Claims professionals are the pri- mary point of contact between insurers and their policyhold- ers. For many, adjusters represent the insurers for whom they work and
their performance is under scrutiny now
more than ever. Even unintentional miscues can set the stage for costly extracontractual claims. It is vital that adjusters
learn to identify and avoid the hazards.
Adjusters encounter policyholders
when emotions are high, following losses
ranging from a damaged car to the death
of a loved one or the destruction of a
business. Even so, the adjusting process
usually goes smoothly and ends well.
In the rare instance where resolution
cannot be reached, either due to cov-
erage denial or disagreement over the
amount of loss, an adjuster’s conduct can
mean the difference between a normal
breach of contract claim and a statutory
claim for unfair settlement practices, ex-
posing the insurer to multiplied damages
and attorneys’ fees.
With the benefit of hindsight and an
enterprising attorney, a policyholder may
identify—and sometimes embellish—any
number of acts and omissions giving rise
to such a claim. This article outlines the
dangers of extracontractual claims, iden-tifies conduct that can give rise to them
and suggests simple preventive measures.
Unlike other segments of our economy
such as banking and healthcare, the in-
surance industry has historically been
regulated at the state level. Every state
has enacted some form of unfair settle-
ment practices legislation. While there
are material differences, the laws generally
address a range of “unfair” or “deceptive”
conduct in adjusting and settling claims,
and permit policyholders to sue directly
to recover statutory damages (e.g., treble
actual damages) and attorneys’ fees. Viola-
tions of these statutes regulating insurance
practices are generally easier to prove than
traditional (“common law”) bad-faith
claims, so they have become the favored
approach of most policyholder attorneys.
To appreciate the risk presented it’s important to understand that insurers have
a difficult time convincing courts to dismiss statutory claims before trial. This is
because statutorily prohibited conduct is
broad and often nebulous, so allegations
of such conduct usually raise fact issues
that must be resolved by juries, not by
judges ruling on pre-trial motions. This
5 Keys to Minimizing
By R. Steven DeGeorge, J.D.
Fortunately, there are simple
things adjusters can do to
minimize the possibility
of statutory claims.