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Ethical Considerations for Claims Adjustors

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Ethical Considerations for Claims Adjustors What do you tell your adjustor? Tell the adjustor to get an examination under oath of your insured. – PowerPoint PPT presentation

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Title: Ethical Considerations for Claims Adjustors


1
Ethical Considerations for Claims Adjustors
2
(No Transcript)
3
Stowers Doctrine
  • Stowers Furniture v. American Indemnity
  • Does the company owe a duty to limit insureds
    exposure to third part claim
  • Damages alleged 20,000
  • Limits 5,000
  • Plaintiff demands 4,000
  • Company offered 2,500
  • Judgment 12,000 plus cost

4
Stowers Doctrine
  • Right of control regarding
  • all aspects (settlement included)
  • When company dictates the
  • course actions must be reasonable
  • Courts create duty to act as a ordinarily
    prudent person would in management of own
    business

Ranger County Mutual Case
5
Question
  • Would an ordinarily prudent person settle this
    case prior to trial?

Judgment - Judgment There is no requirement for
perfection.
6
  • Ranger County Mutual Ins. v. Guin 87
  • The court expanded the Stowers doctrine to all
    phases of litigation
  • Courts imposed duty of
  • Good Faith
  • Fair Dealing
  • With respect to
  • CLAIMS
  • INVESTIGATION
  • TRIAL PREPARATION
  • TRIAL

7
Back to Normal
State Farm v. Travers
  • Tort Reform
  • Election of new Supreme Court
  • Expansion of doctrine stopped!
  • Court recognized mistake
  • Said insurance company not responsible for
  • Failure to attend key depositions
  • Inadequate defense at trial
  • Right to control the details

8
Stowers Test
  • American Physicians Exchange v. Garcia
  • Claim against insured covered
  • Within Policy Limits
  • Ordinary person would accept

9
Stowers Bad Faith
C
O
O
L
  • Multiple Claimants
  • Car 1 Family of four killed wife of 30 years
    (all hurt)
  • Car 2 Drunk driver with guest passenger (guest
    killed)
  • Company of car 2 tenders limits of 20,000 to
    car 1
  • Car 1 refused to see what drunk has
  • Car 2 Guest settles for 5000
  • Car 1 wants full 20,000
  • Company offers remaining 15,000
  • Judgment 172,000 plus interest

10
Stowers Bad Faith
  • Trinity University v. Bleeker
  • Bad accident hurting numerous people
  • Plaintiff had five clients
  • Plaintiff made policy limits demand of 40,000
  • Judgment 11,500,000

NO
Does the company pay?
11
  • Rocor International v. Natl Union Fire
  • Policy covers claim
  • Insureds liability is reasonable clear
  • Claimant had made proper settlement demand
  • Prudent insured would accept
  • No Proper demand

12
  • Formal Demand

Written form
Release of all Claims
30 Days or more to Respond
Trouble
13
(No Transcript)
14
Counselors Relationship
Stowers Doctrine
  • Plaintiffs lawyers would make a Stowers demand
    just to add pressure
  • (Whether good or not justified)

15
Counselors Relationship
Insurance Company


Insured
Lawyer
Unqualified Duty of Loyalty
16
Who is the Client?
Counselors Relationship
  • Reservation of Rights!!
  • Pleadings
  • Proof
  • Evidence
  • Issues

17
Reservation Letter Should
Counselors Relationship
  • Identify insurer
  • Inform of conflict
  • Advise that company will provide defense
  • May secure independent
  • counsel

18
Conflict Develops
  • Tilley Case

Counselors Relationship
  • Attorney Must advise insured of the conflict
  • Cannot serve as coverage counsel to company
  • Comments on date of loss
  • Theories covered / not

19
Counselors Relationship
  • California Case San Diego Credit
  • Counsel must explain to both implications
  • No consent must pay independent
  • Company cannot compel insured to give up
    litigation control

20
Company Liability for Counsel
Counselors Relationship
  • YES
  • Unreasonable failure to settle a matter
  • NO
  • Negligent Investigation
  • Defense
  • Trial Decisions

21
Scenario 1
  • An employee of your insured, shot and killed a
    shopper at the Kroger grocery store (which you
    insure) and the person killed was the starting
    quarterback for the Dallas Cowboys. Your
    investigation is complete and it shows liability
    against Kroger is clear and the claim is covered.
    Plaintiffs attorney has been demanding your
    1million limit for 2 years. Your adjustor
    hasnt offered anything. The president of Kroger
    calls and demands that you settle the case or he
    is going to bring a bad faith lawsuit against
    you.

22
What do you tell your adjustor?
  • You have to have written documentation on the
    lost wage claim before he can offer anything
  • The Cowboys are good because of Coach Parcells
    and not the quarterback. Offer the plaintiffs
    250,000 to settle.
  • To tell the president of Kroger that he cant sue
    for bad faith because this is a third party
    claim.
  • Please settle ASAP and go read Rocor, 77 S.W. 3d
    253(Tex.2002) to avoid a bad faith lawsuit.

