Understanding Claims: Unit 5

September 30, 2014 by


Adjusting Claims
The adjuster’s basic activities in handling claims include:

I. Investigation to establish coverage, determines legal liability, and verify if the alleged damages qualify the loss for payment
2. Evaluation to determine the fair payment in accordance with the contract and applicable law.
3. Negotiation of a quality settlement based on facts discovered during the evaluation process.

The Adjuster’s Investigation

The adjuster’s investigation could be as simple as verification of bills and estimates, or it may be expanded to include taking photographs, interviewing witnesses, or recording statements, as the circumstances require. Also, the facts obtained during the adjuster’s Initial investigation must be transferred into evidence, if and when the claim goes into suit, so that allegations made by the insurer may be substantiated. A general plan of investigation will consist of all or some of the following elements in this sequence:

1. Critical Evidence

  • Statement of the adverse driver (if an auto case).
  • Statement of claimant if other than an auto claim.
  • Statement of the claimant (or claimants in the order of the severity of the injuries).
  • Photograph of the accident scene, showing skid marks and other evidence of the accident in an auto claim.
  • Examination and photographs of the vehicles themselves showing the damage and point of impact if an auto claim.
  • The product itself or the instrumentality causing the injury.
  • The premises or operations causing the claim.

2. Fact Evidence

  • Statements of disinterested witnesses.
  • Statement of the insured, his driver, or employee having knowledge of the accident, the instrumentality causing it, or the
  • part of the premises in which the accident is alleged to have occurred.
  • Negative statements from persons who were in a position to have seen the accident or have some knowledge of its
  • occurrence, but who deny having such knowledge.

3. Official Reports

  • Police report
  • State motor vehicle reports filed by the parties to the accident
  • Fire department reports
  • Reports of state motor vehicle inspectors
  • Traffic court proceeding reports
  • Arraignment in magistrate court
  • Death certificates
  • Autopsy reports
  • Coroner’s inquest transcript
  • Birth and marriage certificates
  • Weather reports
  • School records
  • Certified copies of court records showing prior convictions of crimes
  • Hack bureau reports (if a taxi cab is involved)
  • CAB. reports (aircraft)
  • I.C.C. reports (interstate truckers)
  • Coast Guard reports (boats)

4. Unofficial Reports

  • Newspaper accounts

5. Medical Reports

  • Hospital records
  • Attending physician’s report and records
  • Medical or hospital reports covering preexisting injury or disease

6. Documentary Evidence

  • Deeds of ownership of land
  • Leases
  • Contracts and agreements, especially contracts for construction, alterations and repair, as well as hold harmless agreements

7. Visual Evidence

  • Diagrams or sketches of the scene of the accident
  • Engineering plats
  • X-rays
  • Photographs

8. Verification Evidence

  • Employer’s records to show wage loss
  • Index bureau reports
  • Workers’ compensation claims made by an injured employee, arising out of the same accident

9. Expert Evidence-

  • Report of company medical examiner
  • Automobile inspector or appraiser
  • Engineer or chemist
  • Actuaries
  • Handwriting expert

Guidelines for Taking Written or Recorded Witness Statements

Format of a Written Statement

In general terms, a statement comprises three parts:

I. The introduction
2. The body
3. The closing or conclusion

The introduction will include items such as the date, time, and location of the statement; identification of the interviewee; and so on. The body will include accident data such as the date, time, and location of the accident; vehicle identification (if an auto accident); physical description of the scene; accident description; and injury information. The closing or conclusion will include a closing statement by the interviewee in which he or she states: “I have read the above ( ) pages and ( ) lines and they are true.” Where required, there should be a brief acknowledgment by the interviewee that he or she has received a copy. The closing should also include the interviewee’s signature, and the signature should be witnessed.

