At the turn of the century, insurers, in a search for profit, decimated
their professional claims staff. They laid off experienced personnel and
replaced them with young, untrained, and unprepared people. A virtual clerk
replaced the old professional claims handler; process and computers replaced
skill and judgment.1
The first person from the insurer that the insured meets when he or she
suffers a first-party property loss is the adjuster. The adjuster exists to
help the insured prove the loss to the insurer and get the indemnity promised
by the insurer in the policy. The adjuster will investigate the loss, interpret
the policy wording, and apply the policy wording to the facts discovered in the
investigation. To perform his or her obligation as an adjuster, certain tasks
are always required to be performed fairly and in good faith.
Read the Loss Notice
The loss notice is one of the most important documents the adjuster will
see. It is the starting point of all claims investigations. It tells the
adjuster essential information that will allow the adjuster to properly prepare
to fulfill the obligations imposed by the Fair Claims Settlement Practices
Statute and Fair Claim Settlement Practices Regulations in the state where he
or she works.
- Where the loss occurred
- When the loss occurred
- The type of coverage the insured has
- The type of loss
- The insured's name, address, and telephone number
- The agent's name and address
- Who to contact and how to contact him or her
- Whether there is anything to which the adjuster should give special
attention
- Who to contact and how to contact him or her
Read the Policy
The adjuster must understand the terms and conditions of the agreement
between the insurer and the insureds. To understand a first-party property
policy of insurance, the adjuster must read and analyze the policy in a logical
and thorough manner. The facts of each individual claim clarify and color the
interpretation of the policy contract and bring different nuances to the policy
wording. The adjuster must know what coverage is available to the insured, the
limits of liability, the territory limitations, and the exclusions, conditions,
and endorsements attached.
Before beginning to investigate a claim, the adjuster must first establish
or confirm coverage. To do this, he or she must get a complete copy of the
insurance policy. The company's copy (often called the "daily"),
which when I was an adjuster was on paper, has disappeared in most insurance
company offices and is now data on a private website available to the
insurer's employees and officers. Like the old daily file, the website will
have a full copy of each policy issued starting with the "declarations
page" and each standard forms and company specific forms that were used to
make up the entire policy. If the database is not available, the adjuster may
obtain a complete copy of the policy—digitally or on paper—by viewing a current
copy of the policy in the possession of the insured or the insurance agent or
broker.
With the policy available, the adjuster must also determine the policy
limitations and determine the perils insured against. For example, is the
policy a standard fire policy, a multiple named peril policy, an old "all
risk," or a direct risk of physical loss policy?
The adjuster must be familiar with each of the exclusions, limitations, or
exceptions from coverage.
The much maligned, so-called concurrent cause doctrine does not exist with
regard to first-party property insurance in California and many other states.
The "concurrent cause doctrine" held that if more than one cause
concurs with others to bring about a loss and one cause is excluded and the
other is not excluded, coverage will apply regardless of the proportion with
which the nonexcluded cause was related to the loss. This is still the law in
California for third-party losses but not for first-party losses.
Before many states could adopt the concurrent cause doctrine for first-party
losses, most insurers changed the policy wording to avoid insuring against
something they thought they had excluded. They now require that coverage be
determined on first-party policies by the cause that is the primary, moving, or
efficient proximate cause of the loss.
Meet with the Insured and Witnesses
Once the adjuster has completed the basic preparation of reviewing the loss
notice and the policy wording, he or she should make immediate contact with the
insured (not more than 24 hours after receipt of the loss notice) and arrange
to meet with the insured and witnesses as soon as practical. The adjuster
should explain to the insured that the policy requires the insured to prove his
or her loss to the insurer.
In order to provide the best service possible and to act in good faith to
its insureds, the insurer hires the adjusters to help the insured prove his or
her loss. The adjuster cannot prove the loss for the insured—he or she is only
present to help the insured. If the review of the loss notice and the policy
wording indicate a potential problem with coverage, the adjuster at the first
meeting should ask the insured to execute a nonwaiver agreement, which is a
mutual agreement that the investigation of the claim waives none of the rights
or obligations of the parties to the policy. If the insured refuses, the
adjuster should issue on the same day a reservation of rights letter that
provides the same protection to the insurer.
