“Look for Coverage”– A Fundamental Principle of Adjustment

I have asserted repeatedly for many years, and when necessary, given arguments for the axiom

Various publication on this topic are linked to my WebPage, and it has been included in several CLE lectures.

I now come to the real thesis of this blog:

The Axiom “Look for Coverage” does not so much as suggest the idea “Find Coverage.”  Rather it is about pursuing a required reasonable process for a reasonable length of time.  What is reasonable depends in part by the context, though, of course, logic and objectivity must always be employed as must the proper method for empirical research and historical research.

Obviously, the complexity and streaks of doubt about a claim help determine the requirements “rational/reasonable looking” as to both the reasonable pursuit of truth and the amount of time reasonably spent on the project.  Loss of income claims can add a lot to a schedule that involves only property damages, for example.

I think there are four types of “looking”: (1) “horizontal,” (2)”vertical,” for lack of a better term, (4) “intellectual,” and (4) “critical” or “claim redo.” Horizontal looking is the effort that must be reasonably expended to find out what else counts as a covered loss.  Vertical looking is exploring a given claim more deeply. Intellectual looking is utilizing reasonable efforts to examine the claim and see what is really being claimed. This may require discussing the claim with the insured and its representative.

Critical looking is a type of rigorous critique of the insured’s formula for his claim or reasoning in support for his claim.  The purpose of this kind of “looking” is not to help determine whether to deny, although that activity exists as well.  The purpose of critical looking is to help the insured.  It is to make sure the claim makes sense.  If the insured, in effect, claims that the roof leaks but also claims it does not particularly by implication, the claim needs correction.  If the insured is making a claim for the wooden unattached car garage but states the claim in terms of the dwelling, the claim may need to be revised. If an insured makes a claim for the destruction of his dwelling on the basis of arson, but also says he burned down the business building himself by accident, the insured needs help in reformulating his claim.  These are simple examples for illustration purposes; many degrees of complexity  needing reformulation exist.  This is particularly turn  in highly complex business claims, e.g., those with business income coverage.

What if an insurer does not do something that it needs to have been done, but someone else does it.  What should happen?  There are several scenarios; one would be that once the insurer finds out, it can either pay for the work, or it can refuse. Obviously, the first of these is the correct alternative. What if the insurer is not told for a long time about the “doing” of the needed work? If the insurer’s adjustment was seriously defective in the first place, that is, worse than a simple error, there may be some degree of bad faith. And so forth.

(Each type of looking may be required by the law that all parties to any contract owe the other party some sort of good faith built into the idea of a contract. This idea is not peculiar to insurance. Still an insurer failing to do something really important and then not doing it and/or not hiring someone to do what needs to be done, can be insurer bad faith, whether from the common law or from one or more statutes.)