Part 1 of this series dealt with whether the adjuster's deposition should be taken at all. It was pointed out that in many cases, the deposition of the adjuster is totally irrelevant. Part 2 dealt with the most important aspect of the adjuster's deposition—preparation for the deposition. It is so important that two parts of this series will deal with the preparation. This article, Part 3, continues with the preparation for the adjuster's deposition.
Part 2 of this series dealt with the knowledge of the file, the factual context, and the legal context. These are all very critical in the preparation of the adjuster or preparation to take the adjuster's deposition. Part 3 will address five areas of equal importance—they are the regulatory context of the deposition, the company's policies, the rules of construction, prior positions of the company, and the overall theme of the case. While perhaps not as important as knowledge of the file, each is important in its own right and can go a long way in making or breaking the deposition.
Regulatory Context
It is assumed by jurors that anyone working at a job should be aware of the laws and regulations that govern the performance of one's job. If one is not, then it is not a far leap for the jury to conclude that the person probably is not properly prepared for his or her job. The same is true for adjusters.
It is critical that attorneys preparing adjusters for their depositions make sure that they are aware of the regulatory context in which they operate, even if those regulations are not involved in the case. Let me give you an example. A question is asked to the adjuster: "What standards does your company have to insure the prompt investigation of claims under your policies?" Many will respond that there is no claims handling manual and that each claim is adjusted on its own facts. 28 TAC 21.203(3) defines "unfair claims settlement practice" to include "failing to adopt and implement reasonable standards for prompt investigation of claims arising under its policies." The adjuster has just admitted to an unfair claims settlement practices act.
Similarly, an adjuster may be asked to produce a complete record of all complaints received during the past 3 years. Many adjusters may not want to spend the time looking for the complaints or even ask if they are maintained and will prefer to answer that there is no such record of the complaints to avoid having to produce them. Once again, the adjuster has admitted to an unfair claims settlement practice. 28 TAC 21.203(6) makes it an unfair claims settlement practice to fail to maintain "a complete record of all complaints ... which it has received during the preceding 3 years or since the date of its most recent financial examination by the commissioner of insurance, whichever time is shorter."
While the lack of standards in and of itself may not be case dispositive in that particular case, if there are enough violations of the regulations, the jury will think, "where there is smoke, there is fire." The scope of regulatory context in Texas is broad. Texas has greater regulation of its insurers than any other state in the United States. To cover the waterfront, one must look at the Insurance Code, the Administrative Code, board orders, board bulletins, and any other positions taken by the Texas Department of Insurance.
Company Policies
As indicated above, the insurer is required to maintain certain policies. If it does not, it is an unfair claims settlement practices act as defined by the regulations. Many companies will have their own claims handling manuals and procedures. First, it goes without saying that any insurer that has its own claims handling manual should have a disclaimer in the front in capital letters and bold print indicating that it is to serve only as guidelines, that the handling of an individual claim will vary depending on the individual facts of the case, and that the procedures and steps set forth in the manual cannot and do not apply to every single case.
If, however, an insurer does have policies and procedures, the adjuster should be intimately familiar with them in order not to present testimony inconsistent with the company's own policies and procedures. Nothing is more damaging than to have an adjuster present testimony about the procedure he or she followed and then be impeached with the insurer's own policies and procedures. The question is, "Why didn't you follow your own policies and procedures?" Usually, the answer that follows is not one that the attorney for the insurer wants to play back to the jury.
The focus should not be limited to merely written policies and procedures. Most every insurer now has a website as part of its marketing and advertising efforts. On the website, there typically is a mixture of advertising and policy. Generally, the copy has not been written by someone in the claims department but someone in the marketing department. This can lead to embarrassing questions to the adjuster. On many occasions, the marketing department may have assumed duties or responsibilities that are not imposed by law. For example, the statement that "We put the interests of our insureds first" sounds great from a marketing standpoint but does not accurately reflect duties under Texas law. If the statement appears on the company website, an argument can be made that the company has assumed a duty not imposed by Texas law.
Rules of Construction
If the deposition concerns a coverage question, and the deposition of the adjuster is focused on the coverage issues, it is imperative that the adjuster be aware and fully informed of the governing rules of policy construction and interpretation in Texas. This may be difficult. Many lawyers and sometimes judges do not fully understand the steps and rules that govern policy interpretation under Texas law. (See "Algorithm for Construction of Insurance Policies under Texas Law" by Cooper, Sheffield, and McClelland, 10th Annual Insurance Law Institute, University of Texas Continuing Legal Education, Austin, December 8–9, 2005.)