23
Scenario 2
  • Your insured was in an auto accident and
    liability is not clear. Your defense attorney
    takes the depositions of two witnesses who say
    your insured was not at fault. Plaintiffs
    attorney, How Dewey Cheatham, calls and demands
    your policy limits. You refuse his offer. The
    Plaintiffs attorney then says he is going to get
    you for these unfair settlement practices and he
    is going to amend his pleadings to allege Breach
    of the Duty of Good Faith and Fair dealing
    against the insurance company.

24
What do you tell your adjustor?
  • You can now have the policy limits, we only
    respond to threats.
  • You need to go read Allstate v. Watson, 876 S.W.
    145 (Tex. 1994)
  • Please dont do that, I might get fired!
  • Didnt you work for the Texas Hammerhead formerly
    known as the Smart Tough Lawyer?

25
Scenario 3
  • A Plaintiffs attorney known as the Texas
    Hammerhead calls your adjustor and asks about all
    insurance coverage which is applicable to a death
    claim from a trucking accident which caused a
    death. You know that your company has a
    50,000.00 trucking policy and a 500,000.00
    excess policy. What do you tell your adjustor to
    say to the Plaintiffs attorney?

26
The Adjustors Response
  • You must have the wrong insurance company we
    dont have any coverage.
  • Hey, Mr. Hammerhead, youre in luck, we got a
    50,000.00 policy.
  • Tell him you got both policies, but that you
    hired Kirk Willis, so he will never see a penny.
  • Ask him, Hey whats your yearly advertising
    budget?

27
Scenario 4
  • One of your adjustors is handling a claim by Mr.
    Procrastinator, an 82 year old who was rear ended
    by your insured. The date of loss is June 26,
    2002. Mr. Procrastinator is not represented by
    counsel. You have the file reserved at
    10,000.00. Your adjustor has been negotiating
    with the claimant for about 4 months. Your
    adjustor tells you that Mr. Procrastinator called
    this morning and offered to settle his claim for
    4,500.00. Your adjustors last offer was
    4,000.00. What do you tell your adjustor to do?

28
What do you tell your adjustor?
  • Tell your adjustor to call Mr. Procrastinator on
    Monday (June 28, 2004) and tell him that the gig
    is up and he gets NOTHING!
  • Tell your adjustor to call Mr. Procrastinator
    today and tell him that, after careful
    consideration, her revised (and final) offer is
    2,500.00.
  • Tell your adjustor to call Mr. Procrastinator and
    tell him that he needs to get an attorney because
    the statute runs tomorrow.
  • Tell your adjustor to call Mr. Procrastinator and
    offer him 4,250.00 as a best and final offer.

29
Scenario 5
  • Your insured ran a red light and hit a car in
    which the mother was driving and her 6 year old
    son was the passenger. Thankfully, the mother
    was not hurt. The child, however, was
    transported from the scene due to loss of
    consciousness. At the hospital, the child was
    thoroughly checked out and the tests came back
    normal. The final diagnosis was a mild
    concussion. It has been one year since the
    accident and the child has had not further
    problems. The total medical bills are 1,600.00
    The Plaintiffs attorney accepts your settlement
    offer of 2,500.00 however, he does not want to
    have the case resolved with a friendly suit.

30
What do you tell your adjustor?
  • Cut the check for 2,500.00 and get the mom to
    sign a standard Release.
  • Tell the Plaintiffs attorney that unless there
    is a friendly suit and a minor prove up there
    is no deal.
  • Cut the check for 2,500.00 and get the mom to
    sign a Release where she acknowledges that she is
    settling her sons claim regarding the accident.
  • Call the Plaintiffs attorney and see if
    3,000.00 will convince him of the need to
    conclude the case via a friendly suit.

31
Scenario 6
  • Your insured has a 50,000/100,000 auto policy.
    Your insured is speeding, runs off the road, and
    all five passengers in the car are injured. One
    of the passengers (a 17 year old girl) is in a
    coma and is diagnosed with a severe brain injury.
    Within 28 days of the accident, an attorney for
    the girls family makes a demand for 50,000.00.

32
What do you tell your adjustor?
  • Tell the adjustor that until you get a report
    from a neuropsychologist of your choosing, there
    will be no settlement offers made.
  • Tell the adjustor that you cant pay 50,000.00
    because that will leave only 50,000.00 for the
    remaining four passengers.
  • Tell the adjustor to get it done yesterday.
  • Tell the adjustor to wait six or more months and
    then agree to pay 50,000.00 on girls claim (see
    Calich vs. Allstate)

33
Scenario 7
  • Same coverage and liability facts as before
    except that the two most seriously injured
    passengers happen to be twin sisters. Both have
    suffered brain damage. Their attorney makes a
    demand within 14 days of the accident for
    100,000.00.

