Volume 1, Number 3
|Table of Contents|
Processing An Insurance Claim - Part II
In Part I the theme was helping the client find insurance. Once the client has insurance, the rest is easy, right? Unfortunately, not. Insurance is different than most other products that a client will purchase. The client gets nothing. At least, the client gets nothing physical except a piece of paper. The insurance industry trains new employees by telling them that the insured, your client, has purchased a promise and it is the employee’s job to make sure that the insured gets what is promised.
What is actually promised? The insurance company promises to pay all covered first party claims in a timely manner and to defend and indemnify all third party cases. The insurance company promises to act with the utmost good faith towards their insured. But, this really only happens once - when the insured has a claim. Claims adjusters have a saying: “We are the only contact with an insured after they buy the policy, and then its only because something bad happened.” In order to help your client through this bad experience, you need to know what is available to your client.
Now that you have helped your client obtain insurance, what do you do when there is a claim. A law school professor, a retired judge, from the midwest, once asked this in an insurance law class. A student raised his hand, and when called on, proudly and confidently answered “Sue the insurance company.” The professor chuckled, shook his head, politely nicknamed the student “Flamingo” and asked if anyone else might have an answer. The correct answer was soon given -
report a claim to the client’s insurance agent. While this story is humorous, it does point out that most attorneys do not know what to do when their client suffers a loss.
The size of the loss is one factor in determining what needs to be done. On a small loss, the client can probably handle it without assistance. Anything under a few thousand dollars, maybe even up to $10,000, the client should be able to resolve with the insurance adjuster, and, with some insurance companies, possibly even the insurance agent. Of course, you should be prepared to offer assistance if the matter is not quickly resolved. Some of the assistance may be in getting forms, such as a Sworn Statement in Proof of Loss, notarized, assisting the client in locating a CPA to review the books, or providing the insurance company with documents such as incorporation papers, leases, or other legal documents. Larger losses can be more of a problem.
First party losses such as theft, fire and vandalism may require some assistance. There are a variety of sources available for clients. The first line of defense should be the attorney who has helped the client so far. If you have been involved with the client in choosing insurance products than you have familiarity with the policy, the agent, and can best assist the client. You may act as a liaison between the client and the insurance company. Just as on a smaller loss, you may provide documents. You should also be present if the client is asked to give a statement or a statement under oath.
However, if the loss is larger, more complicated or requires some specialized knowledge, than you need to bring in some true experts. The ABA Journal can be a resource to find experts. (TRIAL, the magazine of ATLA, a plaintiff’s association, also lists excellent experts, as does the Defense Research Institute monthly magazine.) If you cannot find an expert in these sources, go to your list of attorneys who specialize in insurance coverage and see if they have some contacts - or find an insurance adjuster turned attorneys. If none of these sources work for you or the client, and the client needs someone, you may need to contact a public adjuster.
Public adjusters are licensed insurance adjusters who work only for insureds. The public adjuster usually take a percentage of the total loss, similar to a contingency fee agreement on a personal injury case. But, for a busy client, a client who needs to be involved in the business, or a client with a substantial loss, this service can be worth many more times than the cost. Public adjusters can be found at the National Association of Public Insurance Adjusters ( www.napia.org). As with any recommendation, due diligence should be completed on the public adjuster. One or more of these sources should be able to help your client avoid a less than full recovery on a first party insurance claim.
On third party losses, the use of counsel becomes more important. If your client is involved in an automobile accident, has a slip and fall on the premises, or another third party case, the quick involvement of counsel can make all the difference. Sometimes clients do not want to report a claim to the insurance company. However, you can advise them of the importance of timely reporting and make sure that the claim is timely and accurately reported, as is required by the insurance company. (Failure to report a claim timely may result in a denial of coverage.) You can also direct any investigation, in conjunction with the insurance adjuster, and thus preserve attorney work product privileges that may be applicable. But, more importantly, you can protect your client’s interest from start to finish.
Once your client suffers a third party loss, there is a chance of litigation. Even if you are not a litigator, you may want to bring in a litigator to help your client. While most insurance policies provide that the insurance company elects counsel, not all policies do. If your client’s policy allows the client to choose counsel, then quickly bringing in trial counsel experienced in litigation will allow trial counsel to be involved every step of the way and potentially save time and money. If the policy allows the insurer to choose counsel, then the client may still have someone looking out for their interests - especially important in a consent to settle policy. Additionally, in consent to settle policies, someone will need to advise the insured whether they should give consent to settle. Further, a conflict of interest may develop with the insurer or the client may not understand the process. All of these situations present an opportunity for you to provide counseling and insight to your client. These add value to your service.
Clients, hopefully, do not go through the claims process often. It is a new and frustrating process for them. Your guidance, your expertise, your knowledge of when to bring someone else in, all provide an important service to your client. This is a process though which only the brave tread alone.