If there is a question of coverage, the adjuster should explain to the
insured the obligation for the insured to provide a sworn statement in proof of
loss within 60 days of the loss or within 60 days of the request for a proof of
loss, explaining at the same time that if additional time is required, the
adjuster and the insurer, whom he or she represents, will grant any reasonable
extension of time required by the insured.
All of this basic conduct is part and parcel of fulfilling the obligation to
treat an insured with the utmost good faith. The adjuster must always act in
good faith, and to do so, the adjuster must not do, or fail to do, anything
that will deprive the insured of the benefits of the policy of insurance.
Obtain a Recorded Statement
The adjuster should be required to take a complete recorded statement from
the insured and all witnesses to the incident that caused the loss. The
adjuster must get answers to the most important of all questions: who, what,
where, why, when, and how with regard to the policy and the loss. Recorded
statements of neighbors and relatives of the insured may also be useful in
obtaining a complete picture of the loss.
The recorded statement is a simple and thorough means of beginning the
claims investigation. It is performed by an adjuster obtaining a complete
statement from the insured and all witnesses to the incident that caused the
loss.
Some insureds are uncomfortable with regard to giving a recorded statement,
whether taken in person or over the telephone, so the adjuster must take the
time with the insured to make the insured comfortable with the procedure. When
faced with recalcitrance from the insured, the statement can be taken in
person, without a recorder, with the adjuster taking notes. The notes should
then be converted into a statement, sent to the insured to be read, corrected,
signed, and dated. If a tape recorder is used, the insured should be asked to
sign or initial and date the cassette and watch as you punch out the tab to
prevent changes in the recording. If recorded digitally, the statement should
be transcribed and sent to the insured to read, correct, sign, and date.
The statement can be protected from discovery in some states. For example,
the Idaho Supreme Court has indicated that statements made to an insurance
adjuster can be work product and protected from discovery under appropriate
circumstances. In Dabestani v. Bellus, 131 Idaho 542, 961 P.2d 633,
636 (1998), the Idaho Supreme Court agreed that a statement made to an
insurance adjuster was protected as work product and free from discovery. On
the other hand, the routine taking of statements by an insurance adjuster is work in the ordinary course of business, which
fails to qualify as work product. Sorrells v. Cole, 141 S.E.2d 193,
111 Ga.App. 136 (Ga. App., 1965); and Popina v. Rice–Steward, Not
Reported in S.E.2d, 86 Va. Cir. 402, 2013 WL 8118663 (Va.Cir.Ct., 2013).
The Examination under Oath (EUO)
The 1991 edition of the homeowners policy provides, in easy-to-read
language, the following.
2. Your Duties After Loss. In case of a loss to covered
property, you must see that the following are done:
* * *
f. As often as we reasonably require:
(1) Show the damage property.
(2) Provide us with records and documents we
request and permit us to make copies; and
(3) Submit to EUO, while not in the presence of
any other "insured" and sign the same.
Although the EUO is a formal proceeding, it is not part of a judicial
process. The EUO is not controlled by the rules of civil procedure. In most
states, it is considered a condition precedent to recovery under a policy of
insurance. The EUO is not limited by any statute relating to civil discovery.
Some states have enacted regulations that try to limit insurers taking of the
EUO and place certain requirements upon the insurer to chill the desire to take
an EUO.
In Claflin v. Commonwealth Ins. Co., 110 U.S. 81, 3 S.Ct. 507, 28
L.Ed. 76 (1884), the US Supreme Court concluded it is proper to investigate a
potential fraudulent claim where the insurer needed truthful responses.
The EUO Is a Serious and Important Part of the Insurer's
Investigation
The position taken by the US Supreme Court in Claflin has been
upheld by every court that has considered it to date. For example, in Gipps
Brewing Corp v. Central Manufacturers Mutual Insurance Co., 147 F.2d 6, 13
(C.A. 7, 1945), the Seventh Circuit stated the following.
The attorney, insurance adjuster, or investigator who conducts the EUO can
take a role similar to the role of a prosecutor without the usual
constitutional restraints controlling testimony at a deposition or trial.
