sbeau4014Founding Member  Member Posts:427  
| 01/10/2009 11:09 AM |
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I was wondering what adjuster's thoughts are when it comes to who has the burden of proof when it comes to damages, causation, coverages, etc when a claim is presented. This is an area that has changed dramatically over the years based on court decisions and bad faith statutes from state to state. I can tell you you that it is not a one size fits all answer to the issue since it does vary from state to state, but there are some parameters that if followed by us in our initial investigation of the claim should cover most of the bases.
This is an issue that is very much a hot topic when it comes to hurricanes and the wind vs water/surge issues. It can also be very problematic on wind/basic surface water claims, when the adjuster fails to do a very detailed investigation as to what caused what damages. I am a firm believer that if you as the adjuster can't show exactly what peril caused what damages, you should let the carrier know of any questions you have and let them consider getting an expert to investigate, such as an engineer. The perfect example is a hurricane loss where there is just a slab left, or pilings. I think there are way too many adjusters out there that would say that since they were on a beach, that all of the loss was from flood/surge and there was no damages from wind. Those are the opinions that have taken a big hit out of Katrina.
I have also noticed that some carriers may not hire engineers to give them a professional opinion on the causation of various damages before the coverage determination is made. I don't know what the reasoning is behind that, but it has backfired against numerous carriers in LA nd MS, and I would gather it will have the same effect in TX. It goes back to the topic of this thread, who has what burden of proof at what stage of the claim investigation.
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Ray Hall Senior Member Posts:2443
| 01/10/2009 5:47 PM |
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I have been involved in several causation losses from the first adjuster to the one who was in the courtroom wiith the check book when the jury came back. The common thread was... the defense file was the evidence presentrd by the plantiff that was most remembered by the jury after the poll was made after a plaintiff's verdict. "Wave wash" (before flood coverage) were approched on a % of the policy limits attitude 30 to 50 years ago. Much better bottom line results.
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okclarryd Veteran Member Posts:954
| 01/11/2009 4:17 PM |
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Steve,
The carriers have become reluctant to utilize engineers on the "slab" or "total loss" claims and to determine causation issues since the engineers reports sometimes read like the Sunday comics. I have seen some reports from well-known engineering firms that essentially say nothing but infer through word usage that there should be coverage for the loss.
I have also seen engineer reports on composition roofs stating "granule loss" is from the storm and even though there is no visible bruising that the roof should be replaced in its entirety.
These reports leave a lasting impression and are thoroughly discussed at the carrier level between managers and upper management. I believe that these days, calling an engineer is "last resort".
If an engineer is called at the beginning of the claim investigation, the resulting report will determine the course of the claim whether the report is accurate or not. The report is available to the insured, the insurer, and any other interested party. Some firms seem to be oriented toward the carrier or toward the insured (public adjuster, attorney, et al) and slant their reports accordingly. Engineers are probably just as biased as the rest of humanity but their reports seem to carry an uncommon amount of weight within the legal system. And, the slant on the report may simply be a result of who called and made the assignment.
It's one of those deals where the adjuster knows nothing and the engineer knows all.
Larry D Hardin
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Ray HallSenior Member Posts:2443
| 01/11/2009 9:54 PM |
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If a so called experienced property adjuster or file examiner needs a "consultant" to determine the apparant cause of loss... this person is NOT one.
The two exceptions would be a very qualified Arson fire expert, if you suspect arson or the fire marshall does. Another would be on a large subrogation or 3rd party liability claim. |
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Ray HallSenior Member Posts:2443
| 01/11/2009 9:57 PM |
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If you hire an expert on a wave wash claim..... the plaintiff will giggle with glee.
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| 01/12/2009 7:01 AM |
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I watched TV crews interview several people who rode out Ike. I believe they all stated the flood waters came before the wind. Their testimony would be better than any expert you could hire.
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okclarrydVeteran Member Posts:954
| 01/13/2009 8:59 PM |
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Steve,
Getting back on topic, we, as professionals, cannot expect the insured to be as well educated or experienced as we are. Under the terms of the contract, I believe the insured is required to "prove his damages" but, if he or she asks for assistance in determining those damages from his carrier, I believe the carrier is obligated to help him. And that's when the adjuster shows up in the driveway.
