Insurance adjusters often don’t know how to properly interpret the language of the very insurance policies their companies sell their policyholders. My experience tells me adjusters often read the insurance policy looking for any arguable as (even outlandish) way to deny coverage. They take language out of context, misapply language to the facts of the claim and generally look harder for reasons to deny than for reasons to pay. This is exactly the opposite of what the duty of good faith requires them to do – they should be looking harder for reasons to pay than for reasons to deny.
This phenomenon takes on many, many forms. But one of the most common examples of the problem is when an adjuster makes a knee-jerk decision on coverage without knowing all of the facts of the claim that are required to make a fair decision about whether the claim is covered. Adjusters too often don’t seem to fully grasp the concept that the duty of good faith requires them to conduct a full, fair and timely investigation of the coverage issues before denying coverage.
An insurance policy cannot be fairly interpreted in a vacuum. A policy cannot be fairly interpreted based solely on the language of the policy, without an understanding of the claim facts to which the language of the policy is being applied. A policy is a contract between the insurance company and the policyholder requiring the insurance company to provide coverage under certain circumstances, and not under others. Therefore, how can an adjuster know if there is coverage if they don’t fully understand the circumstances of the claim?
The adjuster absolutely must investigate the circumstances before deciding to deny coverage. Instead, the coverage “investigation” conducted by adjusters often consists of nothing more than a cursory reading of the policy language, a failure to gather all the pertinent facts of the claim, and a coverage denial lacking any thoughtful analysis.
If you’re like me early in my career, you may be wondering why adjusters do this. The easy explanation (one that is often true) is that they look for ways to save the company money because that kind of behavior is rewarded by the management of the insurance company. Denying claims is easier on an adjuster with his or her boss than paying claims. But, as the years have gone by and I’ve taken more depositions of adjusters than I care to recall, it has become apparent to me that adjusters receive little to no training on how to properly conduct a good faith coverage analysis. As a result, adjusters often know little about what the duty of good faith requires of them before they take a stab at interpreting difficult policy language and making an uneducated guess about coverage. When this happens, the insurance company wins and the policyholder loses. And the duty of good faith is violated.