34
What do you tell your adjustor?
  • Tell the adjustor to get an examination under
    oath of your insured.
  • Tell the adjustor to get it done, to get it done
    yesterday.
  • Tell the adjustor to tell the twins attorney
    that you cant settle the case for 100,000.00
    because that will exhaust your limits.
  • Tell the adjustor to call the insured and tell
    that they may want to chip in a little money on
    this deal, too. (Thank you very much)

35
  • When faced with a settlement demand arising out
    of multiple claims and inadequate proceeds, an
    insurer may enter into a reasonable settlement
    with one of the several claimants even though
    such settlement exhausts or diminishes the
    proceeds available to satisfy other claims.
  • Texas Farmers Ins. Co. v. Soriano, 881 S.W.2d
    312,315 (Tex. 1994)

36
Scenario 8
  • The firm of Dewey, Cheatum How does quite a bit
    of defense work with your company. They are
    defending one of your insureds on a rear end
    collision case with minimal property damage and
    treatment at K-Clinic. Bill High, one of the
    young stars at DCH, tells you that in his
    professional opinion, there is a witness that
    needs to be deposed that would all but guarantee
    his clients (your insureds) victory at trial.
    The witness is in the Army Reserves and is
    getting shipped out in 30 days. Bill wants
    approval to depose the witness.

37
What do you tell your adjustor?
  • Tell the adjustor to call Bill and remind him of
    page 43, paragraph 5(a)(iii) of the company
    litigation guidelines that says on cases where
    property damage is less than 1,000.00, the ONLY
    deposition that shall be taken is that of the
    plaintiff.
  • Tell the adjustor to tell Bill to go out and get
    a statement from the witness that you can use at
    mediation.
  • Tell the adjustor to give Bill the authority to
    take the deposition of the witness.
  • Tell the adjustor to tell Bill to wait on the
    deposition as the case wont be reached for trial
    for 3 years in Dallas courts.

38
Scenario 9
  • One of your adjustors is approached by Fee
    Slashers, Inc., a company that promises to save
    you up to 80 on your legal fees in the next
    year. They would review the legal bills
    submitted by various outside attorneys and
    recommend reductions, if necessary. Fee
    Slashers compensation is tied to the amount of
    money they recommend be deducted from the
    attorneys bills. The adjustor wants to know if
    she can begin using Fee Slasher on her files.

39
What do you tell your adjustor?
  • Tell the adjustor that if Slashers can get the
    percentage up to 35, they have a deal.
  • Tell the adjustor to see if her friend at Fee
    Slashers can get tickets to the Mavericks game
    against San Antonio and then youll think about
    it.
  • Tell your adjustor that without the consent of
    your insureds, you cannot submit defense
    counsels bills to third party auditing
    companies.
  • Tell your adjustor that your defense lawyers
    would NEVER inflate bills and that youre
    offended by that insinuation.

40
Scenario 10
  • Your insured is involved in a wreck with an
    uninsured motorist, who is totally at fault. You
    hire your subrogation lawyer to file suit against
    the uninsured motorist for only the 8000 in
    property damage. Your subrogation lawyer gets a
    judgment against the uninsured motorist for
    33,000. Your insured hears about the judgment
    and says please pay me 25,000 in um benefits
    even though he only has 500 in medical bills.

41
What do you tell your adjustor?
  • Tell your adjustor to call your subro lawyer and
    tell him to put his EO carrier on notice.
  • Tell your adjustor to deny the insureds request
    because that judgment wasnt based on true facts.
  • Tell your adjustor to offer your insured the true
    value of the claim, 1,500.
  • Tell your adjustor to pay the insured because
    your lawyer established the value of the claim in
    the judgment.

42
Scenario 11
  • Your insured gets sued from an accident that
    happened 18 months ago. The insured claims that
    the lawsuit was the first notice he had of the
    accident. You hire Bill at D,CH to defend
    the insured in the personal injury case. For
    the next 18 months your adjustor (without your
    knowledge) directed Bill, without informing the
    insured, (1) to take 5 separate statements to
    help establish that the insureds coverage is
    waived because of late notification and (2) to
    write a brief outlining your defense of late
    notice coverage. Based upon Bills work, your
    adjustor then directs that a Declaratory Judgment
    be filed seeking to deny coverage.

43
What do you tell your adjustor?
  • Good job, you are saving the company money.
  • Good job! Bill always does good work for us and
    we didnt even have to hire another attorney.
    Say, isnt it time for you to consider moving
    into the management training program?
  • Have you ever heard of the The Tilley
    Doctrine?
  • Make sure Bill sends two bills, one for the
    coverage case and one for the liability claim.

44
  • The attorney hired by the insurance company
    becomes the attorney of record and the legal
    representative of the insured, and as such he
    owes the insured the same type of unqualified
    loyalty as if he had originally been employed by
    the insured. If a conflict arises between the
    interests of the insurer and the insured, the
    attorney owes a duty to the insured to
    immediately advise him of the conflict.
  • Employers Cas. Co. v. Tilley, 496 S.W. 2d 552,558
    (Tex. 1973)

45
Thank You!
Kirk Willis Member 469-893-1870 kwillis_at_helmsgre
ene.com
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