Hickman v. London Assurance Corporation, 184 Cal. 524, 195 P. 45
(1920). A false statement as to any material fact during the EUO can cause the
policy to be declared void, even if the fact has no relationship to the loss.
Unlike a criminal proceeding, the violation need only be proved by a
preponderance of the evidence and not without reasonable doubt.
The EUO is an investigative tool made available to the insurer. It allows
the insurer to delve deeply and under oath into all aspects of the policy and
the loss. The testimony to be elicited is not constrained by rules of discovery
or the Codes of Civil Procedure.
The only restraint on the EUO is reasonableness. Unlimited questions are
allowed. Only totally irrelevant and unreasonable questions dealing with facts
completely outside the policy, its acquisition, or the loss are not
favored.
Irrelevant questions are tolerated if there is any possibility the question
may lead to an inquiry about facts relevant to the policy or claim. In fact,
there are no questions that are irrelevant in an EUO since each question may
lead to more important information that could never have been learned about had
not a foundation been laid by questions that appear, on their face, to be
irrelevant. Since there are no rules for the taking of the EUO, any question
asked is important and must be answered. There is no judge to rule on
objections—although the insured's counsel may raise objections—he or she
will usually find the objections ignored.
The EUO Should Be Required by an Insurer Only If
In the following situations, the EUO should be required by the insurer.
- When the insured has insufficient documentary evidence to prove his
loss
- When the insured refuses to cooperate in the investigation of the
insurer
- When the insured is unable to present documentary evidence in support of
his or her claim
- When the insured needs help proving his or her loss
- When the insurer has no other means of "cross-examining" the
proof of loss submitted by the insured
- When the insurer witnesses a fraudulent claim is being attempted
The list of reasons for requiring an EUO are not the only reasons but a
small list of potential reasons for an EUO.
When an insurance professional, whether an adjuster or a lawyer, finds a
claim poses questions that cannot be answered by the usual and common methods
of investigating a claim, it is important to consider the use of the EUO to get
the answers not available anywhere else.
The EUO and the requirement that insureds produce relevant documents in the
event of a fire or any other loss to property are essential tools for insurers
faced with a possible fraud or other issue affecting insurance coverage.
Insureds and their counsel will often argue that they are not required to
produce tax returns or other financial documents because to do so would violate
the so-called "taxpayers privilege" or right of privacy. In addition,
an insured may refuse to testify about subjects claimed to be irrelevant or
protected by a privilege or right of privacy. In most states, regardless of the
truth of those claims, refusals to testify or produce documents can result in a
forfeiture of claims presented by the insured.
An EUO requirement is "a condition
precedent to suit" under a homeowners policy and the insured's failure
to submit to the examination before filing suit "preclud[ing] an action on
the policy regardless of a showing of prejudice by the insurer." Goldman v. State Farm Fire
General Insurance Co., 660 So.2d 300 (Fla. 4th DCA 1995).
Obtain the Proof of Loss
A person seeking to recover on an insurance policy has the burden of proving a loss from causes
within the terms of the policy and if such proof of loss is made within the contract of insurance, and the burden is on the insurer to establish that the
loss arose from a cause that is excepted from the policy.
The chief purpose of a proof of
loss "is to acquaint the insurance company with certain facts and circumstances relative
to the loss, forming a basis for further steps to be taken by the company,
ranging from full settlement to absolute repudiation of liability."
United States Fire Ins. Co. v. Merrick, 171 Md. 476, 489, 190 A. 335,
341 (1937); and Sutton v. Fire Ins. Exchange, 265 Or. 322, 509 P.2d
418 (Or., 1973).
The adjuster must advise the insured of his or her obligations under the
policy, including the obligation to submit a sworn proof of loss within 60 days
of the date of the loss or, depending on the policy wording, 60 days after the
demand for a proof of loss. In the best of all possible worlds, the proof of
loss is a key document that should be obtained and executed under oath by all
insureds on every loss. A proof of loss is the sworn statement of the insured
required by the conditions of the policy of insurance. It sets forth the
insured's knowledge and belief as to the date, time, and cause of the loss;
the encumbrances on the property; the persons with an interest in the property;
the value of the property; the amount of loss; and the amount of claim.
