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In the Details: Preventing Bad Faith Claims

Tue, 18 Mar 2014
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Published in Articles

Waiver is the voluntary relinquishment of a known legal right because of some act or omission.

An estoppel is the statutory loss of that right because of some earlier act or omission constituted a waiver. Estoppel cannot occur without the waiver. In the insurance professionals’ world, the issue of waiver and estoppels may come up with regard to coverage. If a claims adjuster has a reason to deny coverage, but does not, and the insured relies on that coverage; the insurance company would be prevented from asserting its right to deny coverage at some later date. This is estoppel. The insurance company is then stopped from denying the coverage for the loss at a later date.

Often times, an insurance adjuster fails to properly investigate the insured’s damages and does not properly evaluate the policy exclusions. After suffering a loss, if the policyholder has made decisions to get the repairs started as soon as possible, and many of those decisions are based upon the oral or written representations of the adjuster, or the lack of information given by the adjuster, estoppel can be applied to the insurer’s ability to deny at a later time. In this situation, significant financial expenses have been committed when the policyholder decided to begin repairs, move to a new location, engage in a temporary lease in order to minimize his loss, expenses, etc.

If the insurance claims adjuster does not identify the coverage issue when first presented with it and leads the insured into believing that he/she is insured and covered for the loss; and the insured relies on the information shared by the claims professional, the bricks that build the wall for bad faith begin to take form. If an insurance contract covers certain risks, but the policy contains exclusions or limitations of coverage, when the insured makes a claim for loss from a covered risk, the insurer in many states must notify the insured in writing as soon as possible in order to assert any applicable exclusion or limitation to avoid liability. We cannot empathize adequately with insureds that have just lost their home by a tornado or fire. We can only imagine the panic, anxiety, and heartache that our insureds experience following such a tragic event. It is poor claim handling to delay prompt contact to our policyholders. The insured is panicked and distraught, and hearing from the claims professional goes a long way in making the insured’s situation a little less painful.

Fast conclusion of the claim, within the limitations of the policy, is even better.

Author: Partners of Claims Resources and Solutions LLC publishes this article as a public service. It is provided for general information and is not intended to replace legal advice for specific cases.

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