No Stone Unturned

Picture this: You are a claims adjuster at ABC Insurance Company and you just received notice of a third-party liability claim. What do you do first? What kind of information should you collect? Where will that information come from? How will the information you collect be used during the life of the claim and, if necessary, the litigation process?

A thorough investigation of a third-party liability claim can serve an important role in the preservation of evidence, evaluation of the claim, and eventual decisions regarding coverage and settlement of claims. In addition, the facts and evidence gathered during the claims stage can provide insight as to potential defenses, witnesses, sources of evidence, and other information that is helpful in establishing a litigation strategy. Following are some best practices for handling third-party liability claims.

Date of Anticipation of Litigation

As an initial matter, the date of anticipation in a third-party liability claim is generally established early on—possibly even on the date the company is notified of a claim. For instance, if a person slips and falls and must be transported by ambulance to a medical facility, the existence of a known or assumed injury may be sufficient for an insurer to anticipate litigation.

In another example, you could have a minor motor vehicle accident with no reported injuries. Based on the facts of the accident and absence of reported injuries, there may be no reason to anticipate litigation upon receiving notice of the accident. However, if a claim for medical expenses is later made, it is likely that anticipation of litigation is established at that point.

Similarly, if an insurer receives a letter of representation from an attorney, that certainly establishes anticipation of litigation. Accordingly, establishing the date of anticipation in a third-party liability claim is fact-specific and varies by state.

The date of anticipation of litigation provides a benchmark for determining what documents may be subject to privilege and, therefore, non-discoverable in litigation. Documents in the claim file created by the insurance company in the ordinary course of business are typically subject to a request production. However, once litigation is anticipated, disclosure of these documents, as well as some investigative efforts, are typically protected by the work-product doctrine. Therefore, it is crucial that all necessary facts and communications are clearly noted in the claim file as this is a not a one-size-fits-all analysis.

Initial Investigative Efforts

Upon notification of a third-party liability claim, some initial investigative efforts may prove extremely beneficial to not only gaining an understanding of the facts of the claim, but also preserving evidence and obtaining information that could be important to the evaluation of the claim, including whether to engage in any settlement discussions. Recommended investigative efforts include:

•    Contact the insured. One of the first things an insurer should do upon being notified of a third-party liability claim is speak with the insured. The insured can provide key facts and, in many cases, eyewitness testimony regarding how the alleged loss occurred. In the context of a motor vehicle accident, this can include observations about the claimant, information about damage to the vehicles, and whether there were any other individuals present, such as passengers or witnesses. In a premises claim, the insured can likely provide information about the condition of the area where the alleged loss occurred, inspection procedures, any repairs or modifications to the area, and the possibility of any security camera footage depicting the loss. The more detailed the discussion, the better.

•    Obtain a recorded statement from the injured party. In some cases, it may be possible to obtain an early recorded statement from the claimant, which can provide valuable information about the alleged loss and injuries. Additionally, this can be useful later if the claimant changes her account of the loss. If a recorded statement of the claimant, or anyone else, is obtained, preserve and include in the claim file both the audio recording and transcription. This is important because the audio recording is typically discoverable in litigation, whereas the transcript can be withheld as work product. If the audio recording is not saved, the transcript may need to be produced.

•    Interview any witnesses. It is equally important to obtain statements as early as possible from any passengers, witnesses, key employees, or individuals who may have knowledge about the incident. This includes obtaining all written notes or incident reports about the alleged loss. Not only will this help to provide additional information about the facts and circumstances surrounding the loss, but also it can assist in identifying potential individuals who might be helpful to the defense of the claim in litigation. Contact these individuals early on in the claim and get as much contact information as possible from each individual in case they need to be contacted again or called as a witness at a later date.

•    Obtain photographs and videos. Photographs and videos can be extremely persuasive in third-party liability claims. As such, it is essential to obtain photographs and videos from all potential sources, including the insured, the claimant, passengers, and witnesses. In motor vehicle accidents, obtain photographs of the overall condition of the vehicles—not just the damage caused by the accident—as age and condition are often determining factors of the vehicle’s value. In litigation, photographic evidence showing the vehicle had unrelated damage or was otherwise in poor condition can sometimes diminish testimony regarding a vehicle being deemed a “total loss.” Dash and body camera video from the responding police department can also be useful. In the context of a property claim, pre- and post-loss photographs can aid in evaluating whether the area was properly maintained and whether any hazards were present at the time of the loss. Additionally, securing any security camera footage is especially important at the onset of a claim as this footage is often only retained for a short period of time.

•    Perform prompt inspections and appraisals. Even if litigation may not be anticipated, inspections and appraisals can help provide information about the conditions present around the time of the loss and preserve evidence that might change or disappear. Certainly, engineers and other outside experts can conduct these activities at a later date, but a prompt inspection by a claims professional is most important for preservation of evidence. If these efforts are not taken early, valuable evidence might be lost.

