Each issue, Claims CE will provide several continuing education-based questions designed to test claim professionals on their knowledge of a particular topic. This is in an effort to help educate and inform adjusters and supervisors on appropriate claim-handling techniques. For our inaugural issue, we take a look at Ethics.
The question-and-answer format is meant to be general in nature and does not necessarily account for the differences in law and practice in different venues. The authors of this question-answer column are not attorneys; content should not be construed as legal advice for the unique circumstances of any particular claim.
Question #1
An insured with an extensive criminal record turns in a claim just after policy inception. The adjuster has suspicions that the claim may have occurred before the policy period. However, the evidence is inconclusive at the current stage of her investigation. While discussing the claim, the insured laments that he does not have business interruption coverage on his policy. The adjuster notices that this coverage was, in fact, included in the policy and that the claimant has misread his declarations page. The adjuster should:
a. Advise the insured about the proper coverage if asked directly, but otherwise remain silent. The insured is responsible for checking his own declarations page.
b. Advise the insured about the proper coverage if asked directly, but otherwise remain silent. The suspicious factors surrounding the loss provide a legitimate qualification to the fiduciary duties of an adjuster.
c. Inform the insured about the available coverage only after the investigation is complete and fraud is definitively ruled out.
d. Advise the insured about the available coverage immediately, regardless of whether further investigation may or may not reveal fraudulent activity on the part of the insured.
Answer and explanation
The best answer is "d." It is an adjuster's responsibility to explain and clarify available coverages to an insured. If fraud is a legitimate potential coverage defense for the insurer, the adjuster should communicate this to the insured in an appropriate manner, usually in the form of a non-waiver agreement or reservation-of-rights letter.
Question #2
A partner in what is commonly thought to be a "personal injury mill" is handling an injury claim for an automobile passenger who was involved in a 5-mph accident. The attorney appears to be unaware that the statute of limitations will runs in less than two days. The adjuster should:
a. Not advise the attorney of the date that the statute runs because the adjuster has no duty to keep a claimant's attorney apprised of such basic legal issues.
b. Not advise the attorney of the date that the statute runs because the claim may be fraudulent and having the statute of limitations run would likely be "just desserts" for the claimant.
c. Advise the attorney of the date that the statute runs so that his client will have every available remedy under the law.
d. Let the statute of limitations run, and then afterwards let the claimant know that he may have a malpractice claim against his attorney for failure to protect his rights.
Answer and explanation:
The best answer is most likely "a." Although it is typically appropriate to notify an unrepresented claimant about the statute of limitations, it is an attorney's responsibility to advise his own client about the best way to pursue a claim. Attempting to "punish" a claimant would not be an appropriate motive for an adjuster. Giving advice to a claimant about potential legal malpractice would be outside the scope of an adjuster's role.
Question #3
Due to a significant decline in profitability, the chief operating officer of a commercial insurance company has directed the claim staff to offer "first-and-final" bodily injury settlement offers that are approximately 50 percent of what would likely be recovered in a lawsuit. The COO has reasoned that "if we go out of business, we won't be any good to anyone — and the average injury settlements are too high in this state, anyway." A claim adjuster working for this company should:
a. Ignore the COO and settle claims according to his own conscience.
b. Outwardly assent to the directions of the COO, but actually attempt to settle in a fair manner. Log notes could be left "sparse" to safely walk a middle ground.
c. Draw the COO's attention to the unfair claim settlement practices laws of the state in hopes that the protocol will change.
d. Resign and look for a new company that handles claims in a more ethically responsible manner.
Answer and explanation:
The best answer would likely be "c." Due to the complicated nature of this dilemma, further information may be necessary to make the most appropriate decision. The highest ethical path would likely be to seek to change the company's settlement practice from within, and to only find new employment if such efforts were fruitless. Flatly refusing to follow a corporate directive could possibly be appropriate, but it is not as ethical as seeking to help change an unfair business practice that would affect a large number of people. Whatever the particular considerations, it is clear that offering significantly less than a reasonable amount for a claim is not in line with fair settlement practices.
Question #4
An attorney becomes verbally abusive with an adjuster. His behavior degenerates to the point that he demeans the adjuster's professionalism, accuses her of being racially discriminatory, and uses foul and profane language during settlement negotiations. The adjuster should:
a. Hang up the phone and await suit papers. Fair settlement practices do not necessitate the endurance of such abuse.
b. Extend her "top offer," ask that the attorney never call again, and then disconnect the call. In this way, no more negotiations or contact with the attorney are necessary.
c. Insist that all future correspondence regarding settlement be done via mail. The adjuster should then follow up the call with a letter explaining her position and reiterating her last offer.
d. Encourage the attorney to seek a higher level of professionalism by refusing to extend any more offers. In this way, counsel may learn that being abusive does not always bring about the desired result.
Answer and explanation
The best answer to this question is "c." It is fortunate that this type of scenario is rare; however, I have come across something similar during the course of my career. My claim manager at the time wisely told the handling adjuster to continue to attempt to settle the claim but to insist that all correspondence be done in written form. This enabled negotiations to continue so that a lawsuit was avoided, the attorney's tactics did not result in an inflated claim settlement, the claimant was still treated fairly (despite his own counsel's unprofessional tactics), and the policyholder was properly protected.
Barrett Evans, CPCU, AIC, is a regional claims manager with Insurance House out of Winston-Salem, NC. He is a certified North Carolina Property and Liability CE Instructor and has a Master of Divinity degree.
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