How Insurance Companies Settle Cases

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Table of Contents

 1.      Introduction to the Claims Game

 2.      The Fundamentals

 3.      Creating the Claims File

 4.      Investigating Coverage

4A.     Researching Opposing Insurance Defense Counsel

 5.      The Factual Investigation

5A.     How to Check the Financial Health of Defendant’s Insurer

 6.      Using Insurance Consultants and Experts

 7.      Settlement Negotiations and Compromises

7A.     How to Succeed at Settlement Conferences

7B.     Common Negotiating Mistakes

 8.      Techniques Not Found in Claims Manuals

8A.     Claim Complaints: The Art of Being a Squeaky Wheel

 9.      Claims Denials

9A.     Claim Evaluation Software

10.     Action Letter Outlines

11.     Releases and Covenants

12.     How to Estimate Bodily Injury Settlements

13.     Underinsured Motorist Coverage

14.     How to Take a Claims Representative’s Deposition

15.     Bad Faith—Bad News

15A.   Extraordinary Bad Faith Cases

15B.   Common Claim Myths

16.     Settling the $5,000 to $75,000 Bodily Injury Claim

17.     Uninsured Motorist Claims

18.     The Claims Department and the Claims Manual

 

EXPANDED TABLE OF CONTENTS

Chapter 1. Introduction to the Claims Game

§100  In General—David and Goliath Relationship

§101   Where Is the Money to Pay Claims Kept?

§102   Why Does It Take so Long to Receive Payment?

§110  The Games Played in Wrongfully Denying Claims

§111   The Objective: Settlement and Payment

§112   The Means to an End—Salesmanship

§113   The Salespeople

§114   The Product—Pain and Suffering (Damages)

§115   Packaging a Settlement Demand to an Insurer

§116   Reciprocal Presentations

§117   Trading Settlement Demands and Offers

§118   Selling the Settlement Demand

§119   No Settlement Means Substantial Future Costs Leading Up To Trial

§120  Avoiding Bad Faith

§120.1    How to Avoid Bad Faith Conduct

§130  The Players

§131   The Plaintiff—A Fortuitous Person

§132   The Insured—Who Is Protected Under the Policy?

§133   The Agent or Broker—Middleman

§134   The Insurer—Protector

§135   The Adjuster—Bull or Bear

§135.1    Adjusting the Adjuster—Why Many Adusters Have Lost Contact With Their Claims

§136   The Attorney—Adversary or Assistant

§137   The Insurance Commissioner—Regulator

§138   The Courts—Can Give Authority to Issue Broad Discovery Orders on Other and Similar Claims Files

§139   Agent/Broker Liability

§139.1    Liability of Agent or Broker to Insurer

§139.2    Liability of Agent or Broker to Insured

§139.3    Liability of Agent or Broker to Third Parties

§139.4    Damages

§140  The Rules of the Game

§141   Showing of Good Faith

§150  Duties Owed by the Parties

§160  Common Insurance Industry Acronyms

§170  Locating Old Policies—Insurance Archeology

§170.1  What Standards Do Claim Handlers Apply to Verify Coverage if a Claim Is Presented?

§171   Insurance Premium Payment Records

§172   Certificates of Insurance

§173   Prior Company’s Sales/Mergers

§174   Annual Reports, Financial Statements and Staff Reports

§175   State Insurance Departments and Former Law Firms

§176   Insurance Company Computers

§177   Broker Correspondence and Accounts Payable Files

§180  Rescission—The Ultimate Defense to Claims

§181   Misrepresentation or Fraud in Marine Coverage

§182   Misrepresentation or Fraud in Life or Disability Coverage

§190  Insurance Fraud

§191   Claim Withdrawal—Is It a Legitimate Practice? Or Is It Blackmail?

Key Points to Remember

Chapter 2. The Fundamentals

§200  In General

§201   Why the Application Is Important

Sample: Automobile Application for Insurance

Sample: Homeowners Application for Insurance

§202   The Application as an Escape Device

§203   The Application as a Negotiating Tool

§204   Rescission

§205   Post-Claims Underwriting

§206   Slow Processing Resulting in Coverage—Friend or Foe, You Get No Dough!

§210  The Automobile Accident

§211   The Policy Comes Alive

§211.1    Claims by the Insured

§211.2    Claims by the Claimant

§211.3    Notice Is Notice

§212   Is Notice of a Claim or Occurrence to the Agent the Same as Notice to the Insurance Company?

§212.1    Conflict of Interest—Agent Acting as the Adjuster

§212.2    Coverage Adjustment

§212.3    Factual Investigation

§212.4    Two Estimate Adjusting

§212.5    Minor Claims Only

§213   Prompt Reporting by the Agent

§213.1    Notifying the Claims Department

Sample: Accord Form

§213.2    Service Is the Product

§214   Initial Claim Avoidance by the Agent—Does the Agent Have a Conflict of Interest?