The insured may retain the services of a public adjuster (PA) to help
prepare a proof of loss. A PA for compensation acts on behalf of or helps an
insured in negotiating or effecting the settlement of a claim for loss or
damage under any policy of insurance covering real or personal property. (More
details on the duties and obligations of PAs and the law that controls their
activities are provided.)
The oath carries with it the penalties of perjury—up to 5 years in prison in
most states. More important than the seldom-prosecuted criminal penalties, if
the proof of loss is falsely sworn, the insured loses any right he or she might
have to any of the benefits of the policy. False swearing might also violate
the penal provisions of one of the insurance fraud statutes enacted in many
states. These statutes usually make insurance fraud a felony punishable by up
to 5 years in prison—a felony that is being prosecuted with more vigor than
perjury. Since it is the insured who swears to the truth of the statements on
the proof of loss, the adjuster should not attempt to dictate the contents of
the form. The adjuster is expected to help the insured but cannot execute a
sworn proof of loss for him or her because the insured alone has the personal
knowledge that the statements in it are true. In most cases, the insured is
required to sign the proof of loss and have his or her signature notarized with
the notary attesting to the fact that the oath was administered to the insured
and that the insured swore to the accuracy of the information provided.
Some insurers instruct their adjuster to waive the proof of loss requirement
except under special circumstances. I believe such a policy is improper and
emasculates the policy condition requiring a proof of loss and could be
construed to weaken other conditions of the policy. If such a waiver of this
important policy condition is needed, it must be applied uniformly for all
insureds. The policy should be limited and capable of being applied to all
claims with language such as "no proof of loss is required if the claim is
less than $5,000."
If the adjuster and the insured are in agreement on the amount of the loss,
the proof of loss is one of the last documents prepared (along with the
statement of loss, the subrogation agreement, and the settlement draft).
California Insurance Code section 2057 provides the following.
Under a contract of fire insurance, payment to the insured shall be made
within 30 days after the amount of the loss and the liability of the company
have been agreed upon or settled by the insured and the company in writing.
If the company fails to pay within the 30 days, the payment shall bear
interest, beginning the 31st day, at the prevailing legal rate. The company
also shall be liable for all costs of collection, including reasonable
attorney's fees, if legal action is necessary to obtain payment.
Similar statutes, regulations, or case authority can be found in other
states. The California Insurance Code section quoted here is an expression of
California's desire to protect insureds from insurers. The adjuster must
determine if the statutory or contractual 60-day period has been shortened by
statute or court decision in the particular jurisdiction in which he or she
practices.
Many adjusters have misinterpreted this section of the California Insurance
Code to require a response to a proof of loss within 30 days of its receipt by
the company. The section does not impose such a requirement. The section merely
changes the Standard Fire Policy's promise to pay within 60 days to 30 days
and it sets out methods for enforcing failure to pay promptly. It also codifies
a simple fact of business life: it is business suicide to delay payment of a
claim once an agreement on the amount has been reached.
The insurer has a reasonable time to respond to a proof of loss. Some
personal and commercial lines policies now put in the wording a requirement
that the company respond to the proof of loss within 30 days. The adjuster must
verify the wording of the particular policy that is involved in the
adjustment.
If the adjuster representing the insurer and the insured are not in
agreement on the compensability or the extent of the loss, a blank form of
proof of loss should be provided to the insured simultaneously advising the
insured that failure to submit a properly executed proof of loss within the
required 60 days, unless extended in writing by the insurer, will be considered
a breach of a material condition of the policy and the claim will be
rejected.
In addition, the insured should be advised that when the proof of loss is
presented to the insurer, the insurer will respond to the document accordingly
and as promptly as possible. Providing a blank proof of loss to the insured is
one of the only ways an insurer can compel insureds to reveal their opinion of
the amount of loss.
When fraud is suspected, the adjuster should always demand a sworn proof of
loss. By so doing, the adjuster gives the insurer help in defeating a
potentially fraudulent claim by compelling the insured to put the claim under
oath. If the proof of loss submitted is proper and there is no evidence to
establish fraud, the claim should be paid promptly.