However, the adjuster should have a basic primer on the rules of construction in order to prepare himself or herself for the deposition. For example, the Texas Supreme Court has held that a policy is ambiguous if it is susceptible to two or more reasonable interpretations. Texas Farm Bureau Mut. Ins. Co. v. Sturrock, 146 S.W.3d 123 (Tex. 2004). Whether or not a policy provision is ambiguous is a question of law for the court. National Union Fire Ins. Co. of Pittsburgh, Pa. v. CBI Indus., Inc., 907 S.W.2d 517 (Tex. 1995).
In many cases, resourceful attorneys will try through the deposition of the adjuster to create an ambiguity. For example, the attorney may say "If another court has interpreted a policy in a certain manner, it must be reasonable, because otherwise you are saying that the court is unreasonable." Most adjusters do not want to call a judge or court unreasonable and will agree that the other interpretation is reasonable, and counsel for the insured will argue that, as a result, there are two or more reasonable interpretations. This is not the law. The fact that a court may interpret a policy differently does not create an ambiguity. Sturrock, 146 S.W.3d 123 (Tex. 2004).
Courts misinterpret policies all the time. The number of times that trial courts and courts of appeals in Texas have been reversed based on their interpretation is innumerable. However, it does not make their interpretation reasonable. The adjuster needs to be prepared for this type of question from the creative insured's attorney. Likewise, the adjuster may be asked "If the policy is ambiguous, is it interpreted against the insurer?" Most adjusters will answer this question "yes." However, that is not the correct answer. The answer, according to the Texas Supreme Court, is that the rule of contra proferentum is a rule of last resort. State Farm Life Ins. Co. v. Beaston, 907 S.W.2d 430 (Tex. 1995). It is only resorted to after the rules of construction have been applied to resolve ambiguities and extrinsic evidence examined to determine the parties' intent.
Adequate time needs to be spent with the adjuster ensuring that he or she has a basic understanding of the rules of construction and will not be misled by opposing counsel's questions.
Prior Positions of the Company
The advent of the Internet is a blessing and a curse. For insurers and large corporations, it is generally a curse. Now it is possible for attorneys to research many of the cases in which these large corporations have been involved. For many companies, being sued is a normal part of their business, and the number of cases in which this happens every year is quite large. In all of these cases, these companies, through their attorneys, are taking positions reflecting the company's view on a particular subject.
Most federal cases and pleadings can now be accessed through PACER. Many of the state court proceedings and pleadings can be accessed through subscriptions with West Publishing and LexisNexis. If the company is taking a position on a critical issue, it is incumbent on the counsel to use his or her best efforts to determine whether the company has previously taken a position on that particular subject. This is not possible in all cases. However, it is extremely damaging to a case for the adjuster to be asked: "And your company's position on this subject is 'x'?" Then the next question will be: "Well, didn't your company take the position of 'y' 6 months ago in this case?"
The credibility of not only the adjuster but also the company itself can be tremendously impacted by this type of impeachment. Therefore, a critical part of the deposition preparation is to identify other positions taken by the company in other litigation. This can often be a very troublesome proposition. However, if the insurer has someone in the general counsel's role or has coordinating counsel, the job is much easier, and it is much easier for the company to maintain consistent positions in litigation throughout the nation.
Theme of the Case
Every case should have a theme. It is critical for trial counsel to develop that theme as early in the case as possible, preferably before the key depositions of the adjusters. The manner in which deposition questions will be answered will in large part be determined by the theme. For example, if the theme of the case is that the insured knew of the loss or that a loss was likely to occur before the policy was issued, it is critical that this theme be supported by the deposition testimony.
It does the trial strategy of the case no good if the adjuster is led to the point where he or she admits that there simply is no way that the insured could have known that this loss had occurred or was going to occur before the policy was issued. If this is the testimony of the adjuster, then the position and theme should never have been adopted from the beginning. The deposition of the adjuster, particularly if the adjuster has been designated as a corporate representative, must snugly fit into the theme of the case. If it does not, then the insurer needs a new theme, a new adjuster, or both.
Parts 2 and 3 conclude the preparation for the deposition. Part 4 will conclude with the deposition itself and address what can be done at the deposition to maximize or minimize the testimony of the adjuster.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.
