Unit 2- The Role of the Insurance Adjuster

Statement of Principles

-1939, rescinded in 1981 -Serves as guide for conduct of adjusters, insurance companies and attorneys in regards to handling claims -Do not advised claimants as to their legal rights -Do not communicate with a claimant who is represented by an attorney -Do not advise a claimant against seeking legal advice

Fiduciary Responsibilities

-Adjusters hold a position of trust as they handle financial resources of the insurer -have greater check writing freedom than company officers -properly and promptly attend to business rises

Weather-related catastrophe

15 day exception is given for handling claims

Length of time company has to investigate a claim they might think is fraudulent after proof of loss is received

60 days

Agent-Adjuster Relationship

Agent sells policies, adjusters handle claims Agents can help in settling claims, resolving disputers, locating people etc Agents do not make decision if a claim is payable.

Notice of Acceptance or Rejection of Claim

An insurer must notify a claimant in writing of the acceptance or rejection of a claim no later than 15 business days after the date the insurer receives all items, statements, and forms required by the insurer to secure final proof of loss, with the following exceptions. •If an insurer has a reasonable basis to believe that a loss resulted from arson, the insurer must notify the claimant in writing of the acceptance or rejection of the claim no later than 30 days after the date the insurer receives all items, statements, and forms required by the insurer. •If the insurer is unable to accept or reject the claim within the days specified above, the insurer, within that same period, must notify the claimant of the reasons that the insurer needs additional time. The insurer must accept or reject the claim no later than the 45 days after the date the insurer notifies a claimant.

Adjuster responsibility

Any time an adjuster believes the exposure is greater than the applicable policy limit, the adjuster must send an excess letter to the insured. This may also be referred to as a Stowers letter.

Notice of Claim

Any written notification provided by a claimant to an insurer that reasonable apprises the insurer of the facts relating to the claim

Claims

Claims are paid by the insurer to indemnify losses to the insured (i.e., the first party) or to others who have experienced losses for which the insured is legally liable (i.e., third parties)

Claim settlement is delayed beyond 60 days, except when authorized by Texas Law

Insurer must pay damages. including interest at 18%

Unfair Claims Settlement Practices

Laws to ensure that claims are handled promptly and fairly Texas Insurance Code 542.001-.014 Texas adminstrative code 21.201-.205

Rejection of Claim

Must state the reasons for rejection

Deceptive Trade Practice

Occurs in any commercial transaction in which the seller, acting knowingly or intentionally, causes provable mental anguish and or economic damages to the customer

NAIC (National Association of Insurance Commissioners

Organization made up of individual state insurance commissioners. Purpose is to promote uniformity in regulation by drafting model laws and regulations.

Claimant

Person making a claim

Stowers Furniture Company v. American Indemnity (1929)

Texas Supreme Court ruled that an insurer has a contractual obligation to protect the insured up to policy limits. If the insurance company decides, for any reason, not to pay the claim within limits when it has an opportunity to do so, the company becomes responsible for the entire amount of the judgment.

First Party

The insured -Second party is the company The first-party claimant is the first party to the contract, the insured with whom there is a contractual relationship

Day

any calendar day, including weekends and holidays. Some deadlines for adjusters are measured in days

Business Day

any other day other than Saturday, Sunday or holiday recognized by this state. Some deadlines for adjusters are measured in business days

Extra-contractual duty

duties owed to the other parties beyond the boundaries of a given contract

Good Faith

implied in every contract high duty to protect the interests of the insured established by common sense, case law, Texas Insurance Code and employer Utmost good faith is a contractual requirement for disclosure to all parties.

If guilty of violating unfair claims settlement practices

most likely guilty of violating deceptive trade practices act

Third Party Claims

occurs when a third party that is not a party to the contract turns in a claim for indemnity due to the insured's legal liability for the injuries or damages sustained. The level of duty is to this claimant is different because the company nor adjust has a contractual duty to the claimant

First Party Claims

occurs when the first party to the contract (the insured) with whom there is a contractual relationship turns in a claim for indemnification. The adjusters level of duty to this claimant is extremely high

Bad Faith

occurs when the insurer does not abide by the terms and spirit of the policy. The essence of bad faith is that the insured must prove that the insurance company had no reasonable basis for denying the claim or delaying payment

Third Parties

others who have experienced losses for which the insured is legally liable

Recovery

upon court decision, may be up to 3x the consumer's mental anguish and economic damages

Sending payment

within 5 business days once the company agrees to pay the claim

Within 15 days after an insurer received notice of a claim

•Acknowledge receipt of the claim •Commence any investigation of the claim •Request from the claimant all items, statements, and forms that the insurer reasonably believes, at that time, will be required from the claimant can be amended to 30 days if the claims are being handled for a surplus lines insurer If the acknowledgment of receipt of a claim is not made in writing, the insurer must keep a record of the date, manner, and content of the acknowledgment.

Illegal Incentives

•An all-expense paid trip to the Bahamas as a gift from an insured for whom you are handling a $1 million claim •A $100 bill given to you for your trouble by someone for whom you are handling a roof damage claim •50 pounds of prime beef filets delivered to you from a law firm with which you are negotiating a $200,000 bodily injury claim

Unfair Claims Practices

•misrepresenting facts regarding coverage; •failing to promptly acknowledge communications (i.e., within 15 days); •failing to adopt reasonable standards for handling of claims; •not attempting in good faith to have prompt, fair and equitable settlement of a claim in which liability has become reasonably clear; •compelling policyholders to sue by offering substantially less than the amounts ultimately recovered; •failing to maintain a complete record of all complaints an insurer has received within the last three years or since the date of its most recent financial examination by the Insurance Commissioner; •failing to promptly provide claim forms for a claim settlement (these claim forms should be sent to the claimant when acknowledging her claim); •not attempting to act in good faith to settle claims where liability is reasonably clear to influence settlement under other portions of the policy; and •failing to promptly provide the policyholder with a reasonable explanation of the basis in the insurance policy for the denial of a claim or for the offer of a compromised settlement; •failing to deny or affirm a claim within a reasonable amount of time (i.e., within 15 business days of receiving all requested information); •refusing to offer settlement, failing to offer settlement or unreasonably delaying offer of settlement under first-party coverage on the basis that other coverage may be available; •attempting to settle a claim for less than the amount that a person would have believed was acceptable by reference to an advertisement; •undertaking to enforce a full and final release from a policyholder when only a partial payment has been made; •failing to establish a policy and proper controls to make certain that agents calculate and deliver funds due under policy provisions regarding cancellation of coverage; •refusing to pay claims without conducting a reasonable investigation; •failing to respond to claimants' questions; •for Texas personal auto policies, delaying or refusing to settle claims because there is other insurance of a different type available to partially or entirely satisfy the loss forming the basis of the claim; the claimant is entitled to choose under which coverage and in what order payment is to be made; •violating the Insurance Code 542.051-.061 (Prompt Payment of Claims); and •requiring claimants to produce federal income tax returns for investigation unless the claim is a fire loss or loss of income claim.

Applicability of Stowers Doctrine

•the claim is covered under the policy, •the claimant's demand is within policy limits, and •an insurer, acting prudently and considering the chances of a verdict exceeding the coverage, would have paid the demand.

Adjuster Knowledge Expectations

■Policy language ■Legislation passed by state and federal government ■Case law derived from judicial decisions ■State-of-the-art procedures •Negotiation •Investigation •Mediation •Evaluation ■Rules promulgated (i.e., published) by the various authorities like the Department of Insurance ■Medical procedures in some aspects of adjusting ■Special handling instructions for certain customers ■Established company methods and procedures