Insurance Policies Make Promises to Insureds
The essence of every insurance policy is the promises made by the insurer to the insured to indemnify the insured against losses causing damage to the insured by a contingent or unknown event. How those promises are kept rely on the work of the people that make up an insurer’s claims personnel. Who they are and how they help the insurer keep its promises is important to every person or entity insured and to every insurer.
The Claims Personnel
The Claims Adjuster
The claims adjuster is the contact between the insured and the insurer. He or she can be an employee of the insurer, or an independent contractor retained by the insurer to investigate and adjust insurance claims on its behalf. The adjuster must explain to the insured:
- the coverages available to the insured under the policy;
- the duties of the insured after a loss:
– to protect the property from further loss;
– if a crime has occurred, to report the loss to the appropriate police agency;
– to present documents that support the amount of the loss;
– to provide assistance and cooperation to the insurer so it can complete its investigation;
– to appear and testify at examination under oath if the insurer requires; and
– to present proof to the insurer about the extent of the loss in a sworn document.
- that the property belongs to the insured and that the insurer can only indemnify, that is, pay money to the insured to replace the property loss, but cannot repair or replace the property for the insured.
The adjuster will also investigate the loss on behalf of the insurer, review the policy wording to establish that the loss was due to a peril or risk of loss insured against, and investigate to determine if some third person is responsible for the loss who can contribute or pay all of the loss directly to the insured.
The adjuster usually has a great deal of experience responding to damage caused by fire, lightning, windstorm, hail, flood, earthquake, and other destructive events. If asked, the claims adjuster will recommend to the insured various reconstruction contractors, salvors, inventory specialists, accountants, or other professionals to assist the insured to prepare the evidence necessary to prove his or her loss and file a claim that will be accepted by the insurer.
The claims adjuster is empowered by the insurer to negotiate a settlement with the insured. He or she will “adjust” the loss, since values are often subjective and difficult to establish, to a dollar figure that is agreeable to both the insurer and the insured. Adjusters are often provided with authority to resolve claims up to a certain dollar amount without gaining permission from insurer management. Losses in excess of the authority must be approved by insurer management.
Once an agreement is reached with the insured and the insurer, the claims adjuster will also assist the insured in preparing the necessary closing documents.
The Claims Investigator
Although a small part of the work of the claims adjuster is to investigate, the adjuster does many more things. Insurance companies now retain the services—either by employing them directly or by use of independent contractors—of investigators whose expertise relates exclusively to insurance claims. The experienced claims investigator is usually a part of, or vendor to, a Special Investigative Unit (SIU) set up to protect the insurer and mandated by most states as a means to reduce the amount of fraud perpetrated against insurers.
The fact that an insured is contacted by a claims investigator does not, however, mean that the insured is suspected of committing fraud. By virtue of his or her training and experience, the claims investigator is more skilled than the claims adjuster in discerning facts and evidence that can be used in a court of law if a fraud has been attempted. When a third party is making claims against the insured the claims investigator will seek the assistance of the insured to determine if the third person is attempting fraud. The claims investigator will also contact independent witnesses and work with the police authorities to see to it that a fraudulent claim is defeated.
Although the majority of suspected fraud cases claims investigators work on are perpetrated by third parties, they also handle fraudulent claims perpetrated by insureds.
The Claims Supervisor or Claims Manager
The insured presenting an average claim will resolve it with the claims adjuster who first contacts the insured after the report of the loss, usually within 40 days of presentation or report of the claim.
The insurance company claims department is set up with a hierarchy based upon the complexity and value of losses. The claims adjuster’s authority is limited, whether he or she is an employee of the insurer or a contractor. The claims supervisor has more authority to resolve claims than the adjuster and will be consulted by the claims adjuster if the loss exceeds the adjuster’s authority. The supervisor controls the work of several adjusters, drawing on his or her greater experience, education, and training.
The claims manager supervises several claims supervisors and all of the adjusters supervised by the various supervisors. He or she has the maximum authority in the office to resolve insurance claims.
In large insurance companies there are several other layers of supervision at regional and home office levels. The insured must be aware that his or her adjuster must obtain clearance to resolve the claim through the multiple levels of authority. The time needed to resolve the claim will be extended as each level of authority reports to the next.
The prudent claims adjuster advises the insured at the first meeting as to how complex the process will be, so that the delays inherent in a hierarchical business structure will not come as a surprise to the insured.
The insured may meet with an attorney representing the insurer under two circumstances:
- If the insured has been sued by a third person the insurer will retain counsel to defend the insured at the insurer’s expense. Counsel will meet with the insured and work to present the most effective defense to the suit. Insureds most often meet with claims counsel in a situation where the insured is in an automobile accident and a third party sues him or her for injuries incurred in the accident.
- If there is a problem with coverage or with the extent of the claim, if the insured retains counsel to present his or her claim, or if fraud is suspected, the insurer will retain counsel to protect its interests. Attorneys who represent insurers in such situations are often referred to as “Coverage Counsel.” Coverage Counsel will usually deal with the insured’s attorney. The insured may meet with Coverage Counsel if an examination under oath is demanded by the insurer. In that case the insured must, as a condition of the insurance, appear before claims counsel and give sworn testimony.
This article adapted from
A Comprehensive Review of the law and Practicalities of Property, Casualty and Liability Insurance Claims
In this first volume the book covers:
- What is insurance?
- The History of insurance.
- Lloyd’s of London.
- Acquisition of the policy.
- Claims personnel
- Differences between Property and Liability Policies.
- Analysis of the policy.
- The standard mortgage clause.
- The Liability Policy.
- Additional Insureds.
Read about this and other insurance books by Barry Zalma at http://zalma.com/zalma-books/