§214.1    Referral to the “Other Carrier”

§214.2    Talking the Insured Out of a Claim

§214.3    Bad Faith by the Agent of the Insurer

§220  Agent’s Initial Report to Claims Department

§221   All Lines of Coverage Confirmed

§222   Policy Number Verified

§223   Limitations

§230  Facts of the Accident

§230.1    Date and Time of Loss

§230.2    Location of Loss

§230.3    Driver’s Name

§230.4    Permissive Driver

§230.5    Vehicle Description

§230.6    The “Black Box”

§230.7    Alternative Vehicle

§230.8    Exclusions—Intentional Acts

§230.9    Insured’s Attitude

§230.10   Hardships

§231   Agent’s Request for Status—Identification

§232   Agent’s Bonus Plan Jeopardized

§240  Answers to Frequently Asked Questions About Claims Adjusters and Insurance Companies

§250  Forms of Insurance Companies

§260  Parts of the Whole Insurance Company

§270  Anatomy of the Insurance Contract

§280  Insurance Company Attitudes Toward Payment of Claims and Why Some Companies Pay More Than Others

Key Points to Remember

Chapter 3. Creating the Claims File

§300  In General

§301   How the Claims File Is Created

§302   Real and “Dummy” Files Created

§302.1    Claim Filed With an Administrative Date of Loss

§303   Coverage Documentation

§304   Duties of Primary Insurers Owed to Excess Insurers

§310  Fact Finding Team Assignments

§320  Local and Companywide Claim Numbers

§321   Multiple Claims Offices

§330  Late Reporting Problems—Liability Claims

§331   By the lnsured

§332   By the Agent

§333   By the Broker

§340  Checklist for Coverage Investigations—Automobile, Environmental, Construction, and Job Site Injury Claims

§350  Checklist for Factual Investigations

§360  “First Call” Settlements

§361   Diary Dates

§362   Non-Waiver Guidelines—When Are They Valid?

§363   Reservation of Rights Guidelines—What Is a Proper Reservation?

Sample: Reservation of Rights Letter

§364   Advice of Counsel Defense Through Use of Independent Attorney Letter

§365   Carbon Copy Notice—May Be Evidence of a “Home Office” Claim File

§366   Claim Reserves and Dates of Loss and Why They Are Important

§366.1    Individual Reserves Are Made for Each Line of Coverage

§366.2    Reserves for Legal Costs

§370  Attorneys Involvement in the Claim Process: Is the Attorney Playing Adjuster?

§380  Proofs of Loss (POL) and Examinations Under Oath (EUO)

§380.1    Insurance Company’s Policy

Sample: Proof of Loss (Homeowner)

Sample: Proof of Loss (Automobile)

§380.2    Waivers

§380.2.1  Money Limits

§380.2.2  No Fraud Suspected

§390  Verifying the Timely Handling of the Claims File

§391   Date/Name Stamping

§392   Contact Rules With the Claimant and Insured

§393   Agent Contact and Status Reports

Key Points to Remember

Chapter 4. Investigating Coverage

§400  What Is Insurance Coverage? What Is the Difference Between Potential and Actual Coverage? And Can the Insurer Waive a Coverage Defense?

§401   The Policy

§402   Coverage Analysis

§403   Policy Interpretation

§404   Reasonable Intent of Insured

§405   Reduction in Coverage

§406   Marketing Brochures and Advertising

§407   Duty to Defend

§408   Trigger of Coverage

§409   Reserved

§410  Fiduciary Disclosure by the Insurer

§411   Good Faith and Fair Dealing

§412   Independent or Cumis Attorney Disclosure

§420  Documents Necessary for a Coverage Investigation

§420.1    Insured’s File

§420.2    Application for Insurance

§420.3    Agent’s Files

§420.4    Underwriter’s Files

§420.5    Coverage Question Investigation File

§420.6    Factual Investigation File

§420.7    Promotional\Advertising Materials

§420.8    Insurance Commissioner’s File

§420.9    Declaration Sheet

§420.10   Insurance Endorsements

§420.11   Underwriting Manuals

§420.12   Outside Legal Opinion

§420.13   Drafting History of Policy Forms

§430  Obtaining the Necessary Statements

§440  Policy Defenses

§440.1    Reserved

§440.2    No Insurable Interest

§440.3    Occurrence Not Within Term Policy Period

§440.4    Undefined Policy Terms

              §440.4.1    Vague or Ambiguous Policy Terms

§440.5    Failed Policy Conditions

              §440.5.1    The Bankruptcy Clause

              §440.5.2    Duty to Cooperate

              §440.5.3    The No Action Clause

              §440.5.4    The Other Insurance Clause

              §440.5.5    Notice of Occurrence and Lawsuit

              §440.5.6    The No Assignment Clause

              §440.5.7    The Voluntary Payments Clause

              §440.5.8    The Subrogation Clause

§440.6    Policy Exclusions

              §440.6.1    Burden of Proof on Exclusions

              §440.6.2    Expected and Intended Injury

              §440.6.3    Contractual Liability

              §440.6.4    Pollution Exclusion

              §440.6.5    Automobile Exclusion

              §440.6.6    War Exclusion

              §440.6.7    Damage to Owned Property

              §440.6.8    Damage to “Your Product”

