Editor's Note: This is the second article in a six-partseries on adjuster ethics. Read Part 1: For adjuster ethics, the “I's” haveit!

While none of them are dumb, the Central Intelligence Agencydoes not select their operatives solely on the basis of IQ. Lots ofsuper-smart people have little common sense and would make terriblespies. The CIA isn't about “intelligence quotient,” it's aboutinformation. Intelligence is needed to obtain, evaluate and actupon information, but the key is accuracy. Bad intelligence getspeople killed or insurers sued.

The same is true for claims adjusters. We may be super smart, an A+graduate, or we may be an intellectual drop-out. It is how we gather the information about theclaims we are assigned that determines if the settlement or denialwill be ethical. Information needed for a claim can involvecoverage, liability or damages. Each of these must first beinvestigated, then evaluated, and finally negotiated orresolved.

First must be the investigation of coverage. Does “the who,where, when, why, what and how much” of the claim match the policy?If not, liability doesn't matter, nor do damages. Liability mayresult from a tort or a contract or a statute. If there is noliability, then there is no claim. It's a simple formula, butlawsuit after lawsuit across the nation involving insurancecompanies shows that getting it right isn't easy. In reviewingcourt cases, some situations seemed so obvious one wonders whyeither a proper denial was not negotiated, or why the insurerrefused to pay.

Assumption and trust

In auditing claim files one often reads, “The agent confirmedthat there was coverage.” Really? Was that the agent'sresponsibility? Perhaps the agent confirmed that a policy was ineffect, but that does not confirm that the coverage applies to theclaim at hand. That must be investigated, evaluated and evennegotiated by the adjuster. Adjusters cannot trust someone else'sword on coverage, and cannot “assume” that coverage applies withoutinvestigation. The same is true for liability, regardless of thetype involved. Both personal and commercial insurance policies arecomplex and confusing.

Anyone studying them for years may still have to look at thepolicy itself to see what is and is not covered. Consider aconstruction claim involving some form of general liabilitycoverage which may or may not be applicable to the owner, thedeveloper, general contractor, subcontractors, suppliers or eventhe architect. Subcontractor A's employee injures subcontractor B'semployee. There may be workers compensation, but chances are B'semployee will involve a lawyer and the owner, architect, developer,the general contractor and their spouses will be sued. It's theadjuster's job to figure out who's covered and who isn't.

Related: Is that claim covered?

(Photo: Bigstock)

No easy answers

“A” owns a truck which he rents to “B,” who loans it to “C” fora specific purpose, and “C” injures “D “while using the truck forreasons other than that for which “B” loaned it to him. Can you“assume” that “A's” coverage applies?

Joe leases a house from Sam. Unknown to Sam, Joe sublets abedroom to Bill, who is a smoker. Bill accidently sets Joe's houseon fire. Joe has a Dwelling policy. Does the adjuster need toreview the rental agreement?

John and Jane Smith live in a wooded canyon; a wildfire spreadsand the Smiths and their neighbors are ordered to evacuate. They goto a hotel at $200 a night, but it takes six weeks for the firedepartment to get control of the fire. The Smith neighborhood wasundamaged. Will the insurer pay for the additional living expenseunder the “governmental action” clause in Smith's policy? Theanswer may depend on whether the state of origin recognizes the“efficient proximate cause” rule in insurance, or theinterpretation of the “Civil Authority Prohibits Use” clause.

It takes intelligent investigation of all the factors ofcoverage, liability and damages to determine the correct answers.It ethically requires accurate information.

Ken Brownlee, CPCU, is a former adjuster and risk managerbased in Atlanta, Ga. He now authors and edits claims-adjustingtextbooks. Opinions expressed are the author's.