The adjuster should be careful not to waive the 60-day proof-of-loss
requirement inadvertently. It should be waived in appropriate cases for a
specified period of time in writing but should never be an open extension. If
the adjuster has waived the 60-day time limit expressly or by actions, the
adjuster must demand that the proof of loss be presented to him or her on a
certain date. I recommend not less than 30 days, nor more than 60 days, after
the demand. The extended time should not be extended further without
exceptionally good cause.
When the proof of loss is received, the adjuster must recognize that most
policies have no language defining what a reasonable time is to respond to a
proof of loss. Depending on the facts, a "reasonable time" can be as
short as 30 days and as long as 1 year. I would recommend that the adjuster
attempt to respond in some way to any proof of loss within 30 to 40 days of its
receipt.
As early as 1884, the US Supreme Court in Claflin stated
that the insured had an affirmative obligation under the policy to answer
accurately every question relevant to the insurer's investigation. That is
the purpose of the proof of loss. Honestly, presenting the proof is a condition
precedent to the right to the benefits promised by the policy.
The Fair Claims Practices Regulations, enacted in many states following a
National Association of Insurance Commissioners model set of regulations,
require a response to the proof of loss or proof of claim immediately but no
later than 40 calendar days after receipt of the proof of loss.
If investigation reveals to the adjuster that it will take longer than 30
days to respond to a proof of loss, the adjuster should advise the insured of
this. The adjuster may, as appropriate, state that investigation is incomplete,
that experts have been retained who require at least 90 days to complete their
work, that counsel has been retained to advise the company, and it is expected
to take from 30 to 60 days to complete counsel's research or any other
honest and reasonable excuse available. If the adjuster does not have an honest
or reasonable excuse, the insurer should either accept or reject the proof of
loss.
Obtain Relevant Documents
The adjuster must obtain copies of all relevant and material records from
the insured. These include the following.
- Leases
- Documents establishing title to real property (deeds and trust
deeds)
- The last physical inventory
- Receipts, invoices, purchase orders, and other evidence of purchase and
ownership
- The general ledger of the business
- The banking records of the business for at least the 6 months before the
loss
- Any other document that might be relevant or material to the
investigation
Most insurance policies contain provisions requiring the insured or claimant
to cooperate in the investigation of a claim and to produce certain documents
and information in support of the claim. Documenting the claim is important
because it commits the insured or claimant to a position with respect to the
claim. After committing to a position, the veracity and legitimacy of the claim
can more easily be tested.
Claims Inventories or Other Documents
Many insurers, when faced with a property claim, require the insured to
present an itemized list of contents included in the claim. They have the right
to demand those documents from the promises made in the New York Standard Fire
Insurance Policy that has been adopted by most states. It provides the
following.
The insured, as often as may be reasonably required, shall exhibit to any
person designated by this company all that remains of any property herein
described and … as often as may be reasonably required, shall
produce for examination and copying all books of account, bills, invoices,
and other vouchers.…
Frequently, forms are sent to the insured that request information
concerning claimed items such as a description of the item, date of purchase,
place of purchase, and purchase price. The adjuster should also request any
supporting documentation such as receipts, operating instructions, warranties,
photographs, or other documents that the insured has to establish the
existence, ownership, and value of the items claimed lost.
This information assists the insurer in establishing the amount of the loss.
It also locks the insured into a position concerning the claimed items from
which he or she cannot later retreat. As with intentional misrepresentations in
a proof of loss, it is generally well-settled law that intentional
misrepresentations in a claims inventory will void coverage under the standard
fraud provision in most insurance policies.
Insureds and their counsel will often argue that they are not required to
produce tax returns or other financial documents because to do so would violate
the so-called "taxpayers privilege" or right of privacy. In addition,
an insured may refuse to testify about subjects claimed to be irrelevant or
protected by a privilege or right of privacy. In most states, regardless of the
truth of those claims, refusals to testify or produce documents can result in a
forfeiture of claims presented by the insured.
Claims can be denied if the jury could find that the actual inventory at the
time of the fire was less than that claimed. In Gregory's Continental
Coiffeurs & Boutique, Inc. v St. Paul Fire & Marine Ins., 536 F2d
1187 (7th Circuit 1976), the Seventh Circuit held that the company's gross
overvaluation would of itself support an inference by the trier of fact that
the overvaluation had been deliberate and intentional.
