Although the Atlantic hurricane season doesn't officially begin until June 1, disaster season is well underway, producing storms of terrifying magnitude. The two-mile-wide tornado that tore through Moore outside of Oklahoma City on May 20, 2013 claimed at least 24 lives. For adjusters, the scene is eerily familiar. Roughly two years ago, a powerful EF5 twister ripped through Joplin, Missouri, killing 161 people.
Amid the debris and wreckage, claims adjusters must help policyholders piece their lives back together, which can be an emotionally jarring and complicated process. Without handling claims stemming from catastrophes skillfully, insurers can find themselves bombarded with accusations, not to mention plenty of bad press. That’s why it is imperative to continually refine practices while cultivating a culture of “good faith” at your claims organization.
What is the trap you see insurers fall into most often in the realm of bad faith litigation?
One of the most common things is that you have claims staff who are extremely busy and may not document everything or every conversation they might have had with an insured. They say, “I know I did this,” but it’s not documented in the files. So you’ve been set up, saying “This is in your procedure: You document every conversation you have with the insured, the insureds lawyer?” “Yes.” “Well, you’re saying you had a conversation with the lawyers. Is that important to document?” “Yes, absolutely.” “Where is it in your file?” “Well, it’s not there, but I know I did it.” You’re setting yourself up for a classic trap. It doesn’t mean you didn’t do it, but you have to agree that the golden rule is that if it was not documented it wasn’t done. So then you’re saying you violated the golden rule. To some extent it’s the claim adjuster’s file that goes on trial.
How can claims managers create a culture of adherence to best practices at their respective organizations?
First is training—both in-house and through organizations that provide seminars. This also applies to having your lawyers come in and do presentations to the claims department. Often claims departments are handling several states, or a dozen states, and you have to know the laws. What are your obligations? What is the statute of limitations? Each state has a little variation as to the requirements. [Discerning statutes] therefore becomes a difficult task for the individual claims handler. You must be acutely aware and train them to: 1) be aware of the different regulations and laws in each state; and 2) be sensitive enough to go to your in-house counsel and say, “Help me out here.” In addition, claims departments must be willing to spend the money to ensure their staff is properly trained.
It becomes a question of who didn’t explain what. As for the agent’s role in all of this? Well, this highlights the importance of communication both before and after the claim. This includes the agent thoroughly explaining what the policy covers so that insureds fully understand what the limits are.
As I said before, the laws and court decisions are state-specific. But the good practices, regardless of what’s going on it each individual state, is what will allow insurers to overcome, regardless of where the case law is going.