Written Statement Captions

I. Identification of date, time, and location of the statement.
2. Identification of the interviewee- The interviewee should be immediately identified. The identification should include age, address, telephone number, marital status, occupation, etc.
3. Date, time, and location. of the accident.
4. Vehicle identification.
5. Background or origin and destination of trip – Include identity of any passengers, activity of driver and passengers before accident, and whether any drinking or drugs were involved.
6. Physical description of scene – Include weather and road conditions in detail.
7. Accident and injury description – Gauging precise distances is difficult. Asking in terms of car lengths might help.
8. Events after the accident- Accusations; conversations; witnesses; police; identity of ambulance driver, hospital, doctors, etc.; condition of vehicles, and so on.
9. Conclusion -As mentioned previously, it is important to have the interviewee read the statement and write, at the close of the statement, “I have read the above ( ) pages and ( ) lines and they are true.” Then, the representative should have the interviewee sign the statement.
10. Signature – The statement should be signed immediately below the closing sentence and on the right side of the page. The left side of that line is reserved for someone to witness the interviewee’s signature, preferably a family member or neighbor. Each page of the statement should be signed and witnessed.

Rules for Taking Signed Statements

The following guidelines for taking signed statements are helpful in ensuring that the format and mechanics of the statement will be correct:

I. At the top right of the first page, note the date, time, and place the statement is being taken.
2. Number and date each consecutive page.
3. No margins should be used.
4. No paragraphs or indentations should be used.
5. No gaps should be left any place on any page.
6. No erasures should be made; all errors should he struck through, the correction should be inserted above it, and the interviewee should initial the correction.
7. No abbreviations (or shortcuts in writing) should be used.
8. Statements must be taken in ink or indelible pencil. (Ballpoint pens or typewriters are satisfactory.)
9. Use the language of the person being interviewed- if he or she uses slang, use slang in the statement.
I0. Make the statement clear, concise, chronological, legible, and complete in every respect. A written statement should flow naturally and lead up to the happening of the accident step by step. In other words, the accident should not be presumed to have already occurred in the statement, but rather it should be worked up to in a natural step-by-step sequence (use a Statement Outline or Guide).
11. The interviewee should read the statement and certify, in his or her handwriting, that he or she has read and understands the statement. Example: “I have read the above two pages and eleven lines and state that they are true.”
12. The interviewee should sign at the end of the statement and at the bottom of each page of the statement, and his or her signature should be witnessed

Recorded Statement Guidelines

I. All parties to the interview must be identified. Date and time of the interview and location of all parties at the time of the interview must be established. Identity of the interviewee should include his or her name, age, and address.
2. It must be clear in the recording that the interviewee was aware that a recording was being made and that it was done with his or her permission.
3. All proper names, unusual sounding locations, and any other words that may not be clear should be spelled out.
4. All interruptions must be explained. The machine should not be stopped after the recording begins unless there is a valid reason, and this reason must be explained in the recording itself. ,
5. Continuity of the recording is necessary. If recording with a cassette and a second cassette is necessary, or if the cassette must be turned over, the interruption of the recording must be explained both before and after changing or turning the cassette.
6. The interview must deal with all aspects of applicable and pertinent facts surrounding the Joss or accident.
7. At the end of the interview, the interviewee must be given an opportunity to make additions or corrections, and an offer extending this opportunity must be part of the recording.
8. The interviewee must be asked whether the questions were understood and whether the answers given were true to the best of his or her knowledge.
9. The interviewee must again be made aware of the fact that the interview was recorded.
10. When the interview has been completed, the representative should play back the last few words to make sure the interview has been recorded.

Instructions to the Interviewee Being Recorded

Before the interview starts, the claim, Representative needs to explain the procedures:

I. The representative should tell the interviewee that this will be a question-and-answer type of interview.
2. The representative should let the interviewee know that he or she will be asked his or her age, marital status, occupation, employer, salary (if a claimant), and Social Security number. This is necessary in order to identify the person being interviewed.
3. The representative should not be afraid to ask the interviewee to speak up if the telephone reception is unclear or if the interviewee is speaking too quietly for the microphone to pick up the responses during the personal interview.
4. When a representative is about to conduct an in-person interview and a second person is present, the representative should ask that person not to interrupt the interview. The representative can explain that he or she will be glad to answer any questions after the recorded interview is completed. If the person does interrupt, the representative must identify the person and have the person state his or her relationship to the accident.
5. The representative should explain to the interviewee that he or she is interested only in the physical facts of the accident during the interview and that other, unrelated factors can be discussed after the interview. (Do not negotiate the claim during the recorded interview or discuss the insurance policy. The representative is interested only in the facts, just as he or she would be when writing a longhand statement.)
6. The interviewee should be asked whether he or she remembers:

  • The date and time of the accident;
  • The names of his or her passengers, witnesses, and other parties and their addresses;
  • The exact place of the accident- highway, stairs, intersection, city or county, and state.

