Settling the Claim Flashcards
Claim definition
formal request to settle
What 4 options does an adjuster have when a claimant submits a claim?
- ) Accept and pay
- ) Refuse and deny
- ) Negotiate
- ) Alternative dispute resolution method
“Accept request and pay the claim” process:
- ) Claimant proves damages
- ) Adjuster determines settlement amount based on investigation.
- ) If amount is close to claimant’s offer, adjuster comes to agreement with claimant and issues settlement check. Small differences should be settled in favor of the claimant.
What does draft authority?
- Adjuster can settle directly with claimants and write checks for the insurer.
- Often limited to a certain amount (ex.: $5,000)
- Without draft authority, adjuster would submit settlement for approval.
“Refuse the request and deny the claim” reasons:
- Damages aren’t covered.
- claim is fraudulent.
- claimant can’t prove damages.
- loss occurred outside policy period.
Reasons for “Negotiate with the claimant” option:
- damage is covered
- claimant is asking for more than insurer is willing to pay
- adjuster must negotiate to find an amount that will settle the claim.
When is negotiation not possible?
Adjusters must know the exact amount that the insurer is willing to pay to settle prior to investing time in the negotiation process.
No negotiations:
- When dollar amount difference offered is too small.- goes to court
- When dollar amount difference is too great.- settle the case if it is close enough.
- For punitive damages.
Adjuster/claimant negotiation only works when____ and is the ___, ____ negotiation option.
- both parties are motivated to settle.
- Easiest
- lowest-cost
Alternative dispute resolution methods
- Arbitration
- Meditation
- Appraisal
- Declaratory Judgement
- Litigation (letting the claