Liability Insurance Claims
Duties of the Parties Involved with a Liability Claim
Every policy of third party liability insurance requires, as a condition precedent,[1] that the insured give prompt notice to the insurer and cooperate with the investigation of the loss and the defense the insurer promised to provide. The insured is also required to cooperate in the investigation of the insured, assist in the defense of any litigation brought against the insured, assisting in the preparation of answers to interrogatories, requests for admission, sworn declarations and attending and testifying at deposition and trial. After the report of loss the insurer will assign an insurance adjuster to deal with the claim.
Duties of the Adjuster
When a claim is made, the insurer provides an adjuster to help the insured understand the policy and comply with its conditions.
The role of the liability adjuster is slightly different to that of the property adjuster. Like the property adjuster, the liability adjuster represents the insurer and deals directly with the insured. But these responsibilities play out in a distinct way for the liability adjuster, who has a threefold duty:
to the insured, to protect him or her against exposure to liability to third parties as a result of an accidental tort that falls within the definition of “occurrence”;
to the claimant, to treat him or her fairly and, if liability exists, to resolve the claim promptly without ignoring the duty to the insured; and
to the insurer, before agreeing to resolve a claim, to establish that coverage exists for the loss under the terms and conditions of the policy, that the insured is liable to the third party, and the most reasonable resolution of the claim has been achieved.
The liability adjuster works with the insured to provide the best possible defense to the claim presented against the insured by a third party. The adjuster must understand the meaning of complex contracts (not just insurance contracts) and the rules for interpreting them and be able to explain them in language that a lay insured will understand.
He or she must also be knowledgeable about the law of torts in order to:
§ evaluate the exposure faced by the insured as a result of the loss;
§ evaluate the abilities of various defense counsel best suited to defend the insured if sued;
§ retain an insurance tort lawyer on behalf of the insured and the insurer the adjuster is confident is capable of defending the insured;
§ control as much as possible the work and expenses of tort defense counsel by conducting investigation requested by counsel and assisting counsel in preparing the defense; and
§ negotiate and conclude claims presented by third parties with or without the need to involve counsel.
An adjuster, by definition, is a representative of the insurer who seeks to determine the extent of the insured's liability for loss when a claim is submitted. The adjuster is a person who acts for the insurance company or the insureds in the determination and settlement of claims.[2]
The adjuster resolves claims and negotiates settlements with third parties. Only when the adjuster fails is it necessary to retain counsel to defend the insured. If liability is clear and the claimant is reasonable a settlement will be reached.
A majority of all claims are resolved without the insurer having to retain counsel to defend the insured by the adjuster reaching an amicable settlement with the third party.
The adjuster’s primary duty is to protect the interest of the insured, and by doing so the adjuster provides the service promised by the insurer, and coincidentally protects the interest of the insurer.
The adjuster serves the insurer by:
Ø thoroughly investigating the loss and claim;
Ø determining that the policy agreed to defend and/or indemnify the insured for acts like those claimed by the claimant;
Ø observing the risk—the property that is described in the policy—firsthand and providing information that is of interest to the underwriters;
Ø interpreting the insurance contract as it relates to a specific fact situation;
Ø detecting fraud whether attempted against the insured or the insurer;
Ø assessing loss and damage; and
Ø negotiating a fair and equitable settlement with the third party.
The adjuster’s job is to assist the insured to prove the insured’s claim is due to an occurrence insured against and to ensure that the insured receives the maximum defense and indemnity available from the policy. To do so, the adjuster must know the settlement and jury value of injuries to property and persons in his or her jurisdiction.
Recent statutes in California and other jurisdictions now require independent insurance adjusters to take 12 hours of continuing education, including ethics training, every year to maintain their license.[3]
“West Virginia's law clearly indicates that, while insurance companies owe a duty of good faith and fair dealing to their insureds, agents and adjusters owe their allegiance solely to the insurance company.”[4] Of course, the adjuster that performs that duty fairly and in good faith protects the interests of the insurer and allows the insurer to avoid allegations of bad faith conduct.
Florida law precludes negligence claims by insureds against adjustors hired by insurance companies, though it allows for intentional torts. [King v. National Security Fire and Casualty Company, 656 So.2d 1338, 1339 (Fla. 4th DCA 1995)]. The King case actually found an exception only for “an intentional tort under Howard v. Crawford & Co., 384 So.2d 1326 (Fla. 1st DCA 1980).” The Howard decision involved fraud and misrepresentation by an adjuster against an insured, reliance by the insured and resulting damages.[5]
On the other hand, the Supreme Court of Alaska found that (1) insurer's salaried adjuster owes insureds a duty of care, enforceable in a tort action against the adjuster personally, to exercise reasonable care in connection with claims by insureds that are assigned to adjuster for investigation; (2) present evidence that bodily injuries sustained by child arose from “accident;” and (3) note that a policy's criminal and intentional act exclusions did not exclude coverage on the facts of the case.[6]
Clearly the adjuster trained to handle claims in Alaska will have a greater obligation than the adjuster trained to deal in other states like Florida that hold the adjuster’s duty of care is to the insurer alone.
Duty to Defend
When liability insurance was first offered to the public it was concerned only with indemnity. As liability insurance developed, the concern about defense costs matured into clauses promising defense as well as indemnity — the so-called dual-promise policies.