Remember back in the day when an insurance adjuster arrived at your house to inspect the damage and the adjuster wrote you a check on the spot? Some of you may, but most do not because it probably rarely happened. There may have been a day when most insurance companies paid claims immediately and in a manner respectful of the policyholder. Many claims departments required adjusters to help the insured find coverage. But, this is rarely the case today. Chip Merlin has even written about one insurance company currently calling out its competitors for not properly servicing policies in Chubb Calls Competitors Cheap And Unfair.
So what happened? Think “technology” – think “software.” In the “good ‘ole days,” the adjuster would come out, inspect the damages, prepare his calculations based on his observations and could sometimes write you a check right away. So who does the calculations now? Probably a computer. There is a significant chance that the insurer you are dealing with uses one of several software options to handle your insured’s claim. Unfortunately, these programs are designed to reduce claims payments and increase profits for the insurer. Some software programs can be used to evaluate the claim in general –a program that sets forth the different areas of the insured property that were damaged, the types of materials that will be needed to conduct proper repairs, the amount and cost of repair/replacement materials, labor, etc. Another program can be used to calculate the reserves that should be set up for the claim. There is a program that can establish settlement parameters. Other programs are designed to “calibrate” adjusters’ handling of claims so that there is a more uniform manner of adjusting claims. Want examples? Colossus, “ICE” – Injury Claim Evaluation, “COA” – Claims Outcome Advisor, PowerClaim XML.
So you might be thinking that it doesn’t sound so bad to try to apply general rules across the board. But it does pose a few very obvious problems off the bat. The insurer owes each insured a duty to investigate and fairly adjust each claim. How can an insurer say that it fairly adjust a claim when the software used to adjust the claim was specifically designed to pay less on claims? How can an insurer properly evaluate each claim if it the adjuster is merely plugging data into a system that does not allow for modification for unique circumstances that make the claim more expensive? Do such programs, made for a one size fits all mentality, individually evaluate and investigate each claim? Do these generalized practices make it appear that the insurer is looking out for its insured or "dumbing down" claims processes to make implementation by less experienced and less costly adjusters the claims management response for appeasing those in charge of the company calling for greater profits?
The modern management of many insurers is creative and motivated towards "profitability." Many will spend a considerable amount of money on consulting services to find and implement computer adjustment tracking and methodologies that generate the least expense and most profit rather than training and motivating adjusters to fully pay claims and look for ways to fairly maximize the benefits available under the insurance product. Insurers are willing to invest significant money to make even greater profits at the expense of the insured, who does not get the full benefit otherwise available.
What does that mean for attorneys representing insurance consumers? They need to be proactive, creative and join forces to win cases. Policyholder attorneys should follow steps outlined in Speech Tips Proving Bad Faith Insurance Company Claims Practice and Patterns:
- List the insurer and all their subsidiaries.
- Do a Lexis or Westlaw search on all their Active Cases and Bad Faith Cases.
- Contact the other attorneys, experts, etc. Travel to meet them to exchange information.
- After getting a Core Group, have seminar/information sharing session regarding that insurer.
- Join the Bad Faith Litigation Group of the AAJ.
- Visit and retain multiple insurance claim experts early.
- Advertise for information.
- Hire Investigators to seek whistleblowers–from secretaries to claims executives.
- Push on formal discovery with affidavits and other cases showing need and relevance.
- Bold and Creative Wins–Example–Closed Claim File Review.