Chip Merlin | Property Insurance Coverage Law Blog | September 21, 2018
Insurance companies routinely argue for immunity from their wrongful actions because acts of their customers are not perfect following a loss. Policyholders are not claims specialists. Policyholders generally are not in the insurance claims business much less the civil litigation business which the insurance industry is the number one participant by far.
In a third party “bad faith” case, the Florida Supreme Court yesterday reiterated these practical issues by stating:
To take the Fourth District’s reasoning to its logical conclusion, an insurer could argue that regardless of what evidence may be presented in support of the insured’s bad faith claim against the insurer, so long as the insurer can put forth any evidence that the insured acted imperfectly during the claims process, the insurer could be absolved of bad faith. As Harvey argues, this would essentially create a contributory negligence defense for insurers in bad faith cases where concurring and intervening causes are not at issue. We decline to create such a defense that is so inconsistent with our well-established bad faith jurisprudence which places the focus on the actions on the insurer—not the insured.1
It is unfortunate that we call these cases “bad faith” cases when they are really “lack of good faith” cases. Just read the ethical rules that historically called for insurance companies and their employees to act in the “utmost of good faith and fair dealing” with their customers.
My mother used to remind me that “Chip, two wrongs never equal a right.” The above-mentioned ruling emphasizes this idea. I often find myself reminding attorneys in my firm, as well as myself, that this is true regardless of what the other side is doing in a lawsuit, appraisal or insurance claim. Professionalism and ethical behavior call for honest, legal, proper and civil conduct regardless of how poorly a party on the other side behaves. Still, it is sometimes difficult to turn the other cheek, but it is also not proper for a professional to get walked over by those using improperly aggressive and unprofessional behavior.
I am writing, researching and preparing for a speech at the Georgia Association of Public Adjusters Association (GAPIA) Fall Meeting in Atlanta next week regarding insurance and public adjuster professionalism. My belief is that the most successful adjusters for insurers or pubic adjusters for insureds in the long run are extraordinary examples of consummate professionals. They know much more than others, are vested in becoming personally even better at what they do and are above the fray of any one claim.
These extraordinary performing claims handlers appreciate the other side and understand the other point of view. They look at the policyholder just as importantly a customer following the loss as before and that the insurance company is an important part and has an important societal responsibility of taking care of the policyholder and claimant’s problems promptly. They look at their personal insurance claims work as involving the public trust, do not game the system and look to act fairly, regardless of personal incentives and company objectives not aligned with honesty or fairness.
From the insurance company standpoint, claims educator Ken Brownlee CPCU wrote in Winning By The Rules:
Why, then, do so many insurers and their claims representatives treat third-party claimants and injured employees as if they were an enemy? Why do so many third-party claimants and employees seek attorneys to represent them in their claims against the insurer? Could it be that insurers have been treating these product users as if the insurer were in charge instead of the injured or damaged party?
If adjusters got back out on the streets and met with folks immediately after their accidents or losses, which is what used to occur forty of fifty years ago, the public might begin to trust the insurance industry again. It might not be so prone to sign up with those television-advertising attorneys. It might also reduce the number of lawsuits that have to be defended at great expense, because when the adjuster knows the claim is valid it would be quickly settled, and when the adjuster knew it wasn’t valid, the denial would be quick, authoritative, and well-documented.2
Little has been written about public adjusters and their obligations to the insurance industry, the public, and their clients. There are very fine public adjuster organizations now at state level promoting professionalism. NAPIA certainly has been stalwart in the growth of licensing the public adjusting profession. It has also been instrumental with The Institutes regarding certification for those seeking to be recognized for knowledge and expertise in their public adjuster profession.
Yet, I tell my Merlin Law Group lawyers to vet every case from every public adjuster. It is not just that we have an ethical obligation to do so. Some public adjusters do not tell their clients what they estimate the loss amount to be because they either overestimate the loss on purpose and do not want to create unrealistic expectations, or they are so poor at negotiating an exact estimate of loss that they leave fairness behind to collect their fee quickly, regardless of the consequence to the client policyholder.
Sometimes, both the public adjuster and insurance company adjuster play the Xactimate game of “who knows what the magic method is to control the Xactimate process” for determining loss. Sometimes, outcome-oriented engineering opinions from either side seem to be the critical suspect issue between the battling interests.
As lawyers for the policyholder, there is one way we now look at to build and repair damaged buildings, and that is legally. What are the contractor specifications to do the job? What is required for labor by the materials needed to be used to make the repair? What do the manufacturer’s specifications call for? What do laws require for safely performing the demolition and construction? What taxes and permits have to be paid? What professionals have to be hired to do the job legally and practically? What do Building Codes call for? What is required so that somebody inspects the job to ensure the people doing the job have done it right—meaning legally and to the specifications demanded?
I now often consult with and hire contract specification experts because there is so much gamesmanship and ignorance displayed by overworked adjusters and public adjusters that I cannot trust either side to get the construction scope and pricing right. I am finding myself saying to experts, “are you sure?” “Are you saying this just because you think I want to hear it?” “Please, do not embarrass me in front of a jury or judge—is this your honest and hard worked upon opinion?”
Again, two wrongs do not make a right! The insurance company is the long-term entity required to always investigate, evaluate and promptly settle or pay claims in good faith. I think that is the practical point of the Florida Supreme Court case from yesterday. Still, the rest of us also owe the public and our clients a duty to do our jobs as professionally as we can.
Thought For The Day
“Always place the best interests of your clients above your own direct or indirect interests.”
—True Blue Life Insurance Code of Ethics