Part 1 of this series dealt with whether the adjuster's deposition should be taken at all. It was pointed out that in many cases, the deposition of the adjuster is totally irrelevant. Part 2 dealt with the most important aspect of the adjuster's deposition—preparation for the deposition. It is so important that two parts of this series will deal with the preparation. This article, Part 3, continues with the preparation for the adjuster's deposition.
Part 2 of this series dealt with the knowledge of the file, the factual context, and the legal context. These are all very critical in the preparation of the adjuster or preparation to take the adjuster's deposition. Part 3 will address five areas of equal importance—they are the regulatory context of the deposition, the company's policies, the rules of construction, prior positions of the company, and the overall theme of the case. While perhaps not as important as knowledge of the file, each is important in its own right and can go a long way in making or breaking the deposition.
Regulatory Context
It is assumed by jurors that anyone working at a job should be aware of the laws and regulations that govern the performance of one's job. If one is not, then it is not a far leap for the jury to conclude that the person probably is not properly prepared for his or her job. The same is true for adjusters.
It is critical that attorneys preparing adjusters for their depositions make sure that they are aware of the regulatory context in which they operate, even if those regulations are not involved in the case. Let me give you an example. A question is asked to the adjuster: "What standards does your company have to insure the prompt investigation of claims under your policies?" Many will respond that there is no claims handling manual and that each claim is adjusted on its own facts. 28 TAC 21.203(3) defines "unfair claims settlement practice" to include "failing to adopt and implement reasonable standards for prompt investigation of claims arising under its policies." The adjuster has just admitted to an unfair claims settlement practices act.
Similarly, an adjuster may be asked to produce a complete record of all complaints received during the past 3 years. Many adjusters may not want to spend the time looking for the complaints or even ask if they are maintained and will prefer to answer that there is no such record of the complaints to avoid having to produce them. Once again, the adjuster has admitted to an unfair claims settlement practice. 28 TAC 21.203(6) makes it an unfair claims settlement practice to fail to maintain "a complete record of all complaints ... which it has received during the preceding 3 years or since the date of its most recent financial examination by the commissioner of insurance, whichever time is shorter."
While the lack of standards in and of itself may not be case dispositive in that particular case, if there are enough violations of the regulations, the jury will think, "where there is smoke, there is fire." The scope of regulatory context in Texas is broad. Texas has greater regulation of its insurers than any other state in the United States. To cover the waterfront, one must look at the Insurance Code, the Administrative Code, board orders, board bulletins, and any other positions taken by the Texas Department of Insurance.
Company Policies
As indicated above, the insurer is required to maintain certain policies. If it does not, it is an unfair claims settlement practices act as defined by the regulations. Many companies will have their own claims handling manuals and procedures. First, it goes without saying that any insurer that has its own claims handling manual should have a disclaimer in the front in capital letters and bold print indicating that it is to serve only as guidelines, that the handling of an individual claim will vary depending on the individual facts of the case, and that the procedures and steps set forth in the manual cannot and do not apply to every single case.
If, however, an insurer does have policies and procedures, the adjuster should be intimately familiar with them in order not to present testimony inconsistent with the company's own policies and procedures. Nothing is more damaging than to have an adjuster present testimony about the procedure he or she followed and then be impeached with the insurer's own policies and procedures. The question is, "Why didn't you follow your own policies and procedures?" Usually, the answer that follows is not one that the attorney for the insurer wants to play back to the jury.
The focus should not be limited to merely written policies and procedures. Most every insurer now has a website as part of its marketing and advertising efforts. On the website, there typically is a mixture of advertising and policy. Generally, the copy has not been written by someone in the claims department but someone in the marketing department. This can lead to embarrassing questions to the adjuster. On many occasions, the marketing department may have assumed duties or responsibilities that are not imposed by law. For example, the statement that "We put the interests of our insureds first" sounds great from a marketing standpoint but does not accurately reflect duties under Texas law. If the statement appears on the company website, an argument can be made that the company has assumed a duty not imposed by Texas law.
Rules of Construction
If the deposition concerns a coverage question, and the deposition of the adjuster is focused on the coverage issues, it is imperative that the adjuster be aware and fully informed of the governing rules of policy construction and interpretation in Texas. This may be difficult. Many lawyers and sometimes judges do not fully understand the steps and rules that govern policy interpretation under Texas law. (See "Algorithm for Construction of Insurance Policies under Texas Law" by Cooper, Sheffield, and McClelland, 10th Annual Insurance Law Institute, University of Texas Continuing Legal Education, Austin, December 8–9, 2005.)