              §440.6.9    Damage to “Your Work” or “Faulty Workmanship”

              §440.6.10  Unenforceable Exclusionary Clauses

              §440.6.11  Business Pursuits Exclusion

              §440.6.12  Policy Exclusion Riders

§440.7    Claims for Emotional Distress

§440.8    Policy Limits, Aggregate Limits, and Exhaustion

              §440.8.1    History of Policy Limit Insurance Forms

              §440.8.2    Exhaustion: When Insurer Can Withdraw From Defense

              §440.8.3    Claim Payment Allocation and Policy Exhaustion Issues

§440.9    Prorating Coverage

§440.10   Vehicle Ownership, Maintenance, Use, of Operation

§440.11   Pre-Existing Condition

§440.12   Prejudice

§450  Contract Defenses

§450.1    Fraud/Recission: Voiding the Policy

§450.2    Mistake and Reformation

§450.3    Policy Cancelled

§450.4    Renewal or Cancellation of Coverage

§450.5    Covered Malicious Torts

§450.6    Partial Defenses Liquor Liability Exclusion

§460  Third-Party Liability Policies: Specialized Issues

§461   Duty to Defend

§462   Obligation to Provide Defense for Claims

§463   Duty to Defend and Independent or Cumis Counsel

§464   Duty to Indemnify

§465   Deductibles and Self-Insured Retentions

§466   Stop Losses and Aggregate Deductibles

§467   Beware of Allocation Games on Deductibles and SIR’s

§470  Good Faith Coverage Investigation

§471   Alternative Coverage Investigation

§472   Numerous Theories of Denial—Waiver

§480  Alternative Dispute Resolution

§481   Four Basic Methods

§482   Declaratory Relief Action

§490  First Party Property Claims

§491   Scope of Coverage: All Risk or Specified Peril?

§491.1    Investigation of a Property Claim

§491.2    Proof of Loss Requirements

§491.3    Submitting and Completing Proof of Loss Form

§491.4    Defects in Proof of Loss

§491.5    Examinations Under Oath

§491.6    Actual Cash Value

§492   Collapse and Imminent Collapse

§493   Concurrent Causation

§494   Computer Viruses and Software Coverage

§495   Mold Claims

§495.1    What Is Mold and Why Has It Become an Insurance Issue?

§495.2    First-Party Mold Claims

§495.3    Are Third Party Claims Covered?

§495.4    Additional Research

§4100  Title Insurance Claims and Coverage

§4101 Standard Form Title Insurance Policies

§4102 Applicable Insurance Code Statutes and Regulations for Title Insurance

§4103 Basic Title Insurance Terms and Definitions

§4104 What a Title Insurance Policy Covers and Does Not Cover

§4105 What Is the Title Insurer’s Obligation if a Defect Is Found?

§4106 Benefits Payable Under a Title Insurance Policy

§4110  Investigating Reinsurance Coverage

§4111 What Is Reinsurance?

§4111.1   Primary Purpose: To Spread Loss

§4111.2   Secondary Purpose: To Allow Insurer to Write More Business

§4112 Non-Admitted Insurers

§4113 A Very Brief History of Reinsurance

§4114 Lack of Case Law on Many Reinsurance Issues

§4115 Understanding Reinsurance and Reinsurance Terminology

§4116 How Reinsurance Contracts Work

§4117 Notice and the Following the Fortunes Rule

§4117.1   More on Following the Fortunes

§4118 Is Bad Faith or Punitive Damages Claims Covered by Reinsurance?

§4119 How Reinsurance Can Affect an Insurance Claim

§4119.1   Insolvency of Ceding Insurer

§4120  Coverage Under Personal and Commercial Umbrella Policies

§4121 When Does an Excess or Umbrella Insurer Have an Obligation to Pay Under Its Policy?

§4122 Horizontal vs. Vertical Exhaustion

§4123 Insolvency of Primary Insurer

§4124 If Primary Insurer Refuses to Defend Its Policyholder Leaving Excess Insurer Alone

§4125 If Primary Insurer Is Defending But Refuses to Contribute Towards Settlement Within Its Own Limits 

Key Points to Remember

Chapter 4A. Researching Opposing Insurance
Defense Counsel

§400A          In General

§410A          Search Martindale-Hubbell

§420A          Review Firm Web Page

§430A          Search Internet

§440A          Ask Other Attorneys