•    Conduct social media searches. Social media can be a goldmine of information. Imagine you have a claimant with an alleged ankle injury from a trip and fall. Now imagine finding a video on a social media post depicting that same claimant dancing or walking on the beach. Likewise, imagine finding a social media post showing a rigorous workout or weightlifting regime for a claimant with an alleged neck or back injury. Seemingly irrelevant details that may have important implications on an individual’s third-party liability claims are posted every day on social media. However, timeliness is important to preserve this information before claimants are advised to delete their posts or profiles. A word of caution: These searches should be limited to information posted to a public profile, which is accessible to anyone. While it can be tempting to consider “friending” a claimant or creating a fake profile to gain access to a claimant’s private posts, this could create ethical issues. Any information obtained in this matter would likely not be admissible should the matter proceed to trial.

•    Access open records and other public documents. While certain documents are not obtainable from non-parties until litigation ensues, other documents are easily accessible at the claims stage. For example, 911 calls, computer-aided dispatch logs, dash and body cam video, and certified copies of accident reports are all public records that can be obtained through an open records request. Importantly, retention policies can vary by agency and state, so requesting information as soon as possible will help prevent losing it. This can also be a great time to run internal investigative reports and send open records requests related to any other motor vehicle accidents that might have involved the claimant. In addition, many court filings are also publicly available and can provide information about a claimant’s criminal history (or lack thereof), involvement in other lawsuits, and driving history. This information can be helpful to the pre-suit evaluation of the claim.       

Additional Investigative Efforts After a Lawsuit is Filed

Despite an insurer’s thorough investigation and best efforts, many third-party liability claims still end up in litigation. Taking the aforementioned steps, preserving the evidence, and thoroughly documenting the claim file can provide defense counsel with a good understanding of the facts, potential defenses, and potential weaknesses. Additionally, some of the pre-suit investigative materials can be used as evidence at trial. Recorded statements, while often not admissible, can assist in drafting written discovery requests and preparing for depositions.

But the investigative efforts are not over once a lawsuit is filed. Instead, defense counsel builds on the previous investigation for discovery efforts. In a questionable loss, turn every stone and seek records from every potential avenue, including medical providers, fitness facilities, employers, pharmacies, and health insurers, as these records often lead to the discovery of important information related to prior claims, physical activity, and undisclosed medical providers.

Depending on the type and severity of the claim, there may be a need to retain one or more experts to provide relevant opinions. These individuals could include the following:

•    Medical professionals. Perhaps the most common type of experts used in third-party liability claims are medical professionals who can complete independent reviews of a plaintiff’s medical records and films to provide opinions regarding causation and, in some cases, damages. Consider retaining the same kind of professional whose findings are being reviewed. For instance, if an orthopedist treated the plaintiff for a neck injury, defense counsel should retain an orthopedic expert.

•    Accident reconstructionist. An accident reconstructionist can analyze information and data related to an accident and provide opinions about the speed of the involved vehicles, the paths they were traveling, the drivers’ perceptions and reaction times, visibility factors, and the severity of the accident. These experts are often employed in law enforcement or engineering fields and commonly used in automobile, motorcycle, and trucking accidents.

•    Biomechanical engineer. A biomechanical engineer is able to provide opinions regarding whether the loss could have caused the injuries claimed. These experts are trained in anatomy and physiology and can provide insight regarding the amount and direction of force generated from a loss. While these experts are also commonly used in automobile, motorcycle, and trucking accidents, they provide valuable opinions in other types of bodily injury claims, such as slip and falls.

•    Structural or mechanical engineer. In premises liability cases, a structural or other engineer can inspect the area where the loss occurred and provide opinions regarding the claims asserted in the complaint. This can be related to the soundness of the construction of an area, whether the area complies with applicable building codes and ordinances, or whether the material used in the area was defective or improper, among other things.

•    Billing and coding expert. Bodily injury claims require the plaintiff to prove that the damages claimed were related to the subject incident, were medically necessary, and the amounts charged were reasonable. Billing and coding experts can analyze the medical records and bills to confirm that the amounts charged correspond with the medical services rendered. Additionally, they can provide opinions and testimony regarding the reasonableness of the charges as compared to the usual and customary rates charged in a specific area.

In addition to these experts, private investigators might be able to obtain surveillance video of the plaintiff engaging in certain activities that they testified they could no longer do. In cases involving business disputes, forensic accountants can sort through financial and other business-related documents.

There are a variety of tools available to both claims professionals and counsel that can be used to thoroughly and ethically investigate a third-party liability claim. These tips are intended to provide insight into less commonly used sources of relevant information, and a glimpse of the interplay between the efforts and information gathered at the claims stage and in litigation. Information obtained through these efforts is instrumental in deciding claims and cases, so it is key to obtain the information, preserve the evidence, and fully document the claim file.