(UN) Fair Claims Practices Act

Fair claims practices represents ultimate oversight
over the claims process. Bad faith is of concern when
handling claims but of equal concern is the fair/unfair
claims practices act. So just what is it?

The Unfair Claims Practices Act, also known as the
Unfair Claims Settlement Practices Act is legislation designed
to protect consumers from inappropriate conduct of insurance
companies.

The act permits insurance regulatory authorities to take legal
action against an insurance company that engages in certain unfair
claim settlement practices with such frequency that it amounts to
a general business practice. The eight core fair claims practices
components (depending on the state in which you handle claims)
are as follows:

You must acknowledge the claim
You must process claimant/Insured claim promptly
You can't misrepresent your policy
You can't influence other policy settlements
You can't force claimant/Insured to settle for less
You can't force the claimant/Insured to travel
You can't appeal excessive amounts of claims
You Can't refuse or delay claims without a plausible reason

The phases of the typical claim are divided up into several very important categories. The initial contact, the investigative phase, coverage analysis, appraisal, documentation securing negotiations and settlement, to name a few. The most important of which is the first 24 hours following a loss. They offer a one-time opportunity to minimize the loss and direct its outcome. One thing is certain, the first 24 hours will not return. The effective adjuster will use those hours to uncover the unique hazards and opportunities in that loss, and out of a broad palette of alternatives, address the critical needs. The key areas that warrant attention during the first 24 hours of a claim consist of :

Securing the claim facts
Reviewing and confirming the coverage
Deterring the type and extent of damages
Discovering the witnesses
Securing the support documentation
Instructing the insured as to what to do, how to it and when to do it
Establish rapport with the clamant and/or insured
Get statements while the information is fresh in the minds of the involved parties
Make assignments to vendors and peripheral support people such as appraisers
Mitigate damages
Document the accident scene
Establish the claims adjusters role in the claim process

Many claims may come to conclusion during the coverage review in the first 24 hours but often times they continue because that phase was not properly addressed. This tends to be costly, creates legal exposures and diverts attention from other areas that warrant necessary attention.

When I first heard of this term, I thought it was only engaged during a court trail. As I became more experienced with EUO’s I discovered what a useful tool this is in securing relevant claim facts and how it serves as a claims investigative guide.

The examination under oath is intended to enable the insurer to obtain any and all information known to the insured or within the insured’s possession or control which may be material to the claim. The examination permits the insurer to observe the insured’s demeanor and trustworthiness, and to obtain detailed information concerning the insured’s claim.

The Examination Under Oath (EUO) is a formal proceeding taken before a court reporter and recorded in a verbatim transcript. Every question which is asked and every answer which is given is made a part of the record. Many insurance companies now videotape the Examination Under Oath, as well. It is usually conducted by an attorney hired by the insurance company for that purpose. The insured has the right to be represented by an attorney and often appears with counsel
An examination under oath (EUO) is one of many tools an insurer has at its disposal to assist it in investigating and adjusting claims which have been submitted. As such, if your clients issue insurance policies or merely purchase them, it is imperative that you understand the issues related to the conducting of an EUO.

An EUO is one of the most effective tools an insurance company has in its search for the truth. The EUO provides the company a unique contractual opportunity to gather material facts and information relevant to a claim presented. Although an EUO has some similarities to a deposition, there are some very important distinctions which, if not considered, can put you or your client at a very distinct disadvantage. These differences arise from the fact that an EUO is the product of a contractual relationship between an insured and their insurer while a deposition is generally conducted during the course of litigation.

Most commercial and personal lines insurance policies, including homeowners, auto and general liability policies, contain provisions which allow an insurer to demand that an insured and certain other parties submit to an EUO. Generally, the policy provision which provides for an EUO states as follows: