In some Middle Eastern countries, “going to the wall”means using an ATM. In the U.S. and in the insurance industry, thephrase has a very different meaning.

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Our industry is based on the rock-solid foundation of good faithdealing and the inherent promise to pay that is contained in everyinsurance contract. Do you believe that as a professional insuranceproducer you have an obligation to advocate for your clients—to “goto the wall” if it appears that the element of good faith dealingor the “promise to pay” is not being honored?

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I am not talking just about your biggest and or best clients,but all your clients.

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I have written and testified multiple times on the standards andpractices required of insurance producers. However, littleattention has been given to the standards and practices required ofinsurance companies. The general standard of care expected of claimrepresentatives is that the claim investigation be reasonable,accurate and prompt. Even when in cases where a reservation ofrights letter is issued, it does not give the insurance company alicense to delay claim resolution unreasonably. With respect tofirst-party claims, the burden of proof is on the insurer and theyare expected to treat the insured's interest with the same level ofconcern as their own interest.

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Related: Read another column by Richard Mintzer“History's Lesson.”

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Have you ever wondered why most captive or independent insurancecompanies urge their producers to turn over claims to the claimdepartment and “go out and sell another policy”? Do you believethat the carrier's attempts to take over the entire claims processis part of an overall affect to better service their producers?You're right more than 90 percent of the time because somethingnorth of 90 percent of all claims are handled without a problem andthere is little or no need to get involved.

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Are you willing to go to the wall for your clients for the smallfraction of claims that turn out to be a problem claims? I believethat insurance representatives have a duty to advocate for theirclients when the carrier is taking advantage of their power andposition by not properly dealing with your clientele.

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The best defense is a good offense. Most agents realize thatproblem claims or underwriting issues that are not reasonablyresolved most often lead to litigation. Doing nothing raises thelikelihood that you and your agency will be involved in futurelitigation. On the other hand, if you can establish that you havedone your best to resolve the situation, your organization likelywill not be included when legal papers start flying.

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Questionable Issues

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In early spring 2011 an insured came home from work anddiscovered that her second vehicle was missing from the garage. Thevehicle was insured and the claim was reported promptly to both theappropriate police department and the carrier's claim department.Shortly after the theft, the vehicle was found and was a totalloss. Approximately 10 months later the carrier denied the claim,alleging a failure to cooperate in the investigation by the refusalof the insured's sometime resident son to submit to a sworninvestigation. This allegation was made even though the insured'sson is excluded from coverage by endorsement and cannot beconsidered an insured.

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Further allegations in the denial letter state that it is“questionable” as to whether false statements have been made,concealment of facts and misrepresentations have occurred and thereis a question as to whether or not the insured vehicle was drivenby an excluded driver at the time of the loss.

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The insurer's claim representative met withthe son and attained a recorded statement, in which the sonindicated that he has at least two eyewitnesses who will testifythat he was with them the night of the vehicle theft.

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This is the perfect Catch-22. On one hand if it's shown that theson was actually driving the car, the resulting damage would not becovered because he is explicitly excluded as an insured. Somehowthe carrier's twisted reasoning has determined that although it isundisputed that he is not an insured he has all of the obligationsof an insured and thus has a duty to cooperate. These allegationsdefy logic because if the insured has no obligations to the son,the son certainly has no obligations to the insurer.

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Related: Read the column “What Defines an Expert?”by Richard Mintzer.

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In addition, there are further allegations in the denial letterthat states it is “questionable” as to whether false statementshave been made, concealment of facts and misrepresentations haveoccurred and whether or not the insured vehicle was driven by anexcluded driver at the time of the loss. Speaking only for myself,I have never seen a loss declination based on “questionable”facts.

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To put things in perspective, the total value of this claim isin the low five figures. To date, I have reviewed approximately 700documents that relate to this claim, and there are approximately 50pages of notations in the carrier's activity file. The insured hassubmitted to a sworn statement and despite having no obligation todo so, the son has submitted to a recorded statement. In addition,a neighbor has testified that she saw an unknown person drive awaywith the vehicle and as mentioned earlier, two eyewitnesses havestated that the insured's son was with them at the time of theloss. Other pertinent facts include that the son's phone recordshave been supplied to the carrier at their request, and the insuredhas testified that there are only two sets of keys to thevehicle, which she had in her possession at all times andcannot be duplicated without her specific permission.

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Approximately 4 months after the date of claim, thecarrier issued a reservation of rights letter allowing them tocontinue their investigation. In addition, it appears that one ormore of the claimant representatives are taking this losspersonally. One claim representative states in the activity reportthat it is her “personal belief” that the insured's son made phonecalls that were not revealed on the phone records. Subsequent tothe reservation of rights letter, the fraud unit was called tofurther investigate the claim and subsequent to the fraud unit'sinvestigation the entire matter is turned over to outsidecounsel.

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Related: Read the article “What's in a Name” byLaura Mazucca Toops.

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Despite repeated testimony that the son no longer lives at home,a private investigator was sent to the plaintiff's home to see ifson is living there, almost 8 months after this claimoccurred.

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All responsible members of the insurance industry support full,complete and honest claim investigations; but sometimespersonalities or power plays interfere with proper insurancedelivery procedures.

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Going to the Wall

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Several times during the course of the investigation, theinsured approached her agent asking for his expert help andassistance. The agent refused each time, and it is alleged theagent finally told the insured, “I wash my hands of the entirematter.”

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Put yourself in the agent's position. Are you willing to “go tothe wall” and advocate for your client? Are you willing to pointout that it's not possible to require cooperation from a person whois not an insured? Are you willing to point out that the width andbreadth of the investigation amounts to overkill and abuse? Or areyou going to “wash your hands of the matter”? It certainly doesn'tseem to me that in this first-party claim where the burden of proofis upon the insurance company, it considers the interests of theinsured as equals to its own.

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Please keep in mind that the decision you take for yourself andyour organization may have a great bearing on whether or not yourteam is involved in any potential litigation.

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