Insurance Adjusters: What is their Duty to You?

If you own a home, you should have a policy of homeowner’s insurance in place to protect you against certain disasters that could damage that home. Your mortgage carrier requires you to carry a policy to protect its interest. Chances are good that sometime during your ownership, some event will result in you filing a claim with your insurance company. If you’ve not yet had to use your insurance, you may wonder how that works. Or, if you have filed a claim and the insurance company denies the coverage you expected, you may be wondering what you should do next.

Your primary contact with your insurance company is through your agent. An insurance “agent” is someone who has a contractual relationship with one or more insurance companies to sell and issue policies on their behalf. The agent’s job is to take your application and give the policy. The agent is therefore considered a legal representative of the insurance company, which is then legally bound by its agent’s actions in obtaining and placing insurance coverage. This relationship between the agent and the company exists as a matter of Ohio law, even if the application’s written language or policy suggests otherwise. However, if you have a loss and you find that the coverage the company is willing to provide on your claim is not what you expected, it is unlikely that you will successfully sue the agent. The extent of the agent’s legal duty is to assess what coverage you need and to provide the best available policy. If the agent has discussed whether you’d be best off purchasing a policy that specifically details the risks that are covered rather than a slightly more expensive policy that covers all risks not explicitly excluded, he has, in all probability, fulfilled his duty to you.

The agent’s duties include being your contact with the company when you realize that you need to make a claim under your policy. You usually will contact the agent, who will then notify the company. The agent’s name and number should be on the first (declarations page) of your policy and your policy number. Timely reporting of the claim is important and may be set out in the policy’s provisions. It would be a good idea for you to have your copy of your policy on hand when you make that first call and to have reviewed it to the extent that you can tell your agent where in the policy you find the language giving you coverage. This doesn’t have to be a detailed analysis, and generally, you don’t have to have an attorney’s recommendation but a general idea of where the language is located that gives you coverage for, say, hail damage to a roof or damage from a fallen tree would help focus the insurance company based on your claim early on.

Remember that a claim must be made on a policy before the insurance company’s obligation to perform under the policy is triggered. Mere knowledge by the insurer of the claim or of circumstances that might give rise to a claim are generally not enough to activate the insurer’s obligation. The insured must submit his claim to the insurance company and thereby declare that he expects the company to compensate him for his loss under the policy.

Once the insurance company receives the claim, they will open a claim file and assign an adjuster (also called a “claim representative”). Adjusters settle insurance claims. The adjuster manages the investigation of your claim and considers the extent of policy coverage for your damage. “Staff adjusters” are employed by the insurance company, while “independent adjusters” are non-employees retained by the insurance company to represent them in investigating and settling the claim. The adjuster assigned to your claim will contact you quickly after receiving the claim, usually no later than the next day. They will be your primary contact with the insurance company until the claim is resolved. The adjuster will also schedule a convenient time with you to view the loss. If it appears that specialized knowledge is necessary to determine the extent of the loss, they will retain the services of an engineer or some other professional at the insurance company’s expense. They will investigate the claim, determine whether there is coverage for the claim under the policy, determine the amount due you under the policy, and then resolve the claim either by paying you or disclaiming coverage.

Do remember that if the adjuster hires an engineer to inspect the damage, the engineer’s loyalty is to the insurance company that pays him. He or his firm likely has provided services for the insurance company and hopes to do so in the future. He is therefore looking to save the insurance company money if possible. Hopefully, he will be impartial in analyzing what he sees and fairly assess the extent of the damage. However, if there is any room for ambiguity, his opinion may be slanted to provide the insurance company with a report that will diminish the amount offered to you to resolve the claim. (An example of this might be whether you had reason to know that the tree that smashed your roof was so rotten that it was only a matter of time until it fell on your house. Another example might be the source of water damage to the house’s interior structure.)

If there is any chance that your claim will involve a significant amount of money to remediate the damages, I suggest you retain your engineer to do an independent investigation of the damaged areas. His services will be at your own expense, but if there’s a possibility that the insurance company will not pay you a reasonable amount based upon their interpretation of your policy, his investigation, made at a time when the damages were fresh and open for view, could be essential in establishing the fair value of your claim. Please do not rely on the agent’s representations that she thinks the company will pay for the full remediation of your damages and therefore decide not to incur the additional expense. When, many months later, your agent informs you that her “supervisors” at the insurance company finally decided to offer you much less than your true costs of remediation, you are at a disadvantage if you only then retain your own engineer.

As you can see, the adjuster has a great deal of control over how your claim is processed and resolved. Insurance companies are in business to make money, the same as other types of businesses. They make money when they take in more premiums than they pay in claims. Therefore, it is safe to assume that their adjusters have been trained to minimize claims whenever possible. Sometimes the adjusters are even awarded for doing so. With this in mind, insurance industry regulators have devised a list of practices that insurance adjusters (and their companies) must follow. These include the following:

  • The adjuster must not knowingly misrepresent to you relevant facts or policy provisions relating to your claim;
  • The adjuster must acknowledge with reasonable promptness all pertinent communications regarding claims made under your policy;
  • The adjuster cannot refuse to pay your claim without conducting a reasonable investigation;
  • The adjuster must accept or deny coverage of your claim within a reasonable time after she completes her investigation;
  • If the adjuster denies your claim or offers you less than what you expected, she must promptly provide you with a reasonable and accurate explanation of the basis for her decision;
  • The adjuster must provide you with the forms required to submit your claim within 15 calendar days of your making a claim and provide reasonable explanations regarding their use;
  • The adjuster must not force you to have to file suit to recover the amount due under your policy by offering substantially less than the amounts ultimately recovered in such a lawsuit;
  • The adjuster must have established reasonable standards to ensure that any repairs made by a repairer that she requires you to use performed in a workmanlike manner.

The adjuster’s failure to perform one or more of these duties indicates that she may have processed your claim in bad faith. This is a serious charge against both the adjuster and her company. You should not raise it lightly but have a factual basis to support such a complaint. If you believe your adjuster has acted in bad faith, you would be wise to seek the services of a competent attorney to present and pursue the complaint for you.

Keep in mind that you are also contractually obligated to cooperate with your adjuster in resolving your claim. Your failure to do so could jeopardize the success of your claim. Adjusters sometimes contend that the insured failed to cooperate as a defense to their own lack of performing their duties in the claim process. You will greatly benefit from making detailed notes for yourself of every communication you have with the adjuster and any professional she hires. Note the date and time and briefly record what was said and/or done. Keep in mind that the adjuster has to keep her own case log of everything she does on your claim. If a lawsuit ultimately has to be filed for you to get fairly compensated on your claim, your attorney can get a copy of her claim log, and you can compare it to your own notes.

You are under strain while your claim is being processed. This stress is caused by the uncertainty about how much you will be offered for your loss. At the same time, you are dealing with the disruption and hardship that significant losses or occurrences cause in your life. You and the adjuster are best served if you can maintain a cooperative approach to resolving the claim. That may not always be possible, especially when the facts of the loss may be complicated or there are complex coverage issues. Keep in mind that the resolution of any claim starts with the language of the policy that potentially applies to the loss. If you and the adjuster appear to be at odds as to whether your loss is covered under the terms of your policy, you would be wise to consult with a qualified lawyer. In addition to advising whether you have a solid basis for contesting the adjuster’s interpretation of coverage for your claim, that lawyer may find other provisions that you didn’t realize provide you with additional coverage for your particular loss.

If you have more questions about the role of an insurance adjuster, contact the experienced team of attorneys at Horwitz & Horwitz today.

Logo