Presentation on theme: "Ethical Considerations for Claims Adjustors. Stowers Doctrine Stowers Furniture v. American Indemnity Does the company owe a duty to limit insured’s."— Presentation transcript:
Ethical Considerations for Claims Adjustors
Stowers Doctrine Stowers Furniture v. American Indemnity Does the company owe a duty to limit insured’s exposure to third part claim Damages alleged $20,000 Limits $5,000 Plaintiff demands $4,000 Company offered $2,500 Judgment $12,000 plus cost
Stowers Doctrine Right of control regarding all aspects (settlement included) When company dictates the course actions must be reasonable Courts create duty to act as a “ordinarily prudent person” would in management of own business Ranger County Mutual Case
Question Would an ordinarily prudent person settle this case prior to trial? Judgment - Judgment There is no requirement for perfection.
Ranger County Mutual Ins. v. Guin ‘87 The court expanded the Stowers doctrine to all phases of litigation Courts imposed duty of… –Good Faith –Fair Dealing With respect to: CLAIMS INVESTIGATION TRIAL PREPARATION TRIAL
Back to Normal Tort Reform Election of new Supreme Court Expansion of doctrine stopped! Court recognized mistake Said insurance company not responsible for; Failure to attend key depositions Inadequate defense at trial Right to control the details State Farm v. Travers
American Physicians Exchange v. Garcia Stowers Test Claim against insured covered Within Policy Limits Ordinary person would accept
Stowers & Bad Faith Multiple Claimants CC Car #1 Family of four – killed wife of 30 years (all hurt) Car #2 Drunk driver with guest passenger (guest killed) Company of car #2 tenders limits of $20,000 to car #1 Car #1 refused to see what drunk has Car #2 Guest settles for $5000 Car #1 wants full $20,000 Company offers remaining $15,000 Judgment $172,000 plus interest OO OO LL
Trinity University v. Bleeker Stowers & Bad Faith Bad accident hurting numerous people Plaintiff had five clients Plaintiff made policy limits demand of $40,000 Judgment $11,500,000 Does the company pay? NO
Rocor International v. Nat’l Union Fire Policy covers claim Insured’s liability is “reasonable clear” Claimant had made proper settlement demand Prudent insured would accept No Proper demand
Formal Demand + Written form + Release of all Claims + 30 Days or more to Respond = Trouble
Counselor’s Relationship Plaintiffs lawyers would make a Stowers demand just to add pressure (Whether good or not justified) Stowers Doctrine
Insurance Company Unqualified Duty of Loyalty $$$$$$ $$$$$$ Lawyer Insured Counselors Relationship
Who is the Client? Reservation of Rights!! Pleadings Proof Evidence Issues Counselors Relationship
Reservation Letter Should Identify insurer Inform of conflict Advise that company will provide defense May secure independent counsel Counselors Relationship
Tilley Case Conflict Develops Attorney Must advise insured of the conflict Cannot serve as coverage counsel to company Comments on date of loss Theories covered / not Counselors Relationship
California Case San Diego Credit Counselors Relationship Counsel must explain to both implications No consent – must pay independent Company cannot compel insured to give up litigation control
Company Liability for Counsel YES Unreasonable failure to settle a matter NO Negligent Investigation Defense Trial Decisions Counselors Relationship
Scenario #1 An employee of your insured, shot and killed a shopper at the Kroger grocery store (which you insure) and the person killed was the starting quarterback for the Dallas Cowboys. Your investigation is complete and it shows liability against Kroger is clear and the claim is covered. Plaintiffs’ attorney has been demanding your $1million limit for 2 years. Your adjustor hasn’t offered anything. The president of Kroger calls and demands that you settle the case or he is going to bring a bad faith lawsuit against you.
What do you tell your adjustor? 1.You have to have written documentation on the lost wage claim before he can offer anything; 2.The Cowboys are good because of Coach Parcells and not the quarterback. Offer the plaintiffs $250,000 to settle. 3.To tell the president of Kroger that he can’t sue for bad faith because this is a third party claim. 4.Please settle ASAP and go read Rocor, 77 S.W. 3d 253(Tex.2002) to avoid a bad faith lawsuit.
Scenario #2 Your insured was in an auto accident and liability is not clear. Your defense attorney takes the depositions of two witnesses who say your insured was not at fault. Plaintiffs’ attorney, How Dewey Cheatham, calls and demands your policy limits. You refuse his offer. The Plaintiffs’ attorney then says he is going to get you for these unfair settlement practices and he is going to amend his pleadings to allege Breach of the Duty of Good Faith and Fair dealing against the insurance company.