The policy language becomes important when there is a disagreement as to the extent of damage, cause of damage, cost of repair, ad infinitum. It is in the carrier's own interests to have an adjuster "assist" the insured as the adjuster's opinion of damage determines the reserves, loss payment, loss ratio to the agent, just all kinds of things.
When the insured reports the loss, he has taken the first step in "proving his damages" by making the carrier aware that there is, in fact, damage to covered property, in the insured's opinion.
At least that's the way I see it. I'm sure there are some much more learned minds here that could expound on the policy terms and conditions and their interpretation within the current legal environment.
Did I say that right?
Larry D Hardin
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Tom TollModerator & Life Member Senior Member Posts:1865 
| 01/14/2009 9:39 AM |
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Larry, you hit the nail on the head, and your fingers are still intact.
Success is not final, failure is not fatal: it is the courage to continue that counts.
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MedulusModerator Veteran Member Posts:786
| 01/14/2009 9:50 AM |
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Here's a question from real life. My boss and I have recently disagreed on this one about the burden of proof. I won't reveal who was on which side of the issue or any specifics at all about the insured (including the jurisdiction), but here's the scenario:
The policy is a commercial Condo Association form (ISO's CP0017) with Special Form Causes of Loss (ISO form CP1030). The elevator circuitry blew out and was replaced. The elevator repair person tells the insured that this is an insurance claim and he should file it. The repair person says that the loss is due to "water damage", and throws the damaged circuit board away. There is, therefore, nothing for an engineer to analyze. "Water damage" is a covered cause of loss, but is defined very narrowly in the policy. My question is not whether this is covered or not. I haven't really given you enough information to make that determination, and I think (for the sake of confidentiality) I shouldn't reveal any other details. My question is this: Does the insured have a duty to show what caused the damage, or is the burden of proof on the carrier to show what caused the water damage and why it is or is not covered?
Steve Ebner CPCU AIC AMIM
"With great power comes great responsibility." (Stanley Martin Lieber, Amazing Fantasy # 15 August 1962)
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BobHVeteran Member Posts:759 
| 01/14/2009 11:15 AM |
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Posted By Steve Ebner on 14 Jan 2009
My question is this: Does the insured have a duty to show what caused the damage, or is the burden of proof on the carrier to show what caused the water damage and why it is or is not covered?
If it was an "All Risk" policy (like HO-3) the Insured only has to prove that "a loss occurred" and the carrier has the burden to prove if excluded. I would apply that to your Commercial "special" CP 10 30
If it is a "named peril" policy, the Insured has the duty to prove the loss is one of the covered perils (per the CE course I just did from IRMI). On the next page I will quote the article.
-------------------
Aside from "who" has the duty to prove, the obvious issue I am sure you are dealing with is if the "proof" even exists anymore. If a pipe burst and the ensuing damage makes sense, replaced pipe and it's invoice are available, I would pay for replacing a circuit board that was in the line of fire based on invoice, even if discarded. I would have a brief call to the guy who did the work to document my file. If an opening was created by a storm and there is evidence of that, I would pay the ensuing damage (if receipt, etc. per above).
If there is no other evidence, and the circuit panel "could" have just failed due to age, I would say they blew it by not retaining the damaged property per policy conditions (and I have often heard the argument of "didn't know could claim the damage" and know that is sometimes true).
Bob H
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BobHVeteran Member Posts:759
| 01/14/2009 11:52 AM |
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Following my last post, I wanted to quote the material referenced. This is from WebCE.com who delivers the IRMI material.
Out of respect, I am only quoting a fraction of the chapter, and attributing the source:
IRMI on Legal Principles of P&C Insurance
8.5 Specific Rules for Insurance Policies
Insurance policies are particular kinds of contracts that are made in a special
relationship between the insurer and the policyholder. They have a unique structure
and format which is different than other contracts. Consequently, courts have
developed a series of special rules of construction that are only applicable to
insurance policies.
Coverage Grants Construed Broadly
The first special rule of contract interpretation that is specifically applicable to
insurance policies is that the provisions in an insuring agreement are to be construed
liberally or expansively in favor of the policyholder.
