It is a subject that plagues the claim adjuster daily: how muchis pain worth? This is, surprisingly, an ancient issue, one thathangs heavily over 21st century C.E. as well as the 21st centuryB.C.E. — 4,000 years ago. It affects the financial industry,including those Wall Street millionaires who made big bucks“advising” investors to stick their money in ventures that advisorsshould've known were not up to snuff.

Does all of the pain or damage that the insured or claimantalleges really exist? Is the value being assigned realistic? Howmuch depreciation is fair? How can the policy language be used tomake things turn out better for the insurer than the insured? Whatis “dishonest,” and what constitutes sharp business practices?

“A legal obligation is not the same as a moral obligation,”wrote Raymond Westbrook in his article, “Good as His Word,” in theMay-June, 2009 issue of Biblical Archaeology Review.“There is a formality in the law, especially the law of contractsthat sets it apart from the dictates of justice.”

Shepherding Contracts

Westbrook's article explains a basic law of contracts in timespast that remain, in many ways, bedrock legal standing even intoday's world of contracts and negotiation. One aspect hereferences is the “shepherding agreements” that impact so manyBiblical and other ancient and modern stories. These agreements arefound throughout history, including in common Middle Easternpractices that many Americans find confusing and puzzling as we tryto comprehend what is happening in that region. In a shepherdingagreement, one party makes a promise to another party, and ishonor-bound to keep the promise, even if it ultimately leads tosomething that might otherwise seem illegal or dishonest.

Writing for what is basically a publication tailored to Biblicalhistorians and archaeologists, Westbrook cites the stories inGenesis about Jacob, whose name was better known asIsrael. He was the patriarch of the 12 tribes to which modernIsrael traces its roots. The article also cites the 500 B.C.E Codeof Hammurabi, King of Babylon (modern Iraq), which states, “Ifanyone hire a herdsman for cattle or sheep, [then] he shall pay himeight gur of corn per annum.” However, “if he kill[s] the cattle orsheep that were given to him, [then] he shall compensate the ownerwith cattle for cattle and sheep for sheep.”

The shepherding contracts, however, had a caveat that if thecattle or sheep were killed by a lion or bear, then the hiredshepherd would not be liable. Further, the shepherd was liableonly for the number of sheep or cattle entrusted to him —meaning that if the herd grew by new births during the term of thecontract, then the new sheep or cattle belonged to the hiredshepherd.

To some degree, this explains various verses in Psalm 23, wherethe sheep are led to green pastures, avoiding rushing water thatwould frighten the sheep. Further, the sheep were to be kept on theauthorized pathways. If they strayed onto someone else's land, thenthose sheep could be captured and kept by the other owner. Theshepherd had to ensure that the pasture or meadow where the sheepwould graze was free of poisonous plants or serpents that couldharm or kill the sheep. This person's duty was to protect the sheepfrom wolves, who often would attack when sheep were passing througha narrow valley.

Jacob and His Brother

Many are familiar with the phrase, “he sold his soul for a messof potage.” Although Jacob and his brother, Esau, were twins, Esauhad been born first and was therefore the rightful heir under thelaw. Tired and hungry, Esau came in from the fields one day, andJacob tricked him into giving up his birthright in exchange for astew. Esau, like so many moderns, placed current needs andpleasures ahead of any long-term benefits, which, at the time, hemay have seen as having little value.

Jacob needed to have the deal consummated. Otherwise, it mightnot be deemed valid. His father, Isaac, was blind, and when hecalled his son Esau to give him his blessing and birthright, Jacobtook Esau's place, fooling his father and even wearing a sheepskinto mislead the old man. Was the deal legal? It had been planned byJacob's mother, Rebecca, who assisted in the deception. Thecontract was not in writing, as it was a verbal agreement. WithIsaac's blessing, however, the deal was made legal, though perhapsnot ethical. Jacob, not his brother, inherited the birthright.

Jacob was himself trapped in another “bait and switch” schemedreamt up by his future father-in-law, his Uncle Laban. Jacobtended Laban's sheep, and Laban agreed with Jacob that if he woulddo so for seven years, then Jacob could marry Laban's beautifuldaughter, Rachel. On the wedding night when Jacob was alreadyinside his darkened tent awaiting his bride, Laban instead sent inhis older daughter, Leah. Jacob did not discover until the morningthat he had consummated the wedding with the wrong sister. Buthonor made Leah his wife, so Jacob agreed to work for Laban anotherseven years so he could also marry Rachel.

“Bait and switch” is a similar modern version of selling one'ssoul for something of little value. It's done all the time. Unlesssomeone complains, merchants get away with it. My grocery chainsends me great coupons for products that are either unavailable orcost far more than the store brand. I once bought a willow tree ata nursery. The tree was tagged with a price that was far below thatof other willow trees in the row of trees where it sat in its pot.True, it was a bit scrawnier than the others, but the value wasprobably far more than what the tag indicated. When I took it tothe check-out in the nursery's cart, the salesman said the pricecouldn't be right. He called the manager, who agreed that the tagwas obviously wrong. The tree should have cost at least twice asmuch. But the tag listed a certain price, and it was the kind oftag that I could not have “exchanged” from something else. Thus, Iinsisted to purchase the tree for the price printed on the tag andwent home with the tree for that price.

Was this justified? The tree was obviously worth more than Ipaid, even though I paid the price listed on the tree. Although mypurchase was certainly legal, was it ethical? Was it moral? Had Icheated the nursery for what was obviously its mistake? We whobecome the embodiment of the insurance policy contract are oftenplaced in similar situations. Thousands of times we have calledupon the courts to define policy wording. If the court finds thewording clear, then it means what the policy says. However, if thecourt finds that the meaning is ambiguous or misleading, then thecourt will rule against the insurer and for the policyholder.

Changing the Wording

Court decisions have often led insurers to change their policywording or add exclusions. For example, the issues surroundingwhether computer data was “tangible” led to the addition in a CGLproperty damage definition of the phrase, “for the purposes of thisinsurance, electronic data is not tangible property.” Thedefinition then continues with a definition of what is considered“electronic data.” It is like two medieval monks arguing about howmany angels can dance on the head of a pin.

The ambiguity issue is not new. This column has spoken of thisbefore, and the story is repeated in the sidebar, The Flipsideof Ambiguity, for any new readers who may be unaware ofGybbons v. Martin.

Deals and laws are rarely verbal in the 21st century.Legislatures make the rules as complex as possible, and oftencourts must interpret them. For example, within one Georgia County,speeding fines may range from $60 to $200, depending on thejurisdiction. It may seem unfair that if the speeder happened to becaught on one side of the city line then he would pay only $60, butif caught on the other, he would have to pay $200. Is this just? Isit ethical? Perhaps a court ruling will dictate the answer to thosequestions.

Adjusters are faced with similar situations. The laws of thevarious states — and often even within various circuits of the samestate — differ greatly in how laws, policies, and claims areinterpreted. Adjusters are supposed to know all those differencesand apply them to each and every case. That is a tough requirement.How simple it must have been in times past when one person wouldagree with another, shake hands on it, and uphold the bargainregardless of circumstances.

Ken Brownlee, CPCU, is a former adjuster andrisk manager based in Atlanta, Ga. He now authors and editsclaim-adjusting textbooks.