7. The representative should instruct the interviewee to have his or her Social Security number handy.
8. Even with a telephone-recorded interview, the representative should ask the interviewee to draw a sketch of the accident scene, because this will help the interviewee keep his or her thoughts in order.
9. Before recording a telephone interview, the representative should ask the interviewee not to hang up when the interview is completed so that the representative may make arrangements to visit the interviewee and inspect damages.
I0. The representative should advise the interviewee that the recorder will be turned on and that he or she will make a short introduction of the interview.

Common Mistakes When Recording Statements

Common mistakes claim representatives make when recording interviews include:

I. Don’t refer to insurance during the interview. (If coverage is an issue, take a separate statement concerning the coverage question.)
2. Don’t ask leading questions. Instead of asking, “You were in the left lane?” or “Were you in the left lane?” ask, “What lane were you in?”
3. Don’t ask argumentative questions, which tend to create an adverse or a hostile environment.
4. Don’t give your opinions.
5. Don’t express excessive .sympathy.
6. Don’t invite a settlement demand during the interview.
7.Don’t use legalistic words or phrases.

The Evaluation Process

The evaluation process involves establishing a dollar value on the claim. In anticipation of the negotiation process, the evaluation for- bodily injury and uninsured motorist’s claims will involve setting a settlement range, rather than a single dollar amount. At one end of the range is the lowest dollar amount that will fairly reimburse the claimant for the loss and fulfill policy obligations. At the top of the range is the highest amount for which the insurer would be willing to settle the claim, before allowing the claim to go to trial.

Negotiation of Settlement

For successful negotiation, the adjuster must develop strong technical expertise in several major areas, including thorough knowledge of:

I. The contracts issued by the insurer and the coverages provided under these contracts;
2. The characteristics of the various kinds of property insured, typical types of losses, circumstances under which property can be repaired rather than replaced, and typical repair and replacement costs;
3. Our legal system and basic concepts of contract law and legal liability. The adjuster must also have knowledge of the laws and regulations applicable to claims handling in the adjuster’s state, local laws and customs affecting the Claims environment.
4. The insurer’s claims handling goals, and the professional standards the adjuster is expected to maintain.

Alternative Dispute Resolutions

Appraisal Clause – This clause is found in property insurance contracts as well as the physical damage coverage in automobile policies. The purpose of the clause is to allow the insured and the insurer to arrive at an agreed amount of the value of the property damaged. The insured and the insurer each employ their own appraiser. They attempt to agree on the value of the damaged property. If they can’t agree on the value of the loss, then an umpire is consulted. Each shares in the cost of the umpire. The amount agreed to by any of the two of the three parties is the amount paid on the loss.

Arbitration Clause – This is a policy condition that is similar to the appraisal clause to settle disputes between the insured and the insurer. This clause is generally found in the uninsured motorist coverage in automobile policies. An arbitrator, approved by both parties, is appointed to consider the facts and pass them on. If the parties cannot agree on one arbitrator, each is permitted to appoint another arbitrator to represent him or her. Each of the parties’ arbitrators then appoint a third arbitrator acceptable to both. If the parties still do not agree to the provisions, the matter may be referred to the courts. When an award is brought down by any of the arbitrators, it is binding and final and both parties must accept it.

Competitive Estimates- To avoid over payment of claims, the adjuster may ask for more than one estimate of the damaged property.

Mediation – The act of a third person in intermediating between two contending parties with a view to persuading them to adjust or settle their dispute.

