Coverage must be evaluated (step two)
and negotiated, disposed of or resolved
before steps four through nine can continue. If an insurer starts seriously investigating liability or damages before issuing
that reservation of rights letter, the result
may be waiver and estoppel. Even though
some investigation of liability or damages
may be necessary as part of the coverage
investigation, once any doubt about coverage arises, the adjuster must stop immediately and reserve the insurer’s rights
or enter a non-waiver agreement. Failure
to do so is malpractice.
Too many files, too few adjusters
Too many adjusters have a desk piled high
with work that never seems to go down.
Each morning they plan to start at the top
and work down until the desk is clear, but
soon new claims are assigned and they are
hopelessly bogged down. Good insurers
hire enough qualified and well-educated
adjusters so that files don’t pile up. Ultimately, that is far cheaper than just “
processing” claims, where overpayments and
errors are common and denials end up in
expensive litigation. Inefficient insurers
simply train someone to process files.
Periodically, firms like J.D. Power and
Consumer Reports survey insureds’ satisfaction with their insurance companies.
For decades the same insurers (or reciprocal exchanges) are always at the top of the
list for both auto and homeowner claims,
and some are always at the bottom. Why?
It is not always the companies that advertise on television that are the best. The
answer is service. Good insurers are good
organizers — even in catastrophes —
while others are disorganized, and that is
a real catastrophe.
Ken Brownlee, CPCU, is a former
adjuster and risk manager based
in Atlanta, Ga. He now authors and
edits claims-adjusting textbooks.
for Adjusters — Part 4
Disorganization means more than a cluttered desk
Doctors cannot treat or prescribe a cure until they have diag- nosed the patient’s illness. At- torneys cannot defend a client
until the allegations are understood. And
adjusters cannot resolve claims until they
have investigated and evaluated the facts.
While employee productivity is up,
the amount of actual work performed is
down, and the difference is technology. In
the adjusting profession computers and
machines do the work while employees
text, tweet or monitor some i-gadget.
Computers and robots may soon eliminate
all employees and we can then commute to
the unemployment line.
For adjusters slugging away at their
claim files, the computer is a handy tool,
but it all comes down to using their brains
to do the nine steps of claim adjusting:
Investigate, evaluate and negotiate the
coverage; then investigate, evaluate and
negotiate the liability; and finally investigate, evaluate and negotiate the damages.
Sometimes it is necessary to ascertain
what kind of damage has occurred before
coverage can be fully evaluated or negotiated. That is what we do, and we must do
it in that order.
Liability needs to be evaluated and negotiated in every claim, providing there
is coverage. If there isn’t any coverage,
steps four through nine are moot. These
steps must be taken one by one, or we will
end up like the adjuster in Mrs. Cadillac’s
case, waiving contractual or legal rights
and being estopped from what we need
to do. Failure to follow those nine steps is
like a doctor who writes prescriptions before examining or diagnosing the patient.
Some adjuster may say, “Wait, we
don’t ‘negotiate’ coverage! Why is that
step number three?” Of the hundreds of
insurance lawsuits filed annually, a vast
number are due to the failure to resolve
coverage issues. If a lack of coverage is
suspected, the insurer will usually issue a
reservation of rights letter until any coverage issues are resolved. Once that letter
is issued and the insured is on notice, the
adjuster has to resolve the issue, either by
accepting coverage for the claim, denying
coverage with an explanation of why the
policy doesn’t apply, filing for the court’s
declaratory judgment, or reaching some
agreement with the insured on what will
and will not be covered, perhaps while defending the entire matter.