Ten Things to Consider and Look For in Handling Insurance Claims

While no two claims are alike, there are 10 frequent claim issues that arise regardless of the type of claim. Do you know what they are?

January 31, 2013 Photo

I love my career as a trial attorney, but most claims professionals do not view testimony as a “fun” part of job. My goal is to address some key points so our professions do not intersect in the courtroom. After all, even simple claims can result in bad faith litigation. Recent trends show more bad faith cases being filed, often with resulting high verdicts. 

There is no “perfect” claim and, even in cases won at trial, a review will find mistakes and many places in which we could do better. Most problems are basic and easily corrected.

While no two claims are alike, these are 10 frequent claim issues that arise regardless of the type of claim. They form a good foundation on which to build claims-handling skills. Consider these 10 items as you approach whatever claim you may encounter.

1.       Be Cautious of What You Write and Say

A good motto is “Anything you write may be used against you.” Before writing anything, ask yourself, “Will I be 100 percent proud of what I am writing if this is presented to a jury?” Assume everything you write is subject to discovery, and filter your comments as you review your work.

Email has dramatically accelerated response times. We no longer think and reflect before responding—but we must. Claimants will intentionally try to provoke angry responses. Emails carry the same power as any other writing. Claims involving texts and “tweets” represent the future and form an even great risk.

This also applies to oral communications. Assume everything you say is being recorded and will be played at trial. Think before you speak. We owe a duty to act with courtesy, respect, and dignity and to not dishonor our profession by engaging in any communication of which we are not 100 percent proud.

2.       Know Your Own Policy

The insurance policy is a contract. Claims professionals must know all coverage, conditions, and exclusions contained in the policy, as well as any endorsements. You may have the duty to inform claimants of all available coverage.

Multi-state claims handling makes this more difficult. You will be held to the highest degree of responsibility for knowing your policy. Many bad faith verdicts result from failing to provide notice of all coverage available or placing conditions and demands on the insured that are not in the policy. Do not merely assume you know what the policy covers or requires; take the time to check and be sure.

3.       When Coverage Is Questionable, Issue a Reservation of Rights

A reservation of rights should be issued whenever coverage may be in doubt. The purpose is not to protect the company, but fairly notify the claimant of possible coverage issues.

A non-waiver does not replace a reservation of rights. Most jurisdictions require the reservation of rights to be specific and not general. The letter must cite the specific sections of the policy affecting coverage.

Many states obligate specific fraud warning language in claim communications. Almost every jurisdiction requires insurers to provide law enforcement, fire investigation agencies, and state departments of insurance with requested records. Advise claimants that your company will turn over file records to any appropriate state agency that properly requests documentation. Finally, there is no reason to not issue a mutual reservation of rights notifying the insured their rights are equally protected.

4.       Failure to Secure All Pertinent Documents and Records

There has never been an era in which more documentation is available. Equally, there are more restrictions on securing private information, due to HIPPA and other federal and state legislation.

The job of the claims professional is to secure all relevant information and documentation in a proper and legal manner. The best tools are a signed authorization pre-suit and a subpoena in litigation. Many companies have failed to update authorization forms to include new electronic communications and the right to data retrieval.

What is relevant depends on the claim. Bodily injuries will require past and current medical and wage records. Property claims may include loss histories and damage documents. Do not overlook access to cell phones, text messages, “tweets,” and social media postings. Retrieval of data from computers, tablets, and vehicle black boxes may be crucial, depending on the facts of the loss.

5.       Use Sworn Statements in Proof of Loss Correctly    

Each company has differing guidelines relative to the use of proofs of loss. Proofs of loss are an extremely important tool in compelling the insured to attest under oath to the occurrence of the loss and all damages claimed. Promptly requesting a proof of loss should be a part of any thorough investigation.

In most states, when a proof of loss is received, an insurer has three options:

  • ACCEPT, meaning the claim will be honored and paid.
  • REJECT, if the proof is materially deficient in providing necessary information, or not signed by all insured persons.
  • HOLD, pending completion of the investigation. This allows the insurer to move forward with the investigation while not accepting or rejecting the proof of loss.

