A person insured seldom meets an employee of the insurer. After a loss, the first person employed by the insurer that the insured meets is the insurance adjuster.
The insurer hired the adjuster to keep the promises made by the insurance policy issued by the insurer. It is the adjuster that the insured expects to keep the promises made when the policy was sold and with great regularity that is what the adjuster does with the assistance and cooperation of the insured.
The adjuster, to keep the promises made by the policy, is obligated to investigate the loss, interpret the policy wording, and apply the words of the policy contract to the facts discovered by the investigation so that a well-reasoned decision can be made about the claim.
For example, in Florida, an independent insurance adjuster owes a duty to the insurance company arising out of the contract between the insurance company and the independent adjuster. [King v. National Sec. Fire and Cas. Co., 656 So.2d 1338 (Fla. App. 1995)] and under Oklahoma law an independent insurance adjuster hired by an insurer to investigate a claim does not owe a duty to the insured to conduct a fair and reasonable investigation. [Trinity Baptist Church v. Bhd. Mut. Ins. Servs., LLC, 341 P.3d 75 (Okla. 2014)]
The insurance adjuster, whether an employee of the insurance company or an independent adjuster retained by an insurer for the purpose of adjusting a single, or series of claims, on behalf of the insurance company. There are multiple acts required of the adjuster to perform the duty of an adjuster professionally.Property Insurance Claim Adjusting
Read the Policy
The key to any insurance adjustment is the ability to read, understand and apply the terms, conditions, and limitations of the policy of insurance.
To understand a first party property policy of insurance, the adjuster must read and analyze the entire policy in a thorough, logical and fair manner. The facts of each individual claim will clarify and color the interpretation of the policy contract and bring different nuances to the adjuster’s interpretation of the policy language. The adjuster must know what coverage is available to the insured, the limits of liability, the territory limitations, and the exclusions, conditions and endorsements attached.
Before beginning to investigate a first party property insurance claim a professional adjuster must first confirm the existence of coverage and how that coverage applies to the claim presented by the insured. To fulfill the duty the adjuster must get a complete copy of the insurance policy.
The company’s copy (sometimes called the “daily” if still on paper) usually has only a “declarations page” and partial copies of standard forms. If the underwriting file is completely digital, the entire policy and underwriting materials are available on an insurer’s intranet, and it is imperative that the adjuster have access to the digital file. Most insurers today include all policy wordings on the company intranet so that the adjuster can have access to the policy wording without leaving his or her computer.
If the insurer still uses paper files the adjuster can recreate the policy from the declarations page, from forms available in the underwriting department, or available from the insurance agent or broker. When all options fail, the best source of a complete copy of the policy is the insured.
Once the policy language is established, the adjuster should explain to the insured the coverages available and any problems that might exist based upon the facts of the loss that will be developed by the investigation. This requires an adjuster with the ability to explain what the average insured considers the complex language of an insurance policy into language a lay person who has never read an insurance policy will understand.
The adjuster must be familiar with each of the exclusions or exceptions from coverage. The so-called “concurrent cause doctrine” does not exist with regard to first party property insurance in California and many other states and does exist in some states.
It is important, therefore, that the adjuster understand how the so-called “concurrent cause doctrine” applies in the state where the claim is being adjusted.
The “concurrent cause doctrine” holds that if more than one cause concurs with others to bring about a loss and one cause is excluded and the other is not excluded, coverage will apply regardless of the proportion with which the non-excluded cause was related to the loss. This is still the law in California for third party losses but not for first party losses.
Before other states could adopt the concurrent cause doctrine for first party losses the insurers changed the policy wording to avoid insuring against something they thought they had excluded. They now require with recently published policy wording that coverage be determined, on first party policies, by the cause that is the primary, moving, or efficient proximate cause of the loss.
Read the Loss Notice
The loss notice is one of the most important documents the adjuster will see. It is the starting point of all claims investigations.
It tells the adjuster:
when the loss occurred;
the type of coverage the insured has;
the type of loss;
the insured’s name, address, and telephone number;
the agent’s name and address;
the location of the loss;
who to contact and how to contact him or her; and
whether there is anything to which the adjuster should give special attention.
Meet with the Insured and Witnesses
Once the adjuster has completed this basic preparation, he or she should arrange to meet with the insured and witnesses. The adjuster should explain to the insured that the policy requires the insured to prove his or her loss to the insurer. The insurer, in order to provide the best service possible and to act in good faith to its insureds, hires the adjuster to help the insured prove his or her loss.
The adjuster cannot prove the loss for the insured, he or she is only present to help the insured fulfill the obligation to prove the loss. To act in good faith the adjuster must not do, or fail to do, anything that will deprive the insured of the benefits of the policy of insurance. Similarly, the adjuster should also recognize that the insured must treat the insurer in good faith and may not do anything that will deprive the insurer of the benefits of the policy of insurance.
