Canadian Underwriter
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Effective Claims Handling


January 31, 2012   by Ian Gold


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With property and casualty insurers’ profits and profitability tumbling in 2011, with auto injury costs soaring and with Standards & Poor’s warning that challenges remain in the Canadian insurance industry, insurers must do everything possible to process claims effectively and efficiently.

Effective claims handling will ensure that policyholders are properly treated and insurers will avoid exposure to extra-contractual damages.   

What is effective claims handling?

Effective claims handling involves a thorough investigation and claims procedure that leads to a satisfactory resolution of a claim which:
• pays claims that are properly payable;
• identifies and denies fraudulent claims when appropriate; and
• does not expose the insurer to extra-contractual awards when the claim is not fraudulent.

Highly effective claims handlers are:
• fair;
• objective;
• thorough;
• informed;
• responsive;
• perceptive; and
• careful.

Habit 1: Fairness

A highly effective claims handler treats all claims as though they are legitimate — as most of them are. Remember, the majority of claims are legitimate and most people, if dealt with openly and honestly, will respond in an open and honest manner.

When seeking production of documents, be fair and do not overreach. You should anticipate that all of your requests in a claims handling file will be reviewed by a judge or jury. If you have overreached, a court will have concerns about your motives.

Ensure records show reconsideration of an issue where new evidence is provided. A 2002 Ontario Court of Appeal decision, Kahzzaka v. Commercial Union Assurance Company of Canada,1 suggests that even if the insurer has acted diligently in identifying, retaining and using an expert and has received an expert report which supports the denial of the claim, the insurer may still be exposed to a punitive damage claim if it fails to evaluate its position in face of changing circumstances. Failure to do so may result in a bad faith award against the insurer.

Habit 2: Objective

Highly effective claims handlers always look at all the facts with an objective and open mind. They recognize there is no right answer for every claim, and recognize they must address all the information and evidence and follow where it leads. This requires reading all reports, estimates and other productions received, in their entirety. This also requires being open to new information and evidence, and reassessing the claim as new information arises.

The decision of Bullock v. Trafalgar Insurance Company of Canada2 illustrates that an insurer has an obligation to continually evaluate the evidence and has a duty to abandon its off-coverage position or refusal to pay and settle the claim should its position no longer be tenable based on the evidence.

Where there are two conflicting opinions, identify why you prefer one over the other. Ensure that someone reading the file materials can understand why a coverage decision was made. Case law has established that the duty of fairness does not require that an insurer be necessarily correct in making a decision to dispute its obligation to pay a claim. An insurer must, however, be able to show an objective and reasonable thought process behind its decision.

In determining whether a decision has been made objectively, a highly effective claims handler asks themselves the following:
• Is the claims decision supported by the underlying claims documentation?
• Does the claim file reasonably reflect why they made the claims decisions?
• Has all the evidence been assessed before the handler responded?
(Do not make a decision if requested information has not yet been provided.)
• Has the insured been provided with the evidence the claims handler is relying upon?

Habit 3: Thorough

Highly effective claims handlers are nothing, if not thorough. Thorough and effective handling of a claim involves obtaining proper documentation proving the insured’s loss (or lack thereof). A careful examination and investigation of all the documentation surrounding the loss must be made. A highly effective claims handler follows all leads within reason.

Highly effective claims handlers ensure log notes and correspondence accurately reflect reasons for claim decisions, not just what claims decisions were made.

Habit 4: Informed

Highly effective claims handlers must keep themselves informed, including with respect to case law. They ensure they are not relying on old case law in order to make determinations on their files, and ensure that both they and their experts are fully informed and understand the issues required to make a determination.

Highly effective claims handlers also seek out experts who are informed and who specialize in the appropriate subject matter.

Habit 5: Responsive

A great deal of case law has confirmed what highly effective claims handlers have known all along, namely, that responsiveness and communication with the insured is key. Highly effective claims handlers engage in timely, regular, professional, polite and comprehensive communication with the insured. They keep the insured informed of the status of the claim and investigation. An effective way to do this is to send a summary letter setting out the insurer’s position and why the claims process remains ongoing.  

Habit 6: Perceptive

Highly effective claims handlers are perceptive. To be highly effective, claims handlers must be able to perceive and identify fraudulent claims.

As was the case in highly effective habit number three, a highly effective claims handler follows all the facts and all the leads. Claims handlers should review the insured’s habits. They should question whether the insured has done anything out of the ordinary. For example, has the insured recently procured new or increased coverage, or had numerous or similar claims?

Habit 7: Careful

Last but not least, highly effective claims handlers are careful. Claims handlers should be careful and mindful of the fact that a judge or jury in a bad faith claim will scrutinize all of their actions. Care must be taken in any investigations into the insured’s personal or business situation, so as not to negatively impact the insured’s livelihood or personal situation. Be careful and make sure that your adjusting log notes are something that you are happy to produce as a highly effective claims handler.

Highly effective claims handlers are careful and know.

•     What to do when law enforcement requests their assistance seeking information about their insured.
•     When, if ever, they should contact law enforcement agencies with information about their insured.
•     What information, if any, they should share with other insurers.
•     What authorizations they should secure from their insured.

To be an effective claims handler it is critical to be fair, honest and transparent in every aspect of the adjustment of a claim. This includes all communications with the insured. An adjuster must be able to justify every step taken throughout the process. This will ensure the interests of both the insured and insurer will be well served. 

Ian Gold is a founding partner in Thomas Gold Pettingill LLP. He has handled all matters of insurance and insurance coverage cases on behalf of policyholders and insurers.

1.    Kahzzaka (cob E.S.M. Auto Body) v. Commercial Union Assurance Co. of Canada [2002] O.J. No. 3110 (Ont. C.A.)
2.   &n
bsp;Bullock v. Trafalgar Insurance Co. of Canada [1996] O.J. No. 2566 (Gen. Div.)


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