The Right Tools for the Job

The claim file is a history of every move the insurer made, the facts it gathered, and the basis for its claim decision. If the claim progresses to litigation, the claim file may also become important evidence. Therefore, it is important to understand the parameters and tools available to conduct a thorough and ethical claim investigation. This article will explore pre-litigation tools and tips for preparing a claim file and investigating a first-party claim.

The claim file is a permanent record. Once a document or note is made a part of the claim file, it cannot be undone. Thus, before making any entry, the claims professional should consider the purpose and tone of the entry and whether the professional would be willing to present the entry to a jury, if necessary.

In considering what to place in the claim file, a list of do’s and don’ts can be helpful:

•    Do consider how the claim file would look if it were an exhibit to the claimant’s complaint in a lawsuit or displayed in a closing argument at trial. The tone and substance of the entry should be appropriate.

•    Do document facts relevant to the claim, including what happened and why. The insurer will use this information to defend its claim decision.

•    Do make sure that the claim file is sufficiently detailed so you can explain your thought process on a claim years later based upon your notes.

•    Don’t try to influence experts’ opinions. If an expert is hired in order to evaluate the claim pre-suit, the expert should remain unbiased and provide an objective view of the claim.

•    Do document the basis of the conclusion ultimately reached by the insurer.

•    Do diary the claim. This will ensure that anyone touching the file will know what needs to happen next.

•    Do maintain objectivity in notes.

•    Don’t include subjective comments about the insured, claimant’s counsel, or vendors.

•    Don’t make conclusory statements prematurely.

•    Don’t ignore claims-handling procedures.

•    Don’t express claim notes as “us vs. them.”

•      Do involve an attorney early if you believe there is a need to protect the file.       

Tools for the First-Party Claim

Claims professionals investigating a loss have a number of tools at their disposal. Here are a few to consider.

Statements of the insured. At the outset of the claim, the insurer should obtain information from the insured about the facts of the loss, the surrounding circumstances, and potential witnesses. This is an opportunity to obtain the who, what, when, where, why, and how of the claim before the insured forgets important details. Where appropriate, an insurer may inquire about an insured’s activities or financial circumstances.

Even if not recorded, notes of the conversation should be maintained in the claim file. A recorded statement of the insured, though not sworn, is still critical. The claims professional should plan objectives for the recorded statement in advance to ensure that as much information is obtained as possible. However, it is also important to listen to the insured and ask follow-up questions where appropriate. While some directed questions may be appropriate for biographical information, most questions should be open-ended and allow the insured to provide answers. The claims professional should not suggest answers, but rather should obtain information about the claim.

Witness statements. Witness statements are equally important. A witness may provide information that corroborates or contradicts material portions of the insured’s statement. The witness may have information about the timeline, value of property, or activities of the insured. For instance, if an insured claimed that a rental property was damaged in a theft, whether the landlord was asked to repair the damage might be relevant.

Photographs and videos. A picture is worth a thousand words. Photographs or videos accurately record a scene. A video of a property loss may be appropriate to show perspective, distance, relationship of items, or particular types of damage. In certain claims, the activities of the insured may be relevant. It is also important to consider obtaining photographs from the insured.

For instance, in a theft loss, photographs of the items with metadata may establish when the insured last had the property. Doorbell cameras, neighbors’ webcams, or store security videos may provide important information about a claim. If an insured claims that his car was stolen from his yard, the webcam video from the neighbor across the street around the time of the loss would be helpful to obtain. Also, if police were called to the scene, body cam video may record the aftermath of the loss and what the insured said to the police officer, providing more context than the police report alone.

Experts. Experts may be needed to evaluate the cause of loss or the value of the claim. For instance, an engineer may provide information about whether a structure was damaged by hail, while an origin-and-cause investigator may provide an opinion regarding the cause of the fire. Additionally, an appraiser may provide a valuation of a piece of property, while a contractor may provide a second opinion on the cost of repair. 

Financial authorizations. If an insured’s finances are relevant to the claim, it may be appropriate to request that the insured execute a financial authorization in order for the insurer to obtain information.

Social media. Social media searches may yield information that tends to refute or confirm the facts and circumstances of the loss or other representations of the insured. An insurer should limit itself to publicly available information. In other words, it is not appropriate to create a fake profile in order to gain access to an insured’s social media posts. However, it may be appropriate to request social media posts as part of a document request under the provisions of the policy. Some social media posts indicate location, which may be as important as the substance of the post to determine the activities of the insured around the time of the loss.

Cellular data. If the insured’s location around the time of loss is important to a claim, an insurer should consider asking the insured to execute an authorization to release the insured’s cellular data. An insured’s cellular data can provide a powerful, objective way to trace an insured’s location. For each telephone call or text message the insured makes, the cellular data can reveal whether the communication was made through a Wi-Fi connection or cellphone tower. By pinpointing which Wi-Fi sources or cell towers were used by the insured, the insurer may be able to create a timeline of the insured’s activities and whereabouts around the time of the loss.

Other online resources. Be creative in online searching. For instance, if an insured has a business, its website may provide information relevant to the claim. Secretary of State records may provide information about businesses owned or associated with an insured. Property tax records, lien records, and Uniform Commercial Code filings are online in many states and may provide information relevant to a claim. Searching for an insured’s email address may uncover online posts pertinent to a claim, too.

An insurer has numerous strategies, which can be used in an ethical manner, to conduct a thorough claim investigation. Although a one-size-fits-all approach is not appropriate for claim adjustment, these tips provide ideas of some of the ways a claims professional can move toward a more comprehensive and principled approach. When utilizing these tips, it is important for the claims professional to understand both the potential privileges that could protect a claim file, as well as the tools to prepare a claim file that will withstand the scrutiny of litigation.