Preparing The Adjuster’s File For Litigation

The way in which an adjuster maintains their file can make a dramatic difference in its value when litigation ensues and counsel is retained. Providing a comprehensive, well-organized package to counsel can also result in significant cost savings for the insurer.

Having acted for insurers for over 20 years, I’ve seen the full spectrum, from comprehensive, highly organized files to a jumble of incomplete paper that raises more questions than answers. The effectiveness of counsel upon being retained is often largely dependent on how quickly and efficiently counsel can understand the facts and determine the issues. This is where the adjuster can be of great benefit in helping set the table for an organized defence engagement that impresses not only the insured, but the opposition as well.

What follows is a primer on how an adjuster should prepare the insurer’s file for counsel when counsel is retained. These are practical tips garnered over the past several years. There may be differences between first party claims, third party claims, subrogated claims and coverage litigation, but the focus here will be on third party claims and how the adjuster’s file ought to be prepared for counsel.

When dealing with an adjuster’s file, one must be mindful of issues regarding privilege, why certain documents are created and whether certain documents will ultimately be producible in the litigation or protected by one of several varieties of privilege.

As overriding principles, adjusters should be mindful of three points when preparing their file for referral to counsel:

1. A full and complete investigation by the adjuster before the file is provided will save time and money.

2. The more efficiently and precisely counsel can review the adjuster’s file and become acquainted with the facts and legal issues, the better.

3. Proper documentation, background information and precise instructions are critical to ensuring that counsel can become promptly and efficiently acquainted with the background facts and circumstances thereby providing a springboard for a prompt and effective defence.

During the course of an adjuster’s work on a claim, there will be certain tasks that are routinely performed. These include taking statements from the insured, possibly from the claimant, and from witnesses. The importance in obtaining and preserving this information soon after the event is critical. Often, statements are taken by tape recording. In most jurisdictions, the tape itself constitutes a document and needs to not only be preserved but provided to counsel. For example, if there is a tape recorded statement from the claimant, that tape is often a document which must be produced to the claimant if and when litigation ensues. As such, those tapes, including any transcriptions, ought to be provided to counsel.

The same can be said of surveillance. While it is often the case that surveillance reports contain excerpts from videotape in the way of still photographs, it is important that the original surveillance tape, in its entirety, be provided to counsel. This is generally retained by the investigators and never seen by the insurer. If counsel receives only the portions of the surveillance videotape which are helpful to the defence, and those portions of the videotape comprise only a small percentage of the overall surveillance, the impact of the overall surveillance may be misunderstood. The entire videotape surveillance, in its entirety, ought to be provided upon the referral of the matter to counsel.

Expert reports are typically gathered at the adjuster level but, on occasion, counsel receives only a copy of the original of these reports. The original expert report ought to be provided to counsel where the expert has been retained by the insurer.

In casualty litigation, the adjuster will typically gather medical information from the third party or the third party’s counsel. The necessity for adjusters to properly maintain this information and ensure that it is labeled as constituting the file of “Dr. Jones,” for example, can’t be overstated. Typically, a number of adjusters simply place one file onto a brad or in a “medicals” file and there is the likelihood that the file of “Dr. Jones” will be co-mingled with the file of “Dr. Smith.” When the adjuster’s file is copied, it is often difficult to distinguish one file from another, especially where the adjuster simply provides instructions to a clerk in the adjuster’s office to “copy entire file.” A great deal of time is often required to reconstruct precisely what was on the adjuster’s file (and whose records they were) when we have received simply a full photocopy of an adjuster’s file without an indication of where a particular medical chart or file stops and starts.

Several companies have differing philosophies about the amount of information to be provided to counsel. For example, electronic claims logs are supplied by some companies whereas they are not supplied by others. Management notes and records are redacted by some insurers but not by others due to corporate policy. It is often helpful to counsel to know the thoughts and comments of management throughout the claims handling process where those thoughts and comments are recorded in a claims log. Perhaps, without knowing it, the insurer, through its adjuster and management, tend to develop a theory of the defence throughout the claims handling process and that defence theory is often clearly articulated in the comments of management. If insurers and adjusters are disinclined to provide such notes and records, they would be well advised to nevertheless articulate the defence theory as they see it upon the file being referred to counsel.

It is often helpful for counsel to have a copy of the expense ledger so counsel knows early on what the insurer has paid for in the way of documents and records from the third party. This can be a valuable and time saving tool for counsel when it comes time to resolve the case and determine what is owing on a Bill of Costs.

Whenever a file is about to be referred to counsel, the adjuster ought to contact counsel and without providing any information as to the facts or the merits of the case, ask counsel to perform a conflicts inquiry in relation to the parties involved in the claim. Only once counsel has advised that conflicts have been cleared should the file be sent to counsel.

Once conflicts have been cleared, the letter of instruction from the adjuster to counsel should include:

1. The policy number, claim number and the precise date of loss;

2. The names of all parties, potential parties, insurers for the parties and potential parties and witnesses;

3. Recent and up-to-date contact information for the insured, witnesses and experts;

4. The limit of liability (some insurers refuse to do this, but it allows counsel to identify the potential for liability in excess of the limits);

5. Any coverage issues that may affect the defence of the action;

6. Background facts giving rise to the claim;

7. The theory of the defence as established by the insurer;

8. Insights and impressions of the insurer including presentation of the insured, witnesses, etc.;

9. Specific instructions as to the handling of the matter.

By following this sort of template, and including the proper documentation in an orderly fashion with originals when required, it can save the adjuster and the insurer money by allowing counsel to become well acquainted with the matter in a prompt and efficient way.

While there will surely be variations from file to file, this method of referring a matter to counsel stood the test of time and has been an effective way of communicating with and retaining counsel.

Don McGarvey is a partner with the Edmonton office of McLennan Ross LLP practicing insurance and commercial litigation. McLennan Ross LLP is an independent member firm with The ARC Group Canada.