Virtually every jurisdiction has a time limit to properly respond to the proof of loss. Claims professionals may be under a duty to provide timely updates on the investigation until a claim decision is made.

6.    Overlooking Patterns of Fraud

Arson, staged accidents, questionable thefts, and a myriad of medical and legal fraudulent activities make insurance fraud a multi-billion-dollar industry. Look for patterns in prior losses, “pairings” of medical providers and lawyers, evidence of solicitation, and reports or billings that follow the same course for every patient.

Most companies have special investigation units (SIUs) that are skilled in handling these claims. They cannot investigate a claim that is not referred, though. A strong partnership between claims and SIUs is necessary to battle against fraud.

 7.       Avoid Delays

The single biggest problem that results in bad faith verdicts against insurance carriers is failure to properly move the claim investigation and decision forward. Most consumers do not look favorably upon our profession, and many have encountered negative experiences with an insurance carrier. A jury does not care how many job changes or claim reassignments led to multiple adjusters on a file during the investigation.

In deciding whether a claim is moving forward promptly, use this simple test: If this was your own mother’s claim, would you believe the company was handling her claim promptly and fairly?

Many times, delays in the claims handling process truly are the fault of the insured. If so, document your file very well and communicate the delay and need for timely cooperation in writing to the claimant.

8.       Secure Proper Experts

The appropriate expert witness can be the deciding factor in a case. The time to identify experts is not after but before the claim. Ask probing questions concerning your expert’s education, training, and prior deposition and trial testimony.

Establish clearly the scope of the expert’s area of retention and require any opinion be founded on honesty, scientific fact, and evidence. Make sure experts know their future work with your company rests on accuracy, integrity, and quality—not finding a way to deny coverage.   

Any expert, regardless of experience or cost, who cannot “go the distance” through trial and explain clearly their opinion to the jury is ultimately of no value.

9.       Hiring Defense Counsel Does Not End Your Duty       

Counsel should bring specific skills, knowledge, and expertise to the case. Claims professionals, however, handle more files than defense counsel will ever litigate. Partner with counsel, but understand that you retain ultimate responsibility for your files. Your career may depend upon the outcome of the case.

Do not be intimidated or assume counsel knows more than you. Expect counsel to explain to your level of satisfaction what is being done and why. Counsel owes you the courtesy of communicating promptly. Establish the discovery and resolution plan deemed most effective for the case at hand, and do so early on in the litigation. The best results come from working cooperatively and communicating effectively as a team.

10.      Do Not Fear Deposition or Trial Testimony

There are times when you may need to give deposition or trial testimony. Remember that you are a professional who is knowledgeable and well trained. You know how to handle claims and the attorney questioning you has probably never worked for an insurance company or adjusted a claim. Reality is they are probably more afraid of you than you of them.

Most trial attorneys are good at “bluffing” and trying to intimidate or confuse you. They actually may be covering their own lack of knowledge and understanding of what you take for granted.

When asked to give testimony, insist that your counsel prepare you fully. Review all the claim file materials in advance. No attorney can force you to say anything. Stop and think before you answer any question. Require the attorney to ask clear questions and do not “guess” or “assume” when making an answer.

While some fear is good and keeps you sharp, remember that you know how to do your job. If you did the right thing on the claim, you are simply explaining the how’s and why’s of your claims handling expertise.       

The profession you have selected is one in which your company, its policyholders, and claimants all place great trust in you and your abilities and skills. Whether focusing on these 10 points or more, the basic premise remains the same. Your profession requires you to be detail-oriented and make certain that you consider the myriad of factors that affect the claim you are handling or investigating. Our duty every day is to give our best, and our work should always be centered toward the goal of making certain the correct decision is made with regard to each claim we are entrusted to handle.


Matthew J. Smith is founder and president of the CLM member firm of Smith, Rolfes & Skavdahl Co., LPA. He is also a member of CLM’s insurance fraud committee and can be reached at (513) 579-0080, msmith@smithrolfes.com.

About The Authors
Matthew J. Smith

Matthew J. Smith, Esq. is the executive director of the Coalition Against Insurance Fraud based in Washington, D.C.  matthew@insurancefraud.org

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