staff, the insurer must cherish and nurture them and use their experience and professionalism to train new claims people. If none are available, the insurer has no option but to train its people from scratch. Those claims people who treat all insureds and claimants with good faith and fair dealing and provide excellence in claims handling must be honored with increases in earnings and perquisites. Similarly, those who do not treat all insureds and claimants with good faith and fair dealing should be counseled and given detailed training. If they continue with less than professional conduct they must be fired. The insurer must make clear to all employees that it is committed to immediately eliminating staff members who do not provide excellence in claims handling.

An excellence in claims handling program can include a series of lectures supported by text materials. It must be supplemented by meetings between supervisors and claims staff on a regular basis to reinforce the information learned in the lectures. The insurer also must institute a regular program of auditing claims files to establish compliance with the subjects studied. The insurer’s management must support the training and repeat it regularly. There is no quick and easy solution. The training takes time; learning takes longer. If the insurer does not have the ability to train its staff it should use outside vendors who can do so.

The excellence in claims handling program requires thorough training providing each member of the claims staff with a minimum of the following:

Training

The insurer seeking to create an excellence in claims handling program should institute regular training of its claims staff in all or more of the following subjects:

  1. How to read and understand the contract that is the basis of every adjustment, including but not limited to:
  2. The formation of the insurance policy.
  3. The rules of interpretation.
    1. Tort law including negligence, strict liability in tort, and intentional torts.
    2. Contract law including the insurance contract, the lease agreement, the bill of lading, nonwaiver agreements, proofs of loss, releases and other claims related contracts.
  4. The duties and obligations of the insured in a personal injury claim.
  5. The duties and obligations of the insurer in a personal injury claim.
  6. The duties and obligations of the insured in a first party property claim.
  7. The duties and obligations of the insurer in a first party property claim.
  8. The Fair Claims Practices Act and the regulations that enforce it.
  9. The thorough investigation:
    1. Basic investigation of an auto accident claim.
    2. Investigation of a construction defect claim.
    3. Investigation of a non-auto negligence claim.
    4. Investigation of a strict liability claim.
    5. Investigation of the first party property claim.
    6. The recorded statement of the first party property claimant.
    7. The recorded statement or interview of a third party claimant.
    8. The recorded statement of the insured.
    9. The red flags of fraud.
  10. he SIU and the obligation of the claims representative when fraud is suspected.

This training can be accomplished in several ways. The claims person may be required to read a chapter every week of “Insurance Claims: A Comprehensive Guide” available from National Underwriter Company at http://www.nationalunderwriter.com/reference-bookstore/property-and-casualty/zalma-insurance-claims-library.html. In addition, the claims person can be required to view a three to four minute video training session by starting at volume 1 and going through all videos, one or more a day, at Zalma Insurance 101.

Claims Report Writing

The new adjuster and new insurance lawyer must understand that an insurer needs information to evaluate the risks it is asked to take. To fulfill the needs of the insurer the claims person must recognize that report writing is essential to the duty imposed on the adjuster and insurance lawyer. The reports must include:

  • The name and address of each person insured.
  • The identity of the insurer.
  • The policy number.
  • The persons named as insured.
  • All persons who are insured or additional insureds by means of the policy wording.
  • The date of the loss.
  • The cause of the loss.
  • The risks of loss insured against by the policy.
  • The limits of liability available to the insured.
  • Whether the cause of the loss is due to a peril insured against.
  • Whether there are any exclusions in the policy that might apply to the situation.
  • The estimated exposure face by the insured so that appropriate reserves can be set.
  • The evaluation and settlement of the personal injury claim.
  • Whether there is a need to retain defense counsel to represent the insured.
  • Whether there is a need to retain coverage counsel to aid the insurer when a coverage issue is detected.
  • The need to control coverage counsel and defense counsel.
  • The need to evaluate the charges presented by defense and coverage counsel.
  • An evaluation of the plaintiff’s lawyer whose client is suing the insured or the insurer.
  • Dealing with personal injury defense counsel.
  • The evaluation of the injuries claimed by a plaintiff suing an insured.
  • The evaluation and settlement of the property damage claim.
  • The need for arbitration or mediation.
  • The estimated jury value of the case.
  • The estimated settlement value of the case.

Why an Excellence in Claims Handling Program?

 The answer is simple: an ability to keep all the promises made by the policy and an ability to make a profit by performing better than all other insurers.

You can become an expert in liability insurance claims by taking the course at https://www.illumeo.com/curriculum/certified-expert-corporate-liability-insurance or property insurance claims by taking the course at https://www.illumeo.com/curriculum/certified-expert-corporate-property-insurance  

 

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What Is Insurance?

 

Time To Grow Up
There is No Insurance To Avoid Hard Work

Modern students have grown up in a system where no one wins and no one loses. They get trophies for participating. Competition is discouraged if not totally eliminated.

To those who graduate from law school the lack of a participation trophy disappears. First, the law student must usually take a bar examination before being allowed to practice law. This year the state of California surprised more than 50% of the law students who took the bar examination by advising them that they failed the bar exam. They were shocked. Students from the most prestigious law schools in the country failed. After spending more than $200,000 to graduate they are prevented from practicing their chosen profession. They are allowed to take it again until they pass but there is no guarantee they will pass. One law student took the California Bar 16 times and eventually went to work for his lawyer son who was an infant the first time he took the bar.

Taking the bar exam, like practicing law, establishes that there are winners an losers. In every lawsuit one party wins and one party loses. There are no guarantees, there are no safe places, there are no participation trophies, there are only winners and losers.

Life is not safe. No one earns a living without work. No one starts work as CEO. No one is promoted to the executive suite after a week on the job. No one wakes you up to be at work on time. If your Mom or Dad wrote your papers for you they cannot, once you move into the real world, no one does your work for you. You will win if you work hard, do more than is expected of you, and make sure that you always do more, without asking the boss what is needed, that what is necessary gets done. Work is what makes people useful. Playing video games, watching television, or spending your days surfing, will do nothing for the rest of the world. If you don’t work hard, if you don’t accomplish anything, if you do nothing to make life better for everyone near and dear to you, you will lose, you will never be promoted, you will never have a successful life. You will live on the work of others.

Every lawyer knows, and explains to his or her client, that winning is not certain. That, no matter how appropriate the litigation or defense is, no matter have damning is the evidence available, no matter how hard your lawyer works, no matter how skillful is the lawyer’s ability at presenting evidence to and arguing your position to a judge or jury, you can lose. That lawyer also knows that his opponent is making the same speech to his or her client. It is for that reason that lawyers meet to discuss settlement and recognize the only way both sides can win a lawsuit is if they settle with both unhappy with the solution.

The lesson is that every young person moving into the real world, outside the fantasy world of safe spaces in school, that nothing is certain. Be ready to find a job, any job, and do the very best you can whether you start in a McDonald’s as a french fry cook or as an associate in a major law firm, you must work to be better and more devoted than any other employee or person working in the same business.

Those of you who actually pass the bar exam recognize that you know nothing about practicing law and that for the rest of your life as a lawyer that you must continue to learn something new about the practice of law every day.

Insurance is a contract where a person promises to indemnify another against loss or damage from a contingent or unknown event as long as premium is paid to obtain the insurance. Regardless of the amount of money offered there can be no insurance preventing failure at work or that will guarantee success. Success comes to him or her who trains to do a job well, who works hard to perform that job, who works harder than anyone else, and who expects nothing other than to do the job expected and to do it better than anyone expected.

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