The NAIC model regulations and act were designed to ensure that the claim process was transparent, moved promptly, and reached an equitable result. All of the adopting states imposed upon carriers requirements to report to first- and, in some instances, third-party claimants as to the progress of the insurer's investigation and the date by which a resolution of the claim may be expected fulfill these goals.
Adjusters face a significant problem when they encounter a claim where there exists a suspicion that the insured either contributed to the loss or has intentionally exaggerated the estimate of damages. How does one handle the claim consistent with the policies embodied in the regulations and statutes?
Case In Point
Examples of protection are as follows: Alaska and Maryland require that insurers advise as to the status every 45 days and state the reasons why more time is needed while the investigation is in process. [3 AAC 26.070; MD ADC 31.15.07.04(B) and MD ADC 31.15.07.04(E)] However, "if there is a reasonable basis supported by specific information for suspecting that a first-party claimant has fraudulently caused or wrongfully contributed to the loss, and the basis is documented in the claim file, then this reason need not be included in the written request for additional time to complete the investigation or the written denial."
The limitation as to arson appears to leave open the question of what an adjuster should do where there is no specific evidence of incendiary origin but the lost property descriptions or valuations are very questionable.
Four states extend both the time limit for acceptance or rejection of the first-party claim and the requirement to inform the insured of the reasons for the extension if there is a "reasonable basis" to assert fraud or causation by the insured. These states are:
California extends the waivers to both first- and third-party claims; statute 10 CA ADC 2695.7(b)(1) extends the 40-day time frame for accepting or rejecting the claim to 80 days or, given undefined circumstances, indefinitely if the carrier has a "reasonable basis supported by specific information for belief that claim is false or fraudulent." Under the 10 CA ADC 2695.7(b) (2) statute, the insurer is "not required to disclose information that could be reasonably expected to alert the claimant that the subject claim is being investigated as a suspected fraudulent claim."
Additionally, Rhode Island extends the waiver of the time to complete the investigation to both first and third-party claims. [RI ADC 02 030 073]