Lesson 2: The Claims Filing Process
Duties of the Insured – The insured is required by the policy provisions to report a claim to the company as soon as practical. The insured usually reports the claim to his/her agent who provides the claim forms and assists in its completion. The insured must also preserve the undamaged property to the best of his/her ability to avoid additional loss. The following are additional duties that are required of the insured:
Proof of Loss – A formal statement made by the insured to the insurance company regarding a loss. The purpose of the proof of loss is to place before the company sufficient information concerning the loss to enable it to determine its liability under the policy or bond.
Special Requirements/ Production of Books & Records/ Abandonment – The insured must fully cooperate with the insurance company by offering testimony or other evidence including the production of books and records. The insured must separate the damaged from the undamaged property. The insured cannot simply abandon the property to the insurance company.
Duties of the Insurer- It is the responsibility of the insurer to provide a thorough investigation of the claim and to keep adequate documentation of the investigation.
Claims Investigation – This is the duty of the insurance company to perform on behalf of the insured and to also protect the interest of the insurance company. Each insurance policy contains a clause that outlines the duties of the insurance company. This is found in the insuring agreement in most liability policies. State law requires that the claim be handled “promptly”.
Documentation of Events – Each company has its own claim procedures and methods of documentation. Records must be kept in such a form to present to an insurance examiner should the occasion arise. Such .files shall contain all notes and paperwork pertaining to the claim in such detail that pertinent events and the dates of such events can be reconstructed.
Standards for the Acknowledgment of Pertinent Communications:
a. Acknowledgment of Notices of Claim – Every insurer, upon receiving notification of a claim shall, within a specified number of working days, acknowledge the receipt of such notice unless payment is made within such a period of time. If an acknowledgment is made by means other than writing, an appropriate notation of such acknowledgment shall be made in the claim file of the insurer and dated. Notification given to an agent of an insurer shall be notification to the insurer.
b. Answer of inquiries from insurance department – Every insurer, upon receipt of any claims inquiry from the insurance department shall, within a specified number of working days, furnish the department with a response to the inquiry.
c. Replies to other pertinent communications -The insurer shall reply within a specified number of working days to all other pertinent communications from a claimant that reasonably suggest that a response is expected.
d. Provisions of assistance to first party claimants – Every insurer, upon receiving notification of a claim, shall promptly provide necessary claim forms, instructions, and reasonable assistance so that first party claimants can comply with the policy conditions and the insurer’s reasonable requirements.
Standards for Prompt Investigations and Fair and Equitable Settlements Applicable to all Insurers:
a. Investigation of claims – Every insurer shall establish procedures to commence an investigation of any claim filed by a claimant, or by a claimant’s authorized representative, within a specified number of working days of receipt of notice of claim. Every insurer will provide to every first party claimant, or the claimant’s authorized representative, a notification of all items, statements and forms, if any, that the insurer reasonably believes will be required of the claimant, within a specified number of working days of receiving notice of the claim. A claim filed with an agent of an insurer shall be deemed to have been filed with the insurer unless, consistent with law or contract, such agent notifies the person filing the claim that the agent is not authorized to receive notices of claims.
b. Offers of Settlement – In any case where there is no dispute as to coverage or liability, it shall be the duty of every insurer to offer claimants or their authorized representatives, amounts which are fair and reasonable as shown by its investigation of the claim, providing the amounts so offered are within policy limits and in accordance with the policy provisions.
c. Denial of Claims – No insurer shall deny a claim on the grounds of a specific policy provision, condition or exclusion unless reference to such provision, condition or exclusion is included in the denial. The denial must be given to the claimant in writing or as otherwise provided by law.
d. Records of all claims that have been denied – If a denial of a claim is made by any other means than writing, an appropriate notation shall be made in the claim file of the insurer.
e. Notice of necessary delay in investigating claims (cont.) -Where there is a reasonable basis supported by specific information available for review by the commissioner/insurance department that such claimant has fraudulently caused or contributed to the loss by arson, the insurer is relieved from the requirements of this section, provided, however, that the Claimant shall be notified of the acceptance or denial of the claim within a reasonable time for full investigation after receipt by the insurer of a properly executed proof of loss.
f. Liability of others – Insurers shall not fail to settle first party claims on the basis that responsibility for payment should be assumed by others except as may otherwise be provided by policy provisions.
g. Denial of claims for failure to exhibit property- No insurer shall deny a claim for failure to exhibit the insured property without proof of demand by the insurer and refusal by the claimant to exhibit said property.
h. Separation of claims – In any case where there is no dispute as to one or more elements of a claim, payment for such element(s) shall be made notwithstanding the existence of disputes as to other elements of the claim where such payment can be made without prejudice to either party:
i. Time for payment of claims – Every insurer shall pay any amount finally agreed upon in settlement of all or part of any claim not later than a specified number of working days from the receipt of such agreement by the insurer or from the date of the performance by the claimant of any condition set by such agreement, whichever is later.
j. Notice of applicable time limitations – No representative of the insurer shall negotiate for settlement with a claimant or the claimant’s attorney without giving the claimant written notice that the claimant’s rights may be affected by a statute of limitations or a policy or contract time limit. Such notice shall be given to first party claimants within a specified number of days and the third party claimants a specified number of days before the date on which such time limit may expire.
k. Avoidance of payment- Where liability and damages are reasonably clear, no person shall recommend that third party claimants make claim under their own policies solely to avoid paying claims under an insurer’s insurance policy or insurance contract.
I. Unreasonable travel – No person shall require a claimant to travel unreasonably either to inspect replacement motor vehicles, to obtain a repair estimate or to have the motor vehicle repaired at a specific repair shop.