Burden of Proof as to Coverage Is on the Insured
The relationship of the parties under an insurance policy is different than the
relationship between the parties under other kinds of contracts. Essentially, an
insurance policy is a promise by the insurer to pay for covered claims under the stated
terms and conditions if and when they should occur. The insurer is not going to know if
and when the policyholder suffers a loss that may be covered under the policy. When
that happens, it is incumbent on the policyholder as the only party with knowledge of
the loss to initiate the claim process. Certainly, the unknowing insurer will not do it for him.
There is an old saying in the law that he who alleges must prove. If the policyholder is
the one who must notify the insurer of a loss and allege that the loss is covered under
the policy, the burden of proof will be on the policyholder to marshal the evidence
necessary to sustain his claim. The policyholder can do this by, among other things,
submitting oral or written statements, giving a deposition, and hiring experts to give a
report to the insurer. The policy’s proof of loss provisions provide some ground rules
for the policyholder to follow when trying to carry his burden of proof so that the
process will be somewhat uniform for all issued policies.
For first-party policies providing named-perils coverage, the policyholder’s evidentiary
burden means that he must submit proof that the loss was caused by one of the
enumerated perils. If his evidence is not convincing enough, the insurer need not
respond to the claim at all, but merely deny it on the basis that the proof was
insufficient. If necessary, the parties can submit the question of whether or not the
policyholder’s proof is sufficient to establish that the loss was caused by a covered
peril to a jury to decide.
The insured’s burden is significantly less for first-party policies providing “all risks” or
“open perils” coverage. These kinds of policies cover all losses that are not specifically
excluded. What this means is that the policyholder must merely prove that a loss
happened. After that, the burden automatically shifts to the insurer to prove that the
loss is somehow excluded.
Exclusions Construed Strictly
Whereas insuring agreements granting coverage are construed liberally and
expansively, exclusions from that coverage are construed strictly and restrictively.
Again, the idea is to maximize the utility of an insurance policy as a means to protect
the average consumer from catastrophic losses. Courts can best do that by carefully
reading policy exclusions so as to minimize the number of claims that go uncovered.
Burden of Proof as to Exclusions Is on the Insurer
If he who alleges must prove, then it follows that insurers who allege that a loss is
excluded should bear the burden of proving it. Insurers can do this in a number of
ways. They can hire investigators or other experts to accumulate evidence and give
reports. They can take recorded statements or depositions of the insured. They can
submit documents, like blueprints or photographs, for the court’s consideration. All the
burden and expense of proving the application of an exclusion must be borne by the
insurer.
Exclusions Must Be Conspicuous
Courts in many states have held that exclusions in an insurance policy must be
conspicuous. They cannot be buried in the fine print. They must be somehow set apart
from the rest of the policy in a format that would call attention to them. Courts have
held that setting off exclusions in their own sections or identifying them with bold type
makes them sufficiently conspicuous.
You could read this with a focus on your commercial claim with water-damaged circuit board, or a homeowner's "all risk" policy where flood is excluded.
It would be the carrier's burden to prove the flood exclusion, if it is an "all risk" type policy.
Bob H
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sbeau4014Founding Member Member Posts:427
| 01/14/2009 4:19 PM |
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Larry, I agree with you 100% on your comments in that we have the duty to assist the policyholder in the claim presentation and work up. One of the big problems today is the fact too many adjusters and carriers don't really see it that way.
Bob, your discussion on the burden of proof hits the spot. The burden of proof always starts with the insured, and under a named peril policy it is their burden to prove not only the damages, but the causation of the damages. However on an all risk/open perils policy, most jurisdictions would probably agree that if the insured turns in a claim on a slab house and shows that the house is destroyed, and the value is equal or in excess of the policy limits, the burden of proof at that point shifts to the carrier. It then becomes the carrier's burden to prove any exclusions of the policy that they plan to assert. You will find that the Texas bad faith statutes pretty much have this written into them and have ever since HB 2 passed back in the early 90's. There have been one or two Katrina cases out of MS and upheld by the 5th circuit court of appeals that solidify this thought process.
