Policyholders don’t want insurance adjusters who don’t know what they’re doing handling their claims.  It wouldn’t be fair to the policyholder.  Adjusters can’t know how the insurance company they work for wants them to handle claims unless the company tells them.  Therefore, in order for policyholders to have their claims handled the way the insurance company wants them handled (hopefully in good faith), it is incumbent on an insurance company to put proper policies and procedures for claim handling in place.

The Oklahoma Unfair Claims Settlement Practices Act recognizes this fundamental truth.  That statute provides an insurance company must “adopt and implement reasonable standards for prompt investigations of claims…”  This is a well-known fact in the insurance industry.  As a result, it is industry standard for insurance companies to do so.  Commonly, insurance companies draft and disseminate a set of claim handling rules and guidelines to their adjusters, claim supervisors and claim management personnel.  These documents are put together in what is often called a “claim manual.”  In the old days, claim manuals could be found on adjusters desks in three-ring binders.  Now, in the “paperless” world, claim manuals are usually found on an insurance company’s intranet.  Adjusters and claim supervisory employees have access to the “electronic claim manual” on their company computers.  Insurance companies sometimes refer to their claim policies and procedures by other names (like “Best Practices” or “Claim Bulletins”) but regardless of what they call them, every insurance company must adopt “reasonable standards” for claim handling.

It only makes sense that when a policyholder finds herself in a bad faith lawsuit against an insurance company based on a claim the adjuster and/or supervisor handled the claim incorrectly in some way, the insurance company’s own internal rules and regulations will be highly important.

The policyholder’s attorney should always obtain the company’s claim manual in discovery and carefully measure the adjuster’s performance by the company’s own measuring stick as set forth in their claim manual.

Also, the policyholder’s lawyer should examine the company’s claim manual closely to make sure the policies and procedures contained there are in fact “reasonable.”  Many insurance companies have claim handling procedures in place that are very similar to one another, but sometimes a company will have overlooked something important that may become relevant in a bad faith case.

The moral of the story is the insurance company is required to establish fair claim handling rules for its adjusters, then to follow them when adjusting a claim.  If the company doesn’t do so, they will find themselves under criticism for it in a bad faith case.