The
Inside Game #3
I would like once again to thank everyone who has offered their comments
regarding my musings. The comments on investigation were many.
From that, several individuals noted that investigation must also move
forward to coverage, evaluation and settlement. Today I will muse as I
can to coverage.
We all know of course we could write books on coverage, so my observations
will be short.
Mikes Musing : Claims
representatives must investigate the facts of specific claims to determine
coverage.
For many who have served our time in home office jobs or on corporate audit
teams, and I have done both, we know that the issue of coverage drives bad
faith litigation. The duty to defend being the issue that we see so
often in coverage litigation.
Coverage and an understanding of how the policy applies is fundamental to
the role of an adjuster and all to often not understood. The first
rule from my perspective is that an understanding of coverage is one of the
primary roles of the adjuster, after all how can the promises contained in
the policy be delivered if the adjuster does not understand the promise.
The secondary responsibility that the carrier must ensure that training is
in place that provides the adjuster with the knowledge and skills to deliver
the promise of coverage under the policy. This is a duty that the
carrier has to the policyholder, that being there must be qualified people
in place to delivery the promise.
In the coverage determination process the adjuster must possess knowledge of
what the policy is meant to accomplish and the fundamental parts of the
policy that contain the essential promise of benefits. One can then
ask, how do you approach a coverage problem. The fundamental truth is
it is rather simple but can be exceedingly complex, my fundamental rule is:
D Declarations
I Insuring Agreement
C Conditions
E Exclusions
This is what the adjuster must understand, each part of the policy sets
forth the intent of the underwriter. Each section is part of the promise.
If the adjuser does not understand the promise, he or she cannot deliver the
promise at that point the insurance company has failed in their fundamental
role, to solve the problems of the insured, the policy then becomes an empty
promise with little or no value, for consideration paid.
The adjuster must learn to ask these rather simple, but essential questions
:
" ...Is the type of damage alleged the type of damage that we cover
under this policy..."
"... Is the conduct giving rise to the damage the type of conduct we
cover under this policy ..."
" ...Any exclusions apply..."
" ...Any conditions violated..."
A old timers rule : Do not ever
confuse coverage with liability
These two rather simple models will serve you well. However the problem is
that without investigation, you cannot ask these questions, all to often the
reaction is how can that be covered? Example complex business torts,
where stockholders sue stating the stock offering publication is advertising
and advertising liability applies, your chicken ranch manure pile stinks and
my housing development sales are down and the values of the homes have
depreciated, the seed stock you sold me when the plants grew did not produce
the yield per acre they should and I could not put the acreage to use, etc.
The adjuster all to often misses the fundamental questions does not reserve
his or her rights promptly and then along comes home office guy Mike Cerf,
" where here to help " and says by the way there is no coverage,
and we have to pay the loss, big mistake, lesson learned. Or in the
alternative there is coverage, the insured cannot defend his small business,
and goes out of business, and you are sued for bad faith, all parties then
have lost.
Coverage investigation also requires that training must be always ongoing,
claims office should and must bring in outside counsel on a regular basis to
train and establish partnerships with claims operations. You should
and must use outside counsel when you do not understand the issue and just
want to make sure you are right. But keep in mind the word "
Counsel " is just that; you go to the law firm for advise and counsel,
claims departments then must make the decision.
When I look at coverage I have several observations:
1. The essential duty of the carrier is to resolve
whenever possible coverage in favor of the insured.
2. Claims departments must ensure the prompt, fair and
equitable resolution of coverage issues.
3. Adjusters must have a systematic process for the
evaluation of coverage.
4. Adjusters must have superior knowledge of their
product to ensure the delivery of quality claims service.
5. Insureds to not understand their policy as a general
rule, the adjuster must ensure that they do.
6. The most fundamental promise counted on by the insured
is the promise to defend the insured.
7. At all times the claims department must not place
their interests over that of their insured.
8. Claims departments must not use coverage as a tool to
force compromise.
There are many others, but the all telling comment is not mine but from the
text " The Claims Environment "
" ... The primary duty of the claim representative
is to deliver the promise to pay. Therefore, the claims
representatives chief task is to seek and find coverage, not to seek and
find coverage controversies or to deny or dispute claims ... "
Mikes Rule: The adjuster has a
duty to know his product, the policy, that duty includes the obligation that
coverage issues are evaluated with an eye toward solving the problems of the
insured.
Mike Cerf
Expert Witness Insurance Claims
Sherwood, Oregon
503-925-1937
mcerf@teleport.com
