Property Claims
Duties of the Insured & the Adjuster
Duties of the Insured
The insured has several duties imposed by common first party property insurance contracts:
The insured is required to report losses promptly.
The insured is required to cooperate in the insurer’s investigation. This cooperation can entail as little as letting the adjuster on the premises to as much as creating a list of all damaged and destroyed property, gathering invoices and receipts to support the claim, and providing the insurer with a recorded statement.
The insured is required to produce all relevant documents that the insurer requests and, if necessary, appear for and testify at an examination under oath.[1]
Under most property policies the insured is required to present a sworn proof of loss to the insurer, usually within 60 to 90 days of the loss, or 60 to 90 days after the insurer requests the insured to present a sworn proof of loss.
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 (1900)] But the insurer's right to rely upon the time limitation may be waived according to California Insurance Code § 554. [Savage v. Norwich Union Fire Ins. Soc., 125 Cal.App. 330, 13 P.2d 955; and Beasley v. Pacific Indem. Co., 200 Cal.App.2d 207, 19 Cal.Rptr. 299 (Cal. App. 1962)]
People who buy insurance do not usually understand that it is the obligation of an insured to prove to the insurer that there is a loss and that the loss is due to a peril insured against and not excluded. This lack of understanding became evident when the case of Ravinia Vogue Cleaners v. Travelers Casualty Insurance Company of America, Case No. 16-cv-10311, the United States District Court for the Northern District of Illinois Eastern Division (July 24, 2019) was brought before the US District Court for decision.
Ravinia Vogue Cleaners sued Travelers Casualty Insurance Company of America alleging breach of contract and unreasonable conduct for violating the parties’ insurance agreement. The Policy included certain exclusions to which it would not provide coverage for damage or loss. One of the exclusions to coverage was from damage relating to a “collapse of buildings.” The Policy defined collapse as: “[A]n abrupt falling down or caving in of a building or any part of a building with the result being that the building or part of a building cannot be occupied for its intended purpose.”
However, the Policy allowed for certain exceptions to this exclusion, such as the exclusion of coverage was when the “collapse” was caused by, as relevant here: “(1) weight of snow or (2) use of defective materials or methods in construction, remodelling or renovation if the collapse occurs after construction, remodelling, or renovation is complete . . . .”
The Policy also stated that a building that “is in imminent danger of abruptly falling down or caving in” or “suffers a substantial impairment of structural integrity” is not a “collapse” but rather is in a “state of imminent collapse.”
Ravinia Cleaners reported that there was a leak coming from the ceiling. Travelers sent a claims inspector to evaluate the damage but the local Chicago area snow and ice damning prevented him from inspecting the roof. That same day, construction workers put temporary “shoring” in place on the ceiling.
Travelers informed Ravinia Cleaners that it was denying its claim on May 20, 2015. In its denial letter, Travelers asserted that coverage was excluded because the building (roof) was in a state of imminent collapse.
Travelers asserted that the three weeks between the initial report of the leak and the report of the truss failure demonstrates that there was no “abrupt falling down or caving in” as the Policy defines “collapse.” Travelers also pointed to the temporary shoring that was put in place on February 6, 2015 which actually prevented a collapse.
There can be no dispute that the language of the Policy is what controls the analysis of whether coverage applies to the imminent collapse of the building. The exact terms of the report done by Travelers’ engineer (i.e., buckling truss, roof displacing downward) did not demonstrate a “collapse” because the Policy states that a building that suffers substantial loss to its structural integrity or is in imminent danger of falling down is not a collapse.
When reading the Policy as a whole, it is clear that the parties did not intend for the damage to be considered a “collapse” but rather that the roof and truss structure suffered substantial impairment and was in a state of imminent collapse. Since the Policy excludes coverage from damage related to the building being in a state of imminent collapse unless caused by the weight of snow Travelers established that the exclusion to coverage applied and that it was entitled to judgment as a matter of law.
Once the insured meets his or her burden of proof, the onus shifts to the insurer to prove an exclusion or other policy provision removes the insured’s right to the benefits of the policy. Whether Ravinia Cleaners carried its initial burden Travelers carried its burden to prove that the claimed loss was not due to an insured against peril.
It should be axiomatic that a false statement on a sworn proof of loss defeats any claim. When the Wisconsin Supreme Court found that the insured committed arson, lied to the insurer, Kemper, in the Sworn Statement in Proof of Loss and at an Examination Under Oath, and tried to induce Kemper to rely upon his lies, the “concealment or fraud” condition, the Policy provides no coverage for any insured. [Kemper Indep. Ins. Co. v. Islami, 2021 WI 53 (Wis. 2021)]
Duties of the Adjuster
No standard policy of property insurance mentions the insurance adjuster. No insurer is required to have an insurance adjuster on staff. All of the obligations with regard to the proof of a claim rests on the insured. Regardless, insurers learned that requiring an insured to do everything proved to be unworkable.
Insurance is a service business. Insurers quickly learned that most people who suffer a loss find it traumatic. Few knew that the policy contained conditions. Almost none understood that they were required to report a loss immediately or submit to the insurer a sworn proof of loss no later than sixty days after the occurrence of a loss. All have difficulty complying with the conditions of their policy. To resolve the problem and to assist insureds in complying with policy requirements insurance companies created the position of insurance adjuster.
The adjuster provides the assistance the insured needs to comply with the policy conditions. The adjuster is the living embodiment of the insurance company. It is the adjuster who communicates with the insured after a loss is reported to the insurer.
Usually, the insurance adjuster is the only person connected to the insurance company the insured will ever meet. The adjuster provides the insured the service promised by the insurance company. He or she is the person the insured meets when he or she faces a loss and needs help. It is the adjuster, and the help he or she gives the insured, that is the means by which the insurer keeps the promises it made when the policy was issued. Without this service insurers would be unable to convince the insured or a jury that the insurer treats each insured with good faith and fair dealing.
The adjuster is the foundation upon which an insurer is built. If the adjuster is not professional and does not provide the service promised by the insurer, the promise made by the policy is broken and the insurer will first lose customers and ultimately fail. Every insurer is aware that claims that are owed must be paid promptly and with good grace. To do otherwise would be to ignore the purpose for which insurance exists: to provide service, protection, and security to the insured.