Note: This Guest Blog is by Tina Nicholson, an attorney with Merlin Law Group in the Houston, Texas, office. This is the second in a series she and fellow attorney Javier Delgado will be writing on Texas property insurance issues).
“You have to learn the rules of the game. Then you have to play better than anyone else.”
— Albert Einstein
There are, obviously, many more than five rules for achieving success when representing a policyholder on an insurance claim. Dedicated insurance professionals, such as the lawyers in our firm, can spend their entire careers learning this area of the law.
Sometimes, however, people become consumed in the details and neglect essential principles. It is a good idea, from time to time, to check that we have touched all the bases. Accordingly, here is a quick review of five important principles.
1. Read the Policy.
The insurance policy is a contract between the carrier and the insured, and claim is governed by that contract. You must read every single word of the contract to know exactly what is in there. Is it an all-risk policy or named-perils policy? Is any part of the claim excluded or limited and, if so, is there an exception to the exclusion? Does the insured have to submit a proof of loss within sixty days of the loss or is it by request? Is the language of pertinent provisions clear or ambiguous? In a recent Georgia case where a frozen pipe burst and flooded a building, I discovered that the standard vacancy provision which excluded the claim was a little garbled. Whoever typed up the policy had inadvertently transposed a few words, changing the meaning of the provision entirely. Because the provision was rendered ambiguous, it was interpreted to provide coverage for the otherwise-excluded claim. It is important to read each provision carefully, keeping in mind the specific facts of your case.
2. Know the Law in Your Jurisdiction.
Even basic principles can vary from state to state. For example, a policyholder making a claim under an all-risk policy in some states only has to show that he has incurred a loss. The burden then shifts to the carrier to show that the claim is not covered or excluded. However in some states, the burden of proving the claim is always on the insured. Know the law in your state and, if you have a multi-jurisdictional practice, take the time to learn the law of states where you practice. Don’t assume the law is the same everywhere.
It is also important to thoroughly research the law regarding the particular provisions that apply to your case. For example, in one of my Texas cases, the claim was clearly excluded by a provision that related to the cause of the loss. However, the exclusion contained the phrase, “An ensuing loss will be covered.” After researching the definition of “ensuing loss”, I found that, although the phrase has not been legally defined in many states, Texas case law had given that term a specific meaning which excepted my client’s claim from the exclusion. It pays to research the issues in your case.
3. Get and Put Everything in Writing.
Every event in the case should be documented in writing. For example, although most policies require notice of the claim to be in writing, most policyholders give the carrier notice of the claim simply by telephoning their insurance agent. That may or may not constitute proper notice under the laws of your state. (See Basic Rule No. 2). Unless proper written notice has been given, follow up with a written notice of the claim.
All oral discussions, offers, demands, and agreements should be confirmed in writing. For instance, you may write: “This confirms that you will inspect the loss at 2 p.m. on Friday the 19th”, or “This confirms our conversation where you told me that you will provide your estimate to me within two weeks.” Every conversation should be documented. The insurance company is documenting every event in the claim — the adjuster makes an entry in a computerized log describing every conversation and event in the claim, in a way that ultimately looks favorable to the carrier. Contemporaneous logs or diaries are powerful evidence in court. Your documentation may be used later to counter the insurance company’s version of the events. The insured should have his/her own documentation showing that, for example, the adjuster didn’t show up at the agreed time or failed to provide the estimate as promised. Such documentation serves to refresh the memory of those who later disagree as to what was promised or done.
4. Cooperate with the Insurance Company.
The insurance policy places certain duties on the insured when there is a loss. If the insurance company requests it, the insured must provide documentation, submit a proof of loss, and submit to an examination under oath. In most states, cooperation is a condition precedent to recovery on the claim. The insured should comply with all reasonable requests promptly. If the insured fails to fully cooperate, it can seriously impact his recovery on the insurance claim.
The scope of the insured’s duties can be determined by reading the policy (Basic Rule No. 1) and knowing the law (Basic Rule No. 2). For example, the policy may state that the insurance company can examine only the insured, or it can also state the insurance company can examine the insured as well as all of its employees. The policy will specifically spell out the policyholder’s duties when there is a claim. (See Basic Rule No. 1). You should research the law in your jurisdiction to determine the full extent of the insured’s obligation regarding documentation, examinations under oath, and the proof of loss. (Basic Rule No. 2).
5. Be Proactive.
The insured, and/or her representatives, should act affirmatively to push the claim forward. It is not enough to simply wait for the insurance company to finish its investigation. One of the most important steps is to document the claim thoroughly. If, for instance, the damaged property is being repaired, it should be extensively photographed before, during and after repairs. The insured should prepare an estimate of the damages independently of the insurance company’s estimate. All documentation regarding the claim — like financial statements for a lost profits claim — should be gathered and assembled before the insurance company requests them.
The insured should send a pre-suit notice letter if such is required in the jurisdiction (See Basic Rule No. 2). The insured should set time frames and deadlines for the insurance company to follow. For instance, it is fair to demand (in writing — Basic Rule No. 3) that the insurance company keep the insured updated on the investigation. For example, if the insurance company had an engineer inspect the property, why doesn’t the insured have a copy of the report six weeks later? Be persistent in following up with the adjuster — the squeaky wheel gets the grease. This will ensure that the claim moves along without delay.