Many decades ago, beginning adjusters often heard the phrase, "it's a jury question," meaning that the facts were not clear enough to decide if the insured was responsible for what happened or the claimant was at fault. What this really meant was that there was not yet enough information to make a correct decision and it was necessary to "go dig some more," with documentation, photos, diagrams, statements, data and details. Why? Because it is too expensive to litigate every claim.
Only when adjusters dig as deep as possible into the facts and lay them out logically in a report, will the kind of decision a judge and jury make be the result. Judges and juries don't always get it right, and neither will adjusters. But if enough research has occurred, the odds for correct decisions increase. If an allegation of coverage, liability, damage or injury is not valid, a wrong decision to settle will be expensive. But a wrong decision to deny a valid claim will be even more expensive if it results in litigation.
What is Litigation?
While a majority of small claims may simply be processed if the facts are reasonably clear, it is the serious claim that may trigger litigation. It may be a dispute over whether the policy applies to the loss, requiring a court's declaratory relief judgment; a dispute of fault; or how much the damage or injury or lost lives are worth. These issues reach courthouses daily, and adjusters are responsible for managing the litigation. There is an eight-corners rule: the four corners of the lawsuit must match the four corners of the insurance policy that applies.
In first-party claims, litigation most often involves whether coverage applies to the loss or how much covered damage resulted. There is enough of this litigation (or "appraisal," a form of arbitration required in some first-party coverages) that insurers want to be sure that the adjuster is absolutely correct before saying "No!"
Frequently in third-party lawsuits, both the claims industry and the insureds fail to understand what is called the "tripartite relationship." With very few exceptions (such as indemnification policies or "consent to settle" forms), it is the insurance company that must defend and/or pay on their insured's behalf up to the policy limits. The insurer may elect to settle or defend as it alone decides, even if payment is entirely within a commercial insured's deductible.
The adjuster must select the defense counsel best suited for the lawsuit and make the decision whether to continue with the litigation or settle the claim. Timing is crucial; if the insured is liable, but the plaintiff's demand is unreasonable, the adjuster may recommend aggressive discovery (demands for information). This may discourage the plaintiff into making an earlier settlement. If the demand exceeds the insured's policy limits and both damages and the allegations of the suit are true, to defend rather than settle exposes the insurer to bad faith. Every attempt to settle within or at policy limits must be made.
Understanding Court Decisions
The losing side in any litigation has a right of appeal, at least if they file their appeal in a timely manner, which differs in various jurisdictions. One key word is "venue." There are hundreds of venues in the United States, and it is part of the adjuster's litigation management role to see that the correct venue is chosen. The plaintiff will sue in the venue where courts may be most receptive to his or her position, but the defendant can oppose that venue if there is a valid reason to do so. The plaintiff may file in state court, but the defendant may argue that there is diversity of citizenship and move to transfer the case to federal court. Occasionally there may be no choice. Claims involving the Employee Retirement Income Security Act (ERISA) or the Federal Employers Liability Act (FELA) must be filed in federal courts. Claims under state workers compensation acts must be filed in the proper state court, usually in the state where the accident occurred, although there are exceptions.
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