What do you tell your adjustor? 1)You can now have the policy limits, we only respond to threats. 2)You need to go read Allstate v. Watson, 876 S.W. 145 (Tex. 1994) 3)Please don’t do that, I might get fired! 4)Didn’t you work for the Texas Hammerhead formerly known as the Smart Tough Lawyer?
Scenario #3 A Plaintiffs’ attorney known as the Texas Hammerhead calls your adjustor and asks about all insurance coverage which is applicable to a death claim from a trucking accident which caused a death. You know that your company has a $50,000.00 trucking policy and a $500,000.00 excess policy. What do you tell your adjustor to say to the Plaintiffs’ attorney?
The Adjustor’s Response 1.You must have the wrong insurance company we don’t have any coverage. 2.Hey, Mr. Hammerhead, you’re in luck, we got a $50,000.00 policy. 3.Tell him you got both policies, but that you hired Kirk Willis, so he will never see a penny. 4.Ask him, Hey – what’s your yearly advertising budget?
Scenario #4 One of your adjustors is handling a claim by Mr. Procrastinator, an 82 year old who was rear ended by your insured. The date of loss is June 26, 2002. Mr. Procrastinator is not represented by counsel. You have the file reserved at $10,000.00. Your adjustor has been negotiating with the claimant for about 4 months. Your adjustor tells you that Mr. Procrastinator called this morning and offered to settle his claim for $4,500.00. Your adjustor’s last offer was $4,000.00. What do you tell your adjustor to do?
What do you tell your adjustor? 1.Tell your adjustor to call Mr. Procrastinator on Monday (June 28, 2004) and tell him that the gig is up and he gets NOTHING! 2.Tell your adjustor to call Mr. Procrastinator today and tell him that, after careful consideration, her revised (and final) offer is $2,500.00. 3.Tell your adjustor to call Mr. Procrastinator and tell him that he needs to get an attorney because the statute runs tomorrow. 4.Tell your adjustor to call Mr. Procrastinator and offer him $4,250.00 as a best and final offer.
Scenario #5 Your insured ran a red light and hit a car in which the mother was driving and her 6 year old son was the passenger. Thankfully, the mother was not hurt. The child, however, was transported from the scene due to loss of consciousness. At the hospital, the child was thoroughly checked out and the tests came back normal. The final diagnosis was a mild concussion. It has been one year since the accident and the child has had not further problems. The total medical bills are $1,600.00 The Plaintiff’s attorney accepts your settlement offer of $2,500.00; however, he does not want to have the case resolved with a friendly suit.
What do you tell your adjustor? 1.Cut the check for $2,500.00 and get the mom to sign a standard Release. 2.Tell the Plaintiff’s attorney that unless there is a friendly suit – and a minor prove up – there is no deal. 3.Cut the check for $2,500.00 and get the mom to sign a Release where she acknowledges that she is settling her son’s claim regarding the accident. 4.Call the Plaintiff’s attorney and see if $3,000.00 will convince him of the need to conclude the case via a friendly suit.
Scenario #6 Your insured has a $50,000/$100,000 auto policy. Your insured is speeding, runs off the road, and all five passengers in the car are injured. One of the passengers (a 17 year old girl) is in a coma and is diagnosed with a severe brain injury. Within 28 days of the accident, an attorney for the girl’s family makes a demand for $50,000.00.
What do you tell your adjustor? 1.Tell the adjustor that until you get a report from a neuropsychologist of your choosing, there will be no settlement offers made. 2.Tell the adjustor that you can’t pay $50,000.00 because that will leave only $50,000.00 for the remaining four passengers. 3.Tell the adjustor to get it done yesterday. 4.Tell the adjustor to wait six or more months and then agree to pay $50,000.00 on girl’s claim (see Calich vs. Allstate)
Scenario #7 Same coverage and liability facts as before except that the two most seriously injured passengers happen to be twin sisters. Both have suffered brain damage. Their attorney makes a demand within 14 days of the accident for $100,000.00.
