Doctors cannot treat or prescribe a cure until they have diagnosed the patient's illness. Attorneys cannot defend a client until the allegations are understood. And adjusters cannot resolve claims until they have investigated and evaluated the facts.

While employee productivity is up, the amount of actual work performed is down, and the difference is technology. In the adjusting profession computers and machines do the work while employees text, tweet or monitor some i-gadget. Computers and robots may soon eliminate all employees and we can then commute to the unemployment line.

For adjusters slugging away at their claim files, the computer is a handy tool, but it all comes down to using their brains to do the nine steps of claim adjusting: Investigate, evaluate and negotiate the coverage; then investigate, evaluate and negotiate the liability; and finally investigate, evaluate and negotiate the damages. Sometimes it is necessary to ascertain what kind of damage has occurred before coverage can be fully evaluated or negotiated. That is what we do, and we must do it in that order.

Liability needs to be evaluated and negotiated in every claim, providing there is coverage. If there isn't any coverage, steps four through nine are moot. These steps must be taken one by one, or we will end up waiving contractual or legal rights and being estopped from what we need to do. Failure to follow those nine steps is like a doctor who writes prescriptions before examining or diagnosing the patient.

Some adjuster may say, “Wait, we don't 'negotiate' coverage! Why is that step number three?” Of the hundreds of insurance lawsuits filed annually, a vast number are because of the failure to resolve coverage issues. If a lack of coverage is suspected, the insurer will usually issue a reservation of rights letter until any coverage issues are resolved. Once that letter is issued and the insured is on notice, the adjuster has to resolve the issue, either by accepting coverage for the claim, denying coverage with an explanation of why the policy doesn't apply, filing for the court's declaratory judgment, or reaching some agreement with the insured on what will and will not be covered, perhaps while defending the entire matter.

Coverage must be evaluated (step two) and negotiated, disposed of or resolved before steps four through nine can continue. If an insurer starts seriously investigating liability or damages before issuing that reservation of rights letter, the result may be waiver and estoppel. Even though some investigation of liability or damages may be necessary as part of the coverage investigation, once any doubt about coverage arises, the adjuster must stop immediately and reserve the insurer's rights or enter a non-waiver agreement. Failure to do so is malpractice.

Too many files, too few adjusters

Too many adjusters have a desk piled high with work that never seems to go down. Each morning they plan to start at the top and work down until the desk is clear, but soon new claims are assigned and they are hopelessly bogged down. Good insurers hire enough qualified and well-educated adjusters so that files don't pile up. Ultimately, that is far cheaper than just “processing” claims, where overpayments and errors are common and denials end up in expensive litigation. Inefficient insurers simply train someone to process files.

Periodically, firms such as J.D. Power and Consumer Reports survey insureds' satisfaction with their insurance companies. For decades, the same insurers (or reciprocal exchanges) are always at the top of the list for both Auto and Homeowners claims, and some are always at the bottom. Why? It is not always the companies that advertise on television that are the best. The answer is service. Good insurers are good organizers — even in catastrophes — while others are disorganized, and that is a real catastrophe.

Special Reports /

For adjusters, disorganization means more than a cluttered desk

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