Some courts have held that even where an actual loss happens, coverage for
the insured's entire claim may be barred where the insured also claims
additional items not damaged or destroyed in a loss. The New York Court of
Appeals in Saks & Company v Continental Ins., 23 NY2d 161, 242
NE2d 833 (1968) held: [t]he insured fraudulently includes additional items to
those actually destroyed by fire in his proof of loss, the policy vitiated
and recovery thereunder is not permitted even though the insured has suffered
an actual loss as to part of the included items.
Establish the Amount of the Loss and Claim
To aid the insured in his or her obligation to prove the loss, the adjuster
must on the first visit establish with the insured the exact scope of loss.
This means that the adjuster and the insured (or PA) must walk through the
insured's house or business and agree to exactly what was damaged and
destroyed as a result of the peril insured against.
The adjuster can get this agreement orally with a tape recorder or write it
down. The scope of loss must be detailed. Descriptions, including room
dimensions; materials like moldings, flooring, wall coverings, and fixtures;
and information about special features, openings, casements, detailing,
moldings, and other architectural features must be part of the scope of loss.
The scope of loss must be complete.
The adjuster must never do the following.
- Take a quick look around and ask the insured to fill out a property loss
form at his or her convenience.
- Leave the insured with blank forms, except for supplemental items learned
of after the initial scope was completed.
- Take a partial scope, and attempt to do the rest later.
- Rely on the expertise of the insured's PA.
- Rely on a contractor to establish the scope.
The adjuster must walk through the entire scene of the loss with the insured
and obtain an agreed scope of loss. He or she must advise the insured that the
adjuster will be retaining experts in the valuation and repair of the type of
property that is involved. These experts will bid on the repair and replacement
from the agreed scope. The adjuster must present the insured with a copy of the
agreed scope and inform him or her that he or she may, if he or she wishes,
obtain similar opinions based on the same agreed scope.
The adjuster should provide two general contractors (different from the
construction consultant who helped the adjuster set the scope) with a copy of
the adjuster's scope of loss. Each contractor should prepare detailed
estimates of the costs of repair based on and written in the same order as the
adjuster's scope of loss so that the adjuster can identify the low bidder.
The adjuster then should prepare an estimate of the cost of repairs for
comparison with the estimates made by the contractors.
Once the adjuster and the insured have agreed to the scope of loss, the
adjuster should have the insured sign the form agreeing to the scope. If the
adjuster had tape recorded the scope of loss, the insured can sign the tape
itself or a transcribed copy of it.
Photograph the Scene
To substantiate the agreed scope of the loss, the adjuster must photograph
the scene—both the damaged and undamaged portions of the property—that is the
subject of the loss. The adjuster must take a complete photographic and written
inventory of the loss scene, taking photographs of everything damaged, any
possible source of ignition of a fire, or any other peril that may have caused
the damage and those things not damaged. If the scene is extensive, the
adjuster should consider hiring a professional to do a video inventory of the
loss location. It should be taken silently. A narration can be added later
after everything has been seen. If there is an extensive contents loss, the
adjuster must retain the services of a salvor to inventory and price each item
of inventory, whether damaged or not.
Contact Authorities
Contact must be made with the official investigating officers, either police
or fire arson investigators, in person. Personal contact is necessary to gain
more than cursory information from a report. The prudent adjuster cultivates a
relationship with official investigators. If the adjuster shows an interest in
their work and an inclination to help, the official investigator will more
readily share information with the adjuster. The adjuster who demands
information from a police or arson investigator will invariably be met with a
refusal to comment. The adjuster should collect as many investigation reports
as are available and may purchase photographs taken by the official agency.
When an arson fire happens, both the arson unit and the local police force will
be on hand, and both will be taking pictures.
Determine Values
The adjuster should obtain from the insured any photographs, videotapes, or
motion pictures the insured or its employees may have made of the loss. He or
she must determine the actual cash value of all of the property insured.
