Every profession has some motto and a few secrets hidden in a special place. For physicians, the ssence of the Hippocratic Oath
is “Do no harm.” Their black box is likely
a black bag with a stethoscope and other
tools. For attorneys, the motto may be
“Litigate the issue!” and the black box is
a case for briefs. We adjusters also have a
black box, but it’s most often in our head.
Our tools are the policy, other contracts,
a recorder, a camera, maybe a tape meas-
ure, a smart phone and a computer. It is
what is in that black box that gives adjust-
ers a basic understanding of what we do:
it consists of six words and our motto is:
Six words can adjust any type of claim:
property, casualty, marine or life, and
health insurance. Investigate, evaluate,
and negotiate (or resolve) are the first
three words. The next three are: Cover-
age, liability, and damages. These must be
done in the proper order: Investigate the
coverage first, and negotiate the damages
last. The contents of this little black box
will keep the adjuster out of trouble.
Until the coverage issues are investi-
gated, evaluated and resolved, one can-
not determine liability, because if there
is no coverage, liability doesn’t matter.
Obviously it is not always that simple. If a
coverage problem cannot be immediately
resolved, it may be necessary to proceed
and investigate the type of liability or the
nature of the damages under a Reservation of Rights in order to determine if
coverage applies. But that is part of the
investigation of the coverage.
Waiver and Estoppel
The fastest way for an adjuster to get into
trouble and end up paying claims not
owed is to give the impression that coverage is in order, that there is liability, and
the damages will be paid. But when it is
determined that there is no coverage or
no liability, the adjuster has made a big
“oops!” Coverage defenses are waived
and the insurer is estopped from using its
defenses. Whether liability for damages is
first-party or third-party, coverage is the
most important factor.
How many adjusters can recite, word
for word, the policy language for every
policy under which they handle a claim?
Those policies keep changing, and each
may come with endorsements or condi-
The Insurance Claims Adjuster’s ‘Black Box’
tions different from the “standard.”
There is only one way to be certain
that the coverage matches the claim
and that is to look at the claim in light
of the policy language.
Assuming that we understand the
coverage and that it will apply to the
loss, we adjusters can get ourselves
and our principals into trouble. Joe
works at the ABC Company. Joe is injured at work. A simple workers’ compensation claim is submitted and paid
— and then the adjuster learns that
Joe actually works for an independent
Mary reports a claim to her auto
insurance agent about an intersection
accident. Jim’s car was damaged and
Jim has called the insurer to see where
he can have his car repaired. The adjuster tells him where he can have his car
repaired and authorizes a rental for the
repair time. Then the police report is received and, by golly, it was Jim who was at
fault. Oops! These are simple claims, but
mistakes are easy.
Too Many Oopses!
We’ve all had “oops!” moments. Unless
someone constantly monitors our files, we
may get away with an occasional “oops,” but
if they occur too often, some day that oops
will be a disaster and our principal will end
up in court trying to explain to a judge or
jury what went wrong. The answer lies in
that black box; the adjuster forgot to open
it and look inside to see what was there. On
airliners the black box — although orange
or red — reveals mistakes that pilots may
have made that caused a crash.
The adjuster’s black box can do the
same — but it can also prevent that crashing “oops!” It’s low-tech, but it works, saving a lot of misery.
Ken Brownlee, CPCU, is a former
adjuster and risk manager based
in Atlanta, Ga. He now authors and
edits claims-adjusting textbooks.
By Ken Brownlee, CPCU