That being said, if an adjuster turns in a report to a carrier on a slab case from the west end of Galveston Island or Tiki Island that has 4 pictures of the slab and a narrative saying that all evidence shows the house was washed away by the surge before any winds hit, what do you believe the carrier should do. Consider it is an all risk. Believe it or not, there were probably thousands of cases identical to this our of Katrina.
Steve, your case has some serious problems on it, thats for sure. First of all, I hope that as soon as it was determined the "evidence"/damaged part was disposed of prior to the carrier being able to inspect it, a very strong reservations of rights letter was sent to the insured. i don't believe that I've ever read a property policy that didn't have the standard condition in it about preserving the property and giving the carrier all the opportunities to inspect it as needed. The carrier has the burden of proof to show that the claim may not be covered if it is an all risk policy, but the insured may not be able to show that there is an damages. There is also a theory of law when it deals with spoilation of evidence that may well come into play, although the circumstances are a bit different then usual. It goes along the lines that if one side distroys evidence to where it can no longer be used to present the opposing parties view, the presumption is that the evidence would have favored the opposing party's position. in that situation, the burden of proof may shift back to the insured to prove up that it was indeed a covered cause of loss, which may be difficult with no evidence. The fact that the person who destroyed the evidence is the only one to attest to the casuation is tainted testimony and a bit of a hurdle for the insured to overcome. |
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| 01/14/2009 11:47 PM |
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Posted By Steve Ebner on 14 Jan 2009
My question is this: Does the insured have a duty to show what caused the damage
Yes, the insured must show what caused the damage. However, in my opinion, the insured has done that by presenting the repairman's statement that water did the damage.
Does the insurance company have to pay the claim based solely on the repairman's statement? No. Further investigation can be done by the insurance company, and they can pay or deny the claim after investigation. A judge or jury may ultimately make the decision.
And remember, the repairman threw the circuit board away, not the insured. A court may not penalize the insured for the repairman's error.
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Tom TollModerator & Life Member Senior Member Posts:1865
| 01/15/2009 11:49 AM |
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Good post Bob.
Success is not final, failure is not fatal: it is the courage to continue that counts.
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ChuckDeatonLife Member Senior Member Posts:1110 
| 01/15/2009 3:40 PM |
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By way of qualification, I an involved in settlement negotiations on several litigated claims at the moment, as I do litigation support for carriers. What transpires in negotiations is completely isolated from what happens in open court. Anything can met the any burden of proof if it is not refuted. That is what a negotiated settlement is, the insured says, "I have a covered water loss" and the insurer says, "You have water damage, but the policy does not provide a water damage peril." The insured says, "I estimate that 100,000USD will be required to make repairs." The insurer says, "That maybe, but the policy does not provide a water peril." and sends a denial letter. Something along this line goes back and forth until the insured gives up or the a court finds against them. In the alternative a court finds for the insured and gives them 100,000USD because the insurer never refuted the amount of the insureds proof.
Real life is completely different from sitting around "wondering".
"Prattling on and on about being an ass with experience doesn't make someone experienced. It just makes you an ass." Rod Buvens, Pilot grunt
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BobHVeteran Member Posts:759
| 01/15/2009 4:53 PM |
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Posted By Chuck Deaton on 15 Jan 2009
In the alternative a court finds for the insured and gives them 100,SUD because the insurer never refuted the amount of the insureds proof.
I suppose the moral of the story, is "you can't be too certain that the court won't have a bizarre decision". A lot of times the courts don't agree with each other, let alone common sense. Seems if I deny based on excluded Cause of Loss, (which is a huge part of the "Proof of Loss" form) then the "Amount of Loss" is not particularly relevant. Each side will look for something to argue.
Of course the Insured's "Proof" doesn't even have to be on the written piece of paper called "Proof of Loss".
Posted By Chuck Deaton on 15 Jan 2009
Real life is completely different from sitting around "wondering".
Yep, especially if you get into 3rd party Liability. Always amazes me on Construction Defect litigation, the General Contractor or Developer get sued, and "shotgun" all the subcontractors with lawsuits. Just before it hits the wall, you sit there at a settlement conference and no-one wants to hear about your "work product" exclusions or "lack of responsibility for your subcontractor/insured".
They just want to know the dollar amount that will make it all go away.
Bob H
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