Everything the Insurance Claims Representative Tells You May Not Be Right
By E. L. Eversman, Esq.
I had intended to write this article on a completely different subject, but several things happened which changed my focus. Almost every day for the last month, someone has related an unpleasant personal experience involving a car accident and the struggle that person had dealing with the insurer. With that in mind, let me dispel some serious misconceptions about what rights and obligations an ordinary person has regarding vehicle damage and repairs.
Who are the parties?
There are two distinct classes of persons who submit insurance claims: Insureds and Third Parties. These distinctions are not static based on individuals. They simply designate the relationships of the people involved in the collision to the responsible insurance company. You may be the insured in one accident and a third party in a different one. The easiest way to remember the distinction is that "insureds" are the at-fault drivers (except in situations involving uninsured and underinsured coverage), and "third parties" are the victims. Insurers treat you differently depending on which category you fall in.
How insurers view you and your claim.
In the United States, insurers are not governed by federal law, although Senator Hollings from South Carolina has introduced a bill to change that situation. Until that bill, or any similar one is enacted, however, insurers remain governed by each state's laws and regulations. Every state has its nuances, but there are some general principles they share. One of these principles is that the majority of insurance laws and regulations enacted govern the relationship between an insurer and its insured. There are far fewer state insurance laws addressing the rights of third parties.
First party - Insurer relationship
State legislatures and State Insurance Department Commissioners have fairly well defined insurers' obligations to their customers (insureds), in addition to the contractual obligations set out in the insurance policy. In automobile property and casualty, insurers are typically obliged to handle claims promptly ("promptly" is a set number of days defined by the state), handle claims in good faith, pay amounts insureds are responsible to pay for events covered by the terms of the policy (up to the policy limits), and owe a duty to defend the insured (i.e., pay for legal representation and associated costs.)
Third party - Insurer relationship
The insurer -- third party relationship is very different. Make no mistake about it: Insurers view third parties as the enemy. The insurance company's goal is to settle your claim against its insured as fast and as inexpensively as possible. Because they have no contractual relationship with you, and, therefore, no contractual obligation to pay flowing directly to you, many insurers engage in tactics designed to force third parties to settle and release their claims for less than they are actually worth. I have devised labels for some of the commonplace tactics:
- "The Count on Us". This is the approach several insurers took a few years ago during which they rushed to assure third parties that the insurer would "take care of them", and that they "didn't need to hire a lawyer". This approach ran afoul of state prohibitions against the unauthorized practice of law, and it melted away quickly.
- "The Stall, Drag, and Delay". Insurers make the claims process last. This has the effect of allowing the insurer to hang on to money that should be paid to you for as long as possible, wears down your resistance, and makes you vulnerable if you do not have the financial means to hold out for what you are truly owed.
- "The Stonewall". The knee-jerk NO reaction, even if the insurer is aware your claim is legitimate. It can be presented in different forms like, "Our state law does not recognize a claim for [whatever you have asserted]." "We don't have to pay you for that." "You are not entitled to [X] under the policy."
As a third party, the terms of the policy have no application to you. You are entitled to be made whole by the insured. How the insured makes you whole is an issue between that person and his/her insurance company. Additionally, realize that claims representatives are trained to give you specific responses to particular demands, and the individual handling your claim may or may not know if the response given to you is untrue. Claims representatives are almost never attorneys, but they seem to feel very free to instruct you on the law. So be wary. I have been told "the law" by claims representatives when they were 100% wrong.
- "The Bully". This is the tough approach where you are told that, "You have to do [X]"; or, "You can't do [X]"; or, "If you don't sign the authorization to have the car repaired, we'll take away your rental car." (One insurer in particular loves the last one.) Be careful. As with the Stonewall, watch out. What you are being told is very likely to be untrue or a gross misinterpretation of the law.
- "The Threat". This tactic is designed to intimidate you with the club of possible criminal action if you insist on pursuing your claim. At some point, you get correspondence from the insurer with this type of language in bold, all capital type:
STATE LAW REQUIRES US TO NOTIFY YOU OF THE FOLLOWING: ANY PERSON WHO, KNOWINGLY AND WITH THE INTENT TO DEFRAUD ANY INSURANCE COMPANY OR OTHER PERSON, SUBMITS AN APPLICATION OR CLAIM CONTAINING ANY MATERIALLY FALSE OR DECEPTIVE INFORMATION OR CONCEALS, FOR THE PURPOSE OF MISLEADING, ANY MATERIAL INFORMATION COMMITS A FRAUDULENT INSURANCE ACT WHICH IS A CRIME.
I always find it interesting that insurers gloss right over the fact that their unsubstantiated denials of claims and their claims handling tactics are equally the commission of a fraudulent insurance act, which is a crime. It is also very important to understand that claims representatives are not bound by the same ethical requirements that attorneys are. Attorneys are not permitted to threaten you with criminal prosecution to pressure you into settling a civil claim.
Amazing but true.
Many insurers produce "scripts" for their claims representatives - so if you end up talking to someone who sounds like a telemarketer, you will know why. These scripts ensure that the same rhetoric is given to each claimant, as illogical as some of the arguments may be. Words like "never" and "impossible" are often liberally strewn through the script, sometimes coupled with cajoling or bullying. Just remember this: the claims representative's job is to get you to sign a release against the insured - for as little money as possible -- and often the size of any future bonus depends on how much money the representative "saved" the insurer by under-paying your claim.
E. L. Eversman
The information provided in this column is for information purposes only and should not be construed as legal advice. You should always consult an attorney licensed to practice in your Country, State, and/or Territory as laws vary from Country to Country, State to State, and Territory to Territory. The author is delighted to share information but cannot be responsible for damage or adversity encountered by reliance upon that information and urges you to consult with local counsel.
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