When Claims Inspections Lead to Litigation
As an independent claims adjuster, it is rare that any of the inspections I am contracted to complete are conducted with the anticipation of future litigation. In the normal course of doing business, an insured party files a claim for damages with their insurance company. That company outsources the inspection process to a local licensed adjuster to document the property conditions and to prepare a repair estimate for the damages that appear related to the coverages outlined in the policy. Pretty normal stuff, right?
What happens when the insured party disagrees with the recommendations?
Insurance companies assert the insured is entitled to receive a copy of the damages repair estimate but not entitled to receive a copy of the photos and/or documents obtained in support of the recommendations. Are they correct? Not necessarily.
Insurance claims investigations performed in a routine claims investigation of a First Party claim typically are not determined to be performed in anticipation of litigation; they are found to be done in the ordinary course of business. The insurer owes the insured party a contractual duty to adjust the claim. Citation1. Citation2.
That is not to be confused with investigations initiated after notice of representation has been filed or after the company has been advised of an insured’s intent to file a dispute. This makes the timing of the investigation a factor for consideration.
As the contracted adjuster, how can you help protect your client?
Where possible you can add the statement “in anticipation of litigation” to the verbiage of your claims report and photo sheet documents. This allows the insurance carrier to successfully assert the privilege argument more readily if the Carrier’s claim file timeline also indicates things are heating up.
According to a recent article by Eric Whytsell, the work-product doctrine is now codified in the Federal Rules of Civil Procedure and it encompasses “documents and tangible things that are prepared in anticipation of litigation or for trial by or for another party or its representative.” A party’s representative includes not only its attorney (including in-house counsel), but also an insurer, employee, or other agent working on the party’s behalf.
Within context of this article, an agent of the insurance company would be the adjuster assigned to inspect and assist with the claims investigation.
Does this mean you should automatically brand each of your claim submissions with the wording “in anticipation of litigation?”
When the question arises, if there is no basis for asserting privilege, a judge can determine there is no protection available. Here it is the motivation of the assertion of privilege that comes into play.
“Most courts determine whether the motivational element is met based on whether the documents and tangible things in question were created because of anticipated litigation,” according to Whytsell. “And because the courts apply their own work-product rules instead of conducting a choice of laws analysis, litigants will usually not know until they are sued what tests will apply.”
This makes your individual judgment crucial to your documentation processes. If the damages are considered controversial due to a potential coverage question, you may want to inquire whether to conduct a recorded statement with the insured. There your language will include some assertion of privilege as the possibility of a disagreement is greater.
Because state procedures will vary, it behooves you to do some research on jurisdictional nuances. If you are unable to answer the question on your own seek assistance of other interested parties. In some cases, you may elect to speak with an employee of the insurance company or your contracting vendor firm before filing your report documents. Do this to confirm whether there are special instructions for handling the documentation.
Overall, it is the awareness and the additional consideration that becomes your demonstration of due diligence on behalf of your client. And if you are uncertain about the preferences, include the protective language as a precaution. It never hurts to provide your client the flexibility to manage the claim file documents in a way that best represents the intended coverage.