The duty arises by virtue of the contractual relationship, but the breach of the duty sounds in tort. [Walter v. F.J. Simmons and Others, 818 P.2d 214, 236 (Ariz. Ct. App. 1991). Although an insurer may delegate the performance of its duty of good faith to a non-servant, an adjuster or independent adjuster, it remains liable for the actions taken by this delegate because the duty of good faith itself is non-delegable." [McGhee v. Sedgwick Claims Mgmt. Servs. Inc. (D. Ariz., 2019)]
The relationship between an adjuster and the insured is a purely contractual one in Mississippi and an adjuster does not owe the insured a fiduciary duty nor a duty to act in good faith. [Bass v. California Life Ins. Co., 581 So. 2d 1087,1090 (Miss. 1991) (internal citations omitted); and Luckett v. Allstate Indem. Co. (S.D. Miss., 2019)] Of course, if the adjuster acts wrongfully as an agent of the insurer, the insurer can be held responsible for breach of the contract and breach of the covenant of good faith and fair dealing.
In Florida, the independent insurance adjuster owes a duty to the insurance company arising out of the contract between the insurance company and the independent adjuster, and does not owe a duty to the insured unless the insured is suing for an intentional tort. [Howard v. Crawford & Co., 384 So.2d 1326 (Fla. 1st DCA 1980); King v. National Sec. Fire and Cas. Co., 656 So.2d 1338 (Fla. App., 1995)]
The Sworn Statement in Proof of Loss
Modern insurance policies have modified the standard fire policy language (that requires a proof of loss within 60 days of the loss) to only require a proof of loss within 60 days of the date the proof of loss is requested by the insurer.
The prudent adjuster should immediately, upon assignment, advise the insured that a proof of loss is required within 60 days of the notice and provide the insured a blank form of proof of loss.[1]
The proof of loss is a key document that should be obtained and executed under oath by all insureds on every loss. A proof of loss is the sworn statement of the insured required by the conditions of the policy of insurance. It sets forth the insured’s knowledge and belief as to the date, time, and cause of the loss; the encumbrances on the property; the persons with an interest in the property; the value of the property; the amount of loss; and the amount of claim.
Presenting a sworn proof of loss to the insurer is a condition precedent to receipt of indemnity. Technically, without a sworn proof of loss the insurer owes nothing. Usually, if the insurer and the insured agree the adjuster will prepare the proof of loss as evidence of the agreement. Some insurers, especially with small or minor losses, will waive the requirement for a sworn proof of loss.
The adjuster must advise the insured of his or her obligations under the policy, including the obligation to submit a sworn proof of loss within 60 days of the date of the loss or 60 days of the insurer’s written request for a sworn proof of loss. The proof of loss is a key document that should be obtained and executed under oath by all insureds on every loss. A proof of loss is the sworn statement of the insured required by the conditions of the policy of insurance. Failure to submit a sworn proof of loss will deprive the insured of a right to any of the benefits of the policy.
In general, failure to file the proof within the time limited by the policy is fatal to an action upon it. [White v. Home Mutual Ins. Co., 128 Cal. 131, 60 P. 666; Beasley v. Pacific Indem. Co., 200 Cal.App.2d 207, 19 Cal.Rptr. 299 (Cal. App. 1962)]
The insured may retain the services of a public adjuster (PA) to help him or her prepare a proof of loss. A PA, for compensation, acts on behalf of, or helps, an insured in negotiating or effecting the settlement of a claim for loss or damage under any policy of insurance covering real or personal property.
The oath carries with it the penalties of perjury—up to five years in prison in most states. More important than the seldom-prosecuted criminal penalties, if the proof of loss is falsely sworn, the insured loses any right he or she might have to any of the benefits of the policy.
In Gowland v. Aetna, 143 F.3d 951, 953 (5th Cir. 1998) the Fifth Circuit affirmed the Western District of Louisiana's decision to grant an insurance company's motion for summary judgment on the basis that the plaintiffs failed to file the requisite proof of loss. Plaintiffs in Gowland acknowledged they never filed a formal proof of loss, but unsuccessfully argued that the insurance company waived the proof of loss requirement by repeatedly re-opening their claim after the 60-day deadline and failing to mention the proof of loss requirement as a basis for denial.
In Paulsen v. State Farm Ins. Co., 2008 U.S. Dist. LEXIS 9942, the court held that the report and estimate completed by the hired adjuster did not meet the proof of loss requirement. [Moran v. Am. Bankers Ins. Co. (E.D. La., 2019)]
In Minnesota, the court stated:
We adhere to the rule expressed in earlier Minnesota cases that a commercial insurance policy requiring timely proof of loss as a condition precedent to recovery is enforceable. See Sterling State Bank v. Virginia Sur. Co., 285 Minn. 348, 354-55, 173 N.W.2d 342, 346 (1969) (noncompliance with condition precedent of proof of loss is "fatal to recovery" under theft-insurance policy); see also Shapiro v. Western Home Ins. Co., 51 Minn. 239, 53 N.W. 463 (1892) (enforcing fire-insurance policy requirement that proof of loss be provided within 60 days as condition precedent to the right of recovery); Bowlin v. Hekla Fire Ins. Co., 36 Minn. 433, 31 N.W. 859 (1887) (same for 30-day requirement, unless waiver could be shown).
Although courts are reluctant to construe proof-of-loss requirements as providing for forfeiture, the policy language unambiguously provides that the insured may not bring suit unless all the policy provisions are complied with and thus acts as a condition precedent to recovery. See Sterling State Bank, 285 Minn. at 351, 173 N.W.2d at 344 (finding similar policy provision condition precedent to recovery). [Nathe Bros. v. American Nat. Fire Ins., 597 N.W.2d 587 (Minn. App. 1999)]