What do you tell your adjustor? 1.Tell the adjustor to get an examination under oath of your insured. 2.Tell the adjustor to get it done, to get it done yesterday. 3.Tell the adjustor to tell the twins’ attorney that you can’t settle the case for $100,000.00 because that will exhaust your limits. 4.Tell the adjustor to call the insured and tell that they may want to chip in a little money on this deal, too. (Thank you very much)
When faced with a settlement demand arising out of multiple claims and inadequate proceeds, an insurer may enter into a reasonable settlement with one of the several claimants even though such settlement exhausts or diminishes the proceeds available to satisfy other claims. Texas Farmers Ins. Co. v. Soriano, 881 S.W.2d 312,315 (Tex. 1994)
Scenario #8 The firm of Dewey, Cheatum & How does quite a bit of defense work with your company. They are defending one of your insureds on a rear end collision case with minimal property damage and treatment at K-Clinic. Bill High, one of the young stars at DC&H, tells you that in his professional opinion, there is a witness that needs to be deposed that would all but guarantee his client’s (your insured’s) victory at trial. The witness is in the Army Reserves and is getting shipped out in 30 days. Bill wants approval to depose the witness.
What do you tell your adjustor? 1.Tell the adjustor to call Bill and remind him of page 43, paragraph 5(a)(iii) of the company litigation guidelines that says on cases where property damage is less than $1,000.00, the ONLY deposition that shall be taken is that of the plaintiff. 2.Tell the adjustor to tell Bill to go out and get a statement from the witness that you can use at mediation. 3.Tell the adjustor to give Bill the authority to take the deposition of the witness. 4.Tell the adjustor to tell Bill to wait on the deposition as the case won’t be reached for trial for 3 years in Dallas courts.
Scenario #9 One of your adjustors is approached by Fee Slashers, Inc., a company that promises to save you up to 80% on your legal fees in the next year. They would review the legal bills submitted by various outside attorneys and recommend reductions, if necessary. Fee Slashers’ compensation is tied to the amount of money they “recommend” be deducted from the attorneys’ bills. The adjustor wants to know if she can begin using Fee Slasher on her files.
What do you tell your adjustor? 1.Tell the adjustor that if Slashers can get the percentage up to 35%, they have a deal. 2.Tell the adjustor to see if her friend at Fee Slashers can get tickets to the Mavericks game against San Antonio and then you’ll think about it. 3.Tell your adjustor that without the consent of your insureds, you cannot submit defense counsels’ bills to third party auditing companies. 4.Tell your adjustor that your defense lawyers would NEVER inflate bills and that you’re offended by that insinuation.
Scenario #10 Your insured is involved in a wreck with an uninsured motorist, who is totally at fault. You hire your subrogation lawyer to file suit against the uninsured motorist for only the $8000 in property damage. Your subrogation lawyer gets a judgment against the uninsured motorist for $33,000. Your insured hears about the judgment and says please pay me $25,000 in um benefits even though he only has $500 in medical bills.
What do you tell your adjustor? 1.Tell your adjustor to call your subro lawyer and tell him to put his E&O carrier on notice. 2.Tell your adjustor to deny the insureds request because that judgment wasn’t based on true facts. 3.Tell your adjustor to offer your insured the true value of the claim, $1,500. 4.Tell your adjustor to pay the insured because your lawyer established the value of the claim in the judgment.
Scenario #11 Your insured gets sued from an accident that happened 18 months ago. The insured claims that the lawsuit was the first notice he had of the accident. You hire Bill – at D,C&H – to defend the insured in the personal injury case. For the next 18 months your adjustor (without your knowledge) directed Bill, without informing the insured, (1) to take 5 separate statements to help establish that the insured’s coverage is waived because of late notification and (2) to write a brief outlining your defense of late notice coverage. Based upon Bill’s work, your adjustor then directs that a Declaratory Judgment be filed seeking to deny coverage.
What do you tell your adjustor? 1.“Good job, you are saving the company money.” 2.“Good job! Bill always does good work for us and we didn’t even have to hire another attorney. Say, isn’t it time for you to consider moving into the management training program?” 3.“Have you ever heard of the ‘The Tilley Doctrine’?” 4.Make sure Bill sends two bills, one for the coverage case and one for the liability claim.
[The attorney hired by the insurance company] becomes the attorney of record and the legal representative of the insured, and as such he owes the insured the same type of unqualified loyalty as if he had originally been employed by the insured. If a conflict arises between the interests of the insurer and the insured, the attorney owes a duty to the insured to immediately advise him of the conflict. Employers Cas. Co. v. Tilley, 496 S.W. 2d 552,558 (Tex. 1973)
Thank You! Kirk Willis Member 469-893-1870 email@example.com