each party’s negligence, even 1 percent,
must be factored into the settlement) for
any type of loss the adjuster must make
a calculation of each party’s contribution
to the totality of the loss. Contributory
negligence (especially in a so-called “joint
and several” liability state) must seek out
every contributing factor and party in a
loss, and apportion that negligence into
This cannot be done without imagination. Imagine a multi-car intersection accident where none of the witnesses agree
as to what happened and none of the drivers will admit fault. Third parties don’t
have to, although insureds must be honest
with their own insurer’s adjuster. The adjuster must figure out this mayhem.
Thousands of dollars depend on his or
her getting it right, but if the adjuster can’t
come up with the solid evidence showing
who did what, it is likely that expensive
litigation may ensue. These used to be
called “jury issues,” because if the adjuster didn’t figure it out, a jury somewhere
would. The last thing an adjuster wants is
to ask a jury or judge to decide.
An adjuster without the intellect, intelligence, information and the imagination
to put it all together and determine the
proper allocations cannot indemnify in
the fair and equitable manner required.
There are those who believe that all of the
factors can be fed into some computer and
the software will pour out the absolutely
correct answer. Perhaps in a few decades
that’s the way claims will be analyzed.
There will be no need for human adjusters
then. The computers will do it all, including calculation of the adjuster’s unemployment check. But will it be ethical?
Ken Brownlee, CPCU, is a former adjuster
and risk manager based in Atlanta, Ga. He
now authors and edits claims-adjusting
textbooks. Opinions expressed are the
Imagination and Indemnity
Logically, for an insurance company and its representatives to be ethical, they must believe in and practice the principle of indemnification.
That is what insurance is all about: restoring to wholeness the first- or third-party
person(s) who has suffered a loss covered
within the policy contract.
“To make whole” those who have suffered loss is not always possible; the adjuster cannot restore a family member
killed in an auto accident, or redeem a
home blown or washed away in a storm or
destroyed in a fire. These are gone forever,
but within the terms of the policy contract, the adjuster’s ethical duty is to come
as close to the principle of indemnification as possible.
However, indemnification has a reverse
side; the insured has paid a premium, but
the contract he or she receives is condi-
tional and limited. There is often a deduct-
ible, or the policy covers only “actual cash
value,” hence depreciation and betterment
must be considered. In liability, there
will be a dollar limit, and comparative
(or contributory) negligence of any third
party must be considered. How can an ad-
juster keep all of these factors in mind and
achieve true “indemnification”? A settle-
ment by the Unfair Claims Practices Acts,
must be “fair and equitable” when liabil-
ity is “reasonably clear.” It must be fair to
both sides, the insurer and the insured or
third-party claimant. Overpayment and
underpayment are not indemnification.
As a claims manager I was often amazed
at how little imagination (or ingenuity)
many adjusters displayed. Many seemed
to see their role as if they were a human
computer. Some property adjusters “knew
the price of everything and the value of
nothing!” Many liability adjusters seemed
to lack any empathy at all with an injured
insured or claimant. Where was their
humanity? Sure, “total losses” were easy.
“Here’s the check for your policy limits.
Good-bye.” Is it any wonder people hate
Very few states retain the “
contributory negligence” rule in tort claims. Most
states recognize “comparative negligence,”
either on a pure or modified basis. Previously under the first, any negligence by
the third party totally barred a claim. But
under the new rules (where contributing negligence over 50 percent may bar
a claim in a modified negligence state, or
Editor’s Note: This is the third article in a six-part series on adjuster ethics.