Settlement Options/Releases

The adjuster is responsible for knowing the settlement options the insurer offers and understanding the guidelines for their use. Although each insurer’s rules are unique, the following are some of the more common options being offered today:

I. Full Release Settlement -Results in immediate payment when the claimant signs a release relinquishing his or her right to sue.
2. Scheduled Payment Release or Open-Ended Release- General damages, as well as special damages incurred to date, are paid immediately. The claim is left “open” for payment of future “specials” such as an additional visit to the physician.
3. Payment of Physical Damage, Bodily Injury Pending- Is used in a claim where there is both bodily injury and property damage. Because bodily injury claims are typically more complex and take longer to negotiate, the insurer relieves the claimant’s financial burden somewhat by agreeing to pay the property damage claim while leaving the bodily injury claim open until it can be negotiated.
4. No Release or Walk-Away- The bills presented are paid with no attempt to obtain a separate release, although the wording on the draft or check may also serve as a form of release. After a certain amount of time has passed with no further contact with the claimant, the file is considered closed.
5. Advanced Payment- Relieves the financial burden on the claimant by making certain payments to the claimant even before the claim can be negotiated. Advanced payments are subtracted from the final settlement.
6. Structured Settlement- This type of payout is generally reserved for large settlements. The claimant receives payment in installments over a period of time instead of a lump sum. Structured settlements may call for part of the full amount to be paid as a lump sum.
7. Rehabilitation- Includes provisions for rehabilitative treatment of the claimant.
8. Draft Authority- Most Claims adjusters are given draft authority by the insurers to expedite the payment of claims. The insurer will normally limit the draft authority in terms of the limit that can be paid and the lines of insurance to which it applies. The larger more complicated claims would normally be handled by senior claims management and payment made at that level.
9. Subrogation Procedures – Property and casualty policies contain a clause called “Transfer of Rights of Recovery Against Others to Us”. This provision defines the subrogation rights under the policy when the insurer makes a payment to, or for, any person or organization, the named insured or any other; If payment is made under the policy and there is a right to recover damages from a third party, that right is transferred to the insurer to the extent the payment of the claim has been made. The insurer also attempts to collect the deductible, if any, paid by the insured. The role of the adjuster is to determine the amount of sums to be collected by the insurer from the third party and to show just cause against the third party who caused the loss to the extent that their liability is clear.
I0. Appraisal Process – In case of losses involving property, it is often necessary to obtain estimates of the damaged property before payment can be made. Appraisals involve all types of property losses such as automobiles, structures and their contents. Special appraisers or estimators may be required for fine arts, stained glass or other items that require a higher level of expertise.

Types of Adjuster Reports

I. Initial or Field Report- Results of the initial investigation.
2. Interim Report- Interval reports on the status of the claim. This could include taking depositions, getting estimates, additional medical information, determining special damages, etc.
3. Full Report- This is the final report containing all the facts, evidence and disposition of the claim.

Dealing with Coverage Disputes

I. Reservation of Rights Letter – Should an insured fail to report a claim in a timely fashion, and it is determined that the company’s ability to properly investigate the merits of the claim has been compromised; the company will issue a reservation of rights letter. Its purpose is to advise the insured that the insurer will go ahead and investigate the claim but might deny coverage if it determines that its position on the claim has been damaged because of the late reporting of the claim. Insureds should report all claims to the company regardless of their merits.
2. Non-Waiver- Waiver is defined as the giving up of a known right. Therefore, a non­ waiver is the retention of a known right. A waiver may be intentional, unintentional, direct or indirect. If an insurer sends out a renewal .policy by mistake, it has waived its right to deny renewal for any reason. If an agent tells an insured that something is covered by a policy when it is actually excluded, the agent has waived the exclusion. Although many insurance policies attempt to limit the waiver power of agents, courts often hold that agents may waive policy provisions, including clauses prohibiting agent waivers.
3. Declaratory Judgment- A binding judgment issued by the court that defines the legal relationship between the parties and their rights with respect to the matter before the court. A declaratory judgment does not provide for the enforcement of the judgment, however.
4. Diminution in Value- A few jurisdictions permit diminution in value even though the newer versions of some auto policies exclude this provision. This pertains to a vehicle that has been damaged and repaired. The reason for permitting this claim is that the owner is entitled to the difference between the value of the property before and after the accident. Proponents of this damage theory argue that if after making repairs, the owner has still suffered a loss because the market value for a previously wrecked car is less than that of one that has not been wrecked, then the owner is entitled to be compensated for that diminution in value.

Filed Under: Understanding Claims