Which Claim Should Come First?
August 2006
Consider for a few moments the pressure that
Grant Solomon, a claims adjustment manager for ABC Insurance Company, faced
when a tornado ripped through Toto, a small city in Kansas.
by George
L. Head, Ph.D.*
American Institute
for CPCU
Besides destroying numerous homes, the tornado severely damaged the Toto
General Hospital and Saint Tristan's Community Center. It also tore the roof
completely off Garland's Famous Restaurant, long a landmark in downtown Toto.
The losses at each of these three sites were particularly significant. Toto's
General Hospital was the only trauma center in the county. Furthermore, it employed
20 percent of the community's workforce and drew some of the best doctors in
the country. St. Tristan's had been Toto's only community charity serving the
underprivileged in the city, and its 12-person volunteer staff had been praised
by the President of the United States while visiting Toto during the most recent
political campaign. Finally, Garland's Famous Restaurant had been in operation
since 1900 and had established itself as "the place" to hold wedding receptions
and special anniversary celebrations. Generations of the local residents at
one time had either cooked or served food at this landmark.
Grant's Dilemma
Because of the scope of the disaster, Grant knew he was understaffed to handle
all three of these major claims simultaneously. He also knew that relying on
public or governmental adjusters was out of the question. The three claimants
were covered—of that, there was no doubt. The real dilemma would come in deciding
which of the three claims to resolve first. Grant realized that each of these
three claimants had an equal legal right to have its claim adjusted immediately,
but he also recognized that he did not have the resources to resolve all three
claims at once.
Professionally, the situation was filled with many claims management issues
as well as ethical ones. Priority could not simply be based on a matter of need,
for each of these three claimants could make a strong case that its business
was vital to the revival of their tornado-ravaged community. At first, Grant
was somewhat overwhelmed by his choices. He did not want to play God, but a
decision had to be made. Nothing in his professional background had prepared
him to select one business or one person's livelihood over the other; he wondered
if he had the right to do that. Then he recalled a principle from a college
philosophy course that he thought might possibly be helpful in this situation.
The most ethical thing is to "Do the greatest good for the greatest number."
Grant made a list of why putting one of these claimants first—restoring its
property and business operations before the other two—arguably would be doing
the greatest good for the greatest number of people in the community of Toto.
Grant's Analysis
Initially, the General Hospital seemed to have the strongest case to be first.
As the only trauma center for miles around, it had the best chance to save the
lives of, or at least forestall further physical harm to, anyone in the county
who suffered an acute injury or disease. What's more, the hospital was the largest
employer in the county—hiring 20 percent of the workforce—so getting it up and
running, able to meet its payroll, would put money back in the pockets of lots
of people, and in the cash-registers of lots of Toto's merchants, thus doing
much to put the local economy back on its feet. But Grant realized there was
a problem with resolving the hospital's claim first. It was such a large organization
with such a complex claim that settling it first would mean that his small staff
of adjusters could do virtually nothing for the other claimants for perhaps
several weeks. Immediately after the tornado hit, all emergency and medical
operations were redirected to Bolger Hospital, in Topeka, just 40 miles from
Toto. To everyone's surprise Bolger welcomed the increased business. With these
new arrangements, Grant considered time not to be as crucial as a factor in
processing the hospital's claim first.
St. Tristan's Community Center should perhaps come first. The tornado had
left many more people homeless, clearly increasing the local need for a greater
community-service effort. Already the Red Cross had set up operations at the
site of the damaged Community center. The major television networks were reporting
that St. Tristan's 12 staff members were out helping the survivors. All this
good attention seemed to boost Toto's spirit. Volunteers were pouring into the
city wanting to rebuild the center themselves. St. Tristan's staff feared they
would lose control over their property; therefore, Grant thought, the best way
to bring "the greatest good for the greatest number" might well be to restore
the community center's property in an orderly fashion, keep the town's spirits
high, and provide habitable shelter for those whose homes could not be restored
before winter. But St. Tristan's was small, its staff was volunteer, and obviously
the scope of the damage from the tornado would require a more massive effort.
Supporting the community's spirit was also the key reason for putting Garland's
Famous Restaurant first among the properties to be restored. Fortunately, replacing
the roof would be an uncomplicated repair, so the restaurant probably could
be serving its nationally recognized "four-star" menu within 2 weeks. Garland's
reputation extended to Topeka: its food, and its service drew a prosperous business
from wedding receptions to anniversary parties well booked into the next year.
Knowing that their landmark survived would be a shot in the arm for the local
citizens who worked there and for the city in general. Starting with Garland's
as a highly visible and easily "doable" claim, the completion of which everyone
in town could celebrate as a good place to start over. Yes, Grant thought, Garland's
could well be an excellent first choice for doing the greatest good for the
greatest number in the wake of the tornado.
Your Solution?
This was Grant's dilemma. If you were in his shoes which claim would you
process first? Please feel free to supply whatever additional facts and assumptions
you wish and then e-mail me your conclusions at IRMI.
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