Claims Commandment VI
Thou Shall Document The Claims File
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Most insurance regulators, by Fair Claims Settlement Practices statutes and Regulations, 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.
Insurance company management needs the same ability to determine that the claims people are doing what they are expected to be done to keep the promises made by the insurance policy and resolve all clams fairly and in good faith.
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, and notes of every telephone conversation should be recorded in the claims file.
Because the United States is now considered to be a litigious society, every comment and note made in a claims file should be written in a form the claims professional will be willing to read aloud in a court of law to the Ladies and Gentlemen of the Jury or to an investigator for the state.
The information in the claims file must be maintained so that the claim data are accessible, legible and retrievable for examination by claims management and/or the state Department of Insurance. The claims file is also maintained 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 succeeding 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 backups 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. Insurers should save and maintain hard copy files or maintain claim files that are accessible, legible and capable of duplication to hard copy from electronic backups.
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 kept on paper. 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 to counsel and an appointed expert, 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.
(c) 2022 Barry Zalma & ClaimSchool, Inc.
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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and email@example.com.Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome.
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