This concluding column of this series, Step 4 of the claim resolution process, addresses how you convince the insurer that a claim is covered, examining the balance between the role of policy language and the role of logic and reason, then wrapping up the entire series by returning to the first column which identified the two fundamental premises of claims resolution.
Language vs. Logic
The legendary Bob Smith, retired, of the Florida Association of Insurance Agents was known to say, “If you can’t argue the form, argue logic; if you can’t argue logic, argue the form.” The reality is (or should be) that, if you can only argue one of these, unambiguous form language should always rule. However, if you can argue both language and logic, your position is going to prevail, I believe, over 90% of the time.
To illustrate when language and logic are at odds, take a homeowners claim involving the freezing of an outdoor hot tub water line and pump. The HO policy excludes such freezing damage but makes an exception if reasonable care was used to “Maintain heat in the building…or…shut off the water supply and drain all systems and appliances of water.”
The insured did, in fact, maintain heat in the dwelling, which did nothing to for the outdoor plumbing. The adjuster made that logical argument that the exception shouldn’t apply. However, the policy language was clear the loss was covered. So, the carrier paid the claim and presumably later modified the form language to reflect the more logical argument against coverage.
The superiority of language over logic works both ways. Property stored outdoors within the fenced yard of a business was stolen. The property policy included theft coverage but also had a burglary protective safeguards endorsement attached. The adjuster determined the burglar alarm on the building was not functional at the time of the theft and denied the claim.
The reality is that, even if the alarm system was functional, it would not have sounded since the theft was not to property inside the building. However, the policy made no such qualification and the endorsement was effectively provided on a warranty basis and interpreted literally. Excluded by language though logic would imply that there should be coverage. Language wins.
But, when you can argue language (especially in the cloak of ambiguity) shrouded in logic, your argument becomes more powerful. For example, in the February column of this series, I gave an example of claims involving damage by a falling boulder that were denied on the basis of the “earth movement” exclusion. The policies in question did not define “earth movement,” “earth” or “movement.”
The argument for coverage was supported by logic. For example, dictionary definitions cited referred to “earth” as essentially a plural term, like soil, rocks, etc., not a single, solitary big rock or boulder. What if a vandal threw a rock through a plate glass window? Would that be covered if the policy covers vandalism or is the rock “earth” that is “moving” and excluded? What about a dust or sand storm? Is that moving “earth” and excluded or does the windstorm peril cover any resulting damage? Logic would dictate that “earth movement” doesn’t cover a single rock or airborne movement. In any case, the adjusters in both cases paid the claims.
Dalton’s 3 Rules of Claim Negotiation
In the cinematic tour d’ farce, Road House, head bouncer Dalton had three rules for resolving disputes: (1) expect the unexpected, (2) take it outside and (3) be nice. Be prepared for the occasional unexpected “cranial inversion” claim denial that was discussed in the February column, though those denials are usually very easy to overturn. For us, “take it outside” does not refer to a fistfight in the agency parking lot (though I have a story about that I might share another day), but rather let’s resolve the claim, one way or another, without litigation.
The third rule, though, is the important one…be nice. There is no tougher job in this industry than being a claims professional. The variety and depth of skills and knowledge required to do the job properly is significant. And, keep in mind, that no matter what the adjuster decides, someone is likely to be unhappy. Treat adjusters the way they deserve to be treated, with consideration and professionalism.
Appealing a Claim Denial
By following the process outlined in this year-long series, you should be successful in overturning over 90% of claim denials that are arguably covered. Most of these reversals begin and end with the front-line adjuster. But sometimes claims may have to be appealed to a supervisor or manager who has more experience, decision-making authority or bargaining power.
Occasionally a claim may be appealed to the carrier’s home office, though my experience has been the farther you get away from the source, the less likely you may be to prevail without litigation.
In some situations, you may be able to get your state insurance department involved, though, frankly, I believe this has become less likely. When I worked for the Tennessee affiliate of the Big “I” trade association, I was able to get scores of claim denials reversed through the combined deliberations of the agent, insurer, association and regulatory staffs.
And, of course, there is always litigation…or the threat of litigation. I recall a particularly frustrating denial involving a lady who sold a $29,000 diamond ring to someone who gave her a counterfeit cashiers check. Even though she had theft coverage, and had scheduled the ring on her HO policy on a wide open perils basis, the carrier refused to pay, claiming the cause of loss was “voluntary parting,” something often excluded by commercial property policies but not even remotely an exclusion under her HO policy.
The claim appeal went all the way to the insurer’s home office claims and legal departments and still the carrier refused to pay. I knew someone who knew someone who knew one of the best known trial lawyers in the country. We sent the correspondence on the claim to the law firm, a demand letter was sent under the attorney’s signature to the insurer and the claim was settled within two weeks.
If I were to try to summarize this entire series of articles into three foundational principles, it would be this:
First, insurance is not a commodity differentiated only by price, though you wouldn’t know that from most price-focused industry advertising.
Second, the purpose of insurance is to insure, to look for coverage, not loopholes. An insurance policy is not an escape room game.
Third, the foundational principle of the industry is to assist people and organizations in minimizing their exposure to serious or catastrophic financial loss, a premise seemingly lost on insurtechs who claim they can place your insurance in 60 seconds.
I hope this column has convinced you that many uncovered claims can be prevented and that most claims that involve legitimate differences of opinion as to coverage can be resolved fairly and equitably without litigation.
With that, I’ll close this series with a fond RTFP!
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