Expert Commentary

The Basics of Property Claim Adjusting

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

Claims Practices
February 2021

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.

Insurance Services Office, Inc., form HO 00 03 04 91, Page 9 of 10

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,,, 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.

1This article was adapted from Barry Zalma's book, The Compact Book of Adjusting Property Insurance Claims—Second Edition, available as a Kindle book or a paperback from

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.

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