The latest “Question Of Ethics” we posed to readers of National Underwriter involved an insured calling to report a loss that appears to be questionable. What are the ethical responsibilities of an agent for this type of claim? Do the responsibilities differ if the producer is a broker?

There were no differences noted for agents and brokers if the questionability of the claim related to coverage.

However, there were differing opinions as to how to handle a claim if it appears the claim is questionable because of fraud.

In general, differences in responses to the first question can be summarized as follows. The producer should:

o Report the claim only.

o Report the claim and note the specific factual information about the claim that the agent has.

o Report the claim and note any information or suspicions held by the agent.

For questionable claims from a coverage standpoint, all responding believed the ethical obligation was to report the claim.

The vast majority also suggested it was ethical to pass on whatever factual information the agent had relative to the claim. “Full disclosure of claim facts is necessary,” said an Indiana E&S broker. No one thought it was ethical to give the insured an opinion that the claim was either covered or not covered.

Most differences among the questionable coverage replies related to whether the producer was an agent or a broker. While both agents and brokers should report claims with questionable coverage to the company, the issues were whether or not additional information should be given the company and what the role of the producer during the claim adjustment process should be.

Generally, most responding suggested a coverage advocacy role for a broker, but no one suggested that an agent advocate coverage when reporting a claim.

An Ohio account executive noted both agents and brokers have the duty to report all relevant facts.

An Oklahoma producer said: “Agents must report the claim in any event–it's your duty. And, provide what information you have. The same holds true for a broker. A broker can advocate coverage, but not at the expense of his or her ethics.”

A New York producer said a broker should “be an advocate for coverage by presenting a logical theory of coverage on behalf of the insured.”

It was universally noted that agents of insurance companies–with a contractual obligation to accept notice of loss–must pass any notice submitted by an insured on to the insurer. The logic was that a contract is a legal document, and professionals have an ethical responsibility to act within the law. Therefore, report the claim.

An Illinois producer put it this way: “As a company agent, we are ethically and contractually bound to report the claim.”

An Indiana attorney wrote, “If you are an agent of an insurance company, it is your duty to report not only the claim, but also the circumstances of the claim.”

A trainer in Missouri suggested the agent be “committedly non-committal” to the insured. “Tell the insured the adjuster will look at the facts of the loss and determine coverage under the applicable contract. If necessary, read the relevant language to the insured, but let the insured come to his or her own conclusion.”

The New York producer said: “My job is to report the claim. The company's job is to accept it or reject it.”

Another agent simply said, “Unless you know it is a 100 percent fraud, report the claim and let the adjusters do their job.”

An Arizona underwriter replied: “All policies require quick notice of loss. An agent must report a loss notice he or she has received–especially if it relates to a bodily injury claim.”

A New York producer put it this way: “Give the claim to the insurer and let the chips fall where they may. Don't get in the middle of any questionable claim.”

Most comments on the question of reporting a questionable claim related to assumptions that the claim was fraudulent or suspicious. Under that assumption, all respondents still believed an agent must report the claim, and most still noted the need to provide all relevant factual information when reporting the claim.

Most responding also added other ethical tips.

The Arizona underwriter believes all insurance professionals must respond in this situation with all relevant facts, beliefs and feelings. “If you are ethical, you represent the whole insurance industry and all that it should represent,” he said, suggesting that the producer also request “special” claim handling on a suspicious claim.

Many respondents identified legal requirements in their states affecting their behavior with a suspicious claim. “In New York, agents and brokers must report fraud,” wrote one New York producer. “Talk with the police or other appropriate law enforcement official,” wrote the Ohio account executive.

A Maryland producer suggested that the producer attempt to find, to the best of his or her ability, if the claim is fraudulent. If the belief is that fraud is involved, “tell the insured the claim may not be supportable and explain the consequences of fraud.”

This producer, if pressed by the insured to report a fraudulent claim, would (1) refuse, (2) give the insured the information necessary to report the claim directly to the insurer, and (3) get rid of the insured.

One of the New York producers warned against counseling the insured not to file a claim. If the producer's suspicions of fraud are incorrect, “counseling not to file the claim could blow up in my face later as more facts become known.” The suggestion instead was to let the insured file the claim directly.

A Georgia consultant also suggested counseling the insured of the penalties for fraud if the claim was believed to be fraudulent.

A Florida agent agreed, but added that he would also explain to the insured exactly why the claim appears to be suspicious.

An Ohio claims executive believed the ethical approach for both agents and brokers with a suspicious claim is to not only counsel the insured as to the consequences of filing a fraudulent claim, but also tell the insured that if requested, the claim would be reported and that the producer will disclose all information about the claim.

The Illinois producer believed a broker should do the same thing an agent should do, and that it made no difference whether the claim was suspicious or not. “Report the claim if requested.”

The Indiana attorney revealed why he believed a professional producer to whom a fraudulent claim was reported should not be overly concerned with also reporting the known facts to the company. A summary of his opinion begins with the fact that a professional always acts in the best interests of the client.

However, with agents and brokers the potential for dual representation exists and is well known in the business. Therefore, both an insured and the company should know that a producer will not always act solely in the interests of each.

Both agents and brokers need trusting relationships with insurers. Insureds come to agents and brokers because of the producer's relationships with insurers. Insureds should respect and acknowledge that all producers must deal honestly with insurance companies. That would include reporting all known and relevant facts about a suspicious claim.

One respondent was from outside the insurance business. A real estate developer and manager from the Northeast offered his advice for agents and brokers with a clearly suspicious claim: “If fraudulent, do not assist with the claim in any manner.” He also suggested advocating for the insured if the claim was questionable as to coverage.

In summary:

o Ethically, both a broker and an agent must report claims that are questionable as to coverage to the insurer.

o Brokers should also feel ethically comfortable in advocating for the insured in these situations.

o Agents should report claims that are questionable as to fraud.

o Brokers in this situation may want to consider counseling the insured as to the implications of filing a fraudulent claim.

o If the claim is clearly fraudulent, a broker may be comfortable notifying the insured that the broker will not file the claim, but, at the same time, giving the insured information so that the insured may personally file.

Special Reports /

Producers Find Themselves On The Spot When Client Submits Questionable Claim

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