Lesson 3: Adjusting Losses
Property Losses
There are certain steps taken by the adjuster in the initial process of adjusting a property loss. Some of these are:
- Verify the effective date of the coverage
- Verify coverage and the proximate cause of loss to determine if coverage applies.
- Verify the insurable interest of the named insured in the property. Did they have an insurable interest at the time of the loss?
- Determine if there are other entities having insurable interest in the property such as a mortgagee, a loss payee, or other insureds.
- Determine if other insurance will apply.
- Determine if the loss was caused by a third party, in case subrogation against that third party can be pursued.
- Verify that the insured has complied with their obligations under the policy such as protecting the property from further loss.
- Assist the insured in mitigating the loss by providing assistance and guidance.
- Are there any special policy provisions that apply?
- Are there special deductibles that apply?
- Is part of the damaged property subject to policy limitations as regards limits or peril coverage?
- Is the property insured in compliance with a coinsurance clause?
- Is the property covered on an actual cash value basis, replacement cost basis or a valued or agreed amount basis?
- Determine the extent of the salvage, if any, and its value.
I. Determining Value & Loss – The burden of proof is the responsibility of the insured to prove the value and cause of loss under a named peril policy. Under an open peril form the burden of proof is sometimes left up to the company to prove the loss is excluded. The insured is also obligated to produce estimates of loss and to separate the damaged property from the undamaged property.
- Depreciation – Depending on the type of coverage the insured has purchased, some insurance forms allow for depreciation of the damaged property. If the insured carries replacement cost coverage, and is insured to value, then depreciation would usually not apply.
- Salvage – Unless otherwise agreed to, the salvaged property belongs to the insurance company when they pay the loss.
2. Claim Settlement Options- The following are claim settlement options for property insurance:
- Repair the property
- Replace the property with like kind and quality
- Replace the property with new
- Fair value for damaged property.
3. Payment and Discharge – The payment of a claim in exchange for a release indicating that the claim was paid as a result of a settlement agreed to by all parties.
Liability Losses
In liability losses, the adjuster must do most of the following in the investigation of the claim:
- Verify coverage
- Determine liability
- Physical evidence
- Witness statement
- Determine the physical damages
- Determine the special damages (medical expenses, loss of wages and other expenses)
- Determine the general damages (intangibles such as pain and suffering)
- Determine if litigation is eminent and estimate defense costs and the probability of success in a lawsuit
- Determine if other parties to the loss contributed through their negligence
- Determine the value of the salvage in case payment is made
Types of Liability Policies
- Auto Liability Losses
- Commercial General Liability
- Personal Liability
- Professional Liability (including medical and non-medical)
- Aircraft, boat, ocean marine
Except for non-medical professional liability claims, liability losses usually involve bodily injury and property damage claims.
Claim representatives evaluating bodily injury claims should consider the following damage elements:
- The amount of medical expense
- The type of injury
- The claimant’s wage loss or loss of earning capacity because of the injury
- The pain and suffering resulting from the injury
- The extent of disability and impairment
- The claimant’s loss of enjoyment from an injury
- Any disfigurement resulting from the injury
- Whether preexisting conditions contributed to the injury
Claims Settlement Options – Claims settlement options for liability claims include lost wages, disfigurement, loss of consortium and loss of use. These are categorized as:
- Special Damages – These include medical expenses and loss of wages or the costs of other known expenses.
- General Damages -These would include pain and suffering, punitive damages, loss of consortium, disfigurements and disability claims. In the case of general damages the costs are not immediately known and are usually negotiated or determined in a court of law. These are intangible damages are the most difficult to determine in case of a loss.