However, the adjuster should have a basic primer on the rules of construction in order to prepare himself or herself for the deposition. For example, the Texas Supreme Court has held that a policy is ambiguous if it is susceptible to two or more reasonable interpretations. Texas Farm Bureau Mut. Ins. Co. v. Sturrock, 146 S.W.3d 123 (Tex. 2004). Whether or not a policy provision is ambiguous is a question of law for the court. National Union Fire Ins. Co. of Pittsburgh, Pa. v. CBI Indus., Inc., 907 S.W.2d 517 (Tex. 1995).
In many cases, resourceful attorneys will try through the deposition of the adjuster to create an ambiguity. For example, the attorney may say "If another court has interpreted a policy in a certain manner, it must be reasonable, because otherwise you are saying that the court is unreasonable." Most adjusters do not want to call a judge or court unreasonable and will agree that the other interpretation is reasonable, and counsel for the insured will argue that, as a result, there are two or more reasonable interpretations. This is not the law. The fact that a court may interpret a policy differently does not create an ambiguity. Sturrock, 146 S.W.3d 123 (Tex. 2004).
Courts misinterpret policies all the time. The number of times that trial courts and courts of appeals in Texas have been reversed based on their interpretation is innumerable. However, it does not make their interpretation reasonable. The adjuster needs to be prepared for this type of question from the creative insured's attorney. Likewise, the adjuster may be asked "If the policy is ambiguous, is it interpreted against the insurer?" Most adjusters will answer this question "yes." However, that is not the correct answer. The answer, according to the Texas Supreme Court, is that the rule of contra proferentum is a rule of last resort. State Farm Life Ins. Co. v. Beaston, 907 S.W.2d 430 (Tex. 1995). It is only resorted to after the rules of construction have been applied to resolve ambiguities and extrinsic evidence examined to determine the parties' intent.
Adequate time needs to be spent with the adjuster ensuring that he or she has a basic understanding of the rules of construction and will not be misled by opposing counsel's questions.
Prior Positions of the Company
The advent of the Internet is a blessing and a curse. For insurers and large corporations, it is generally a curse. Now it is possible for attorneys to research many of the cases in which these large corporations have been involved. For many companies, being sued is a normal part of their business, and the number of cases in which this happens every year is quite large. In all of these cases, these companies, through their attorneys, are taking positions reflecting the company's view on a particular subject.
Most federal cases and pleadings can now be accessed through PACER. Many of the state court proceedings and pleadings can be accessed through subscriptions with West Publishing and LexisNexis. If the company is taking a position on a critical issue, it is incumbent on the counsel to use his or her best efforts to determine whether the company has previously taken a position on that particular subject. This is not possible in all cases. However, it is extremely damaging to a case for the adjuster to be asked: "And your company's position on this subject is 'x'?" Then the next question will be: "Well, didn't your company take the position of 'y' 6 months ago in this case?"
The credibility of not only the adjuster but also the company itself can be tremendously impacted by this type of impeachment. Therefore, a critical part of the deposition preparation is to identify other positions taken by the company in other litigation. This can often be a very troublesome proposition. However, if the insurer has someone in the general counsel's role or has coordinating counsel, the job is much easier, and it is much easier for the company to maintain consistent positions in litigation throughout the nation.
Theme of the Case
Every case should have a theme. It is critical for trial counsel to develop that theme as early in the case as possible, preferably before the key depositions of the adjusters. The manner in which deposition questions will be answered will in large part be determined by the theme. For example, if the theme of the case is that the insured knew of the loss or that a loss was likely to occur before the policy was issued, it is critical that this theme be supported by the deposition testimony.
It does the trial strategy of the case no good if the adjuster is led to the point where he or she admits that there simply is no way that the insured could have known that this loss had occurred or was going to occur before the policy was issued. If this is the testimony of the adjuster, then the position and theme should never have been adopted from the beginning. The deposition of the adjuster, particularly if the adjuster has been designated as a corporate representative, must snugly fit into the theme of the case. If it does not, then the insurer needs a new theme, a new adjuster, or both.
Parts 2 and 3 conclude the preparation for the deposition. Part 4 will conclude with the deposition itself and address what can be done at the deposition to maximize or minimize the testimony of the adjuster.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.