If a replacement cost value endorsement applies, the adjuster also must
determine the full cost to repair or replace the items with like kind and
quality. If necessary to establish values, the adjuster should retain the
services of a real estate or commercial equipment and stock appraiser. In so
doing, the adjuster must consider Moore's Law when calculating the
replacement cost of computers and other electronic equipment since the
replacement cost after a year for a faster and better computer would be less
than the purchase price. My first computer that had two floppy drives and no
hard drive or Internet connection cost $5,000, and my present cell phone has
more power and use than the original computer and cost much less.
Additional Living Expenses
If additional living expenses are involved, the adjuster must instruct the
insured that the coverage is only for "additional" expenses incurred
over normal expenses. Therefore, the adjuster must obtain the amounts of the
insureds' normal expenses for mortgage payments, electricity, gas, water,
trash pickup, gardening, laundry, food, eating out, entertainment, travel, dry
cleaning, property taxes, and any other continuing usual household expenses.
The usual costs and expenses can then be deducted from the actual expenditures
to determine what additional living expenses were actually incurred.
Other Considerations
The adjuster must confirm that the coinsurance, average, or reporting
provisions have not been violated. He or she obtains authority to agree with
the insured as to the amount of the loss and obtains from the insured a signed
proof of loss of property, executed before a notary, under oath, or signed
under penalty of perjury.
The adjuster must obtain a subrogation agreement since almost every loss has
a potential for subrogation and then issue a settlement draft in the amount
agreed in the proof of loss. The adjuster concludes by writing the closing
report with recommendations for the pursuit of subrogation or the disposal of
salvage. If the loss is extensive, the adjuster may need to hire a salvor to
perform a complete inventory for the insurer. If a structure is involved, a
construction consultant or contractor can be retained to advise the adjuster
and, for a fee, to write a detailed repair scope for the benefit of the
adjuster and the insured.
There should be agreement with the insured as to what was left after the
loss and what work needs to be done. If the adjuster does not have an agreed
scope of loss at the beginning of an adjustment, the loss will invariably be
larger when it is finally put together by the insured or the PA.
With regard to personal property, the adjuster will help the insured obtain
verification of the values of the property and descriptions. The adjuster will
develop sources that can establish values of certain classes of personal
property. This can be as simple as collecting retail catalogs, like those from
various retailers or through review of products for sale on Amazon.com,
eBay.com, Etsy.com, etc. The adjuster can also find jewelers, furriers, art
dealers, computer stores, and the like who will talk to adjusters on the
telephone about values. Adjusters should develop sources at firms specializing
in replacing personal property who will provide insurers a volume purchase
discount.
With the insured, the adjuster must prepare, as part of the agreed scope, a
list of all of the damaged or destroyed personal property showing its
description, age, cost, fair market value, actual cash value, or depreciated
value.
A combination of all the efforts recommended will result in the adjuster
establishing the amount of loss and claim and will have no difficulty reaching
a fair and reasonable agreement with the insured.
Write the Captioned Report
Once agreement is reached with the insured, the adjuster must write a full
captioned report to the file and present it to his or her supervisor for
approval. The adjuster must remember that insurers are large organizations with
varying levels of authority for the payment of claims. The adjuster is the
representative at the loss scene. He or she must report in writing to superiors
with the authority to pay the indemnity required unless the claim falls within
the authority provided to the adjuster, who will only then write a short
closing report.
Writing a clear, concise, understandable, and comprehensive report is an
essential part of the adjuster's job.
The captioned report should be written immediately after the adjuster's
first meeting with the insured on every file, no matter how small. The length
and detail of the report should only be limited by the extent of the loss. The
captioned report is written to explain to the adjuster's supervisor all the
adjuster knows about the loss so that decisions required of them by the insurer
and the law can be made. It should be supplemented and updated until an
agreement is reached with the insured or a decision is made to reject the
claim.
It should include no less than the following captions providing full
information on each issue.
- Insurance
- Insured
- Origin
- Potential fraud
- Experts that the adjuster has retained
- Meetings with officials from authorized government agencies
- Risk
- Adjustment
- Title and encumbrances
- Policy violations
- Subrogation and salvage
- Coverage question if needed
- Recommendations if necessary
- Replacement cost agreement
Once the final captioned report is approved by management, the amount of
loss can be agreed to and payment issued promptly but, in no event, more than
30 days after the agreement is reached.
© 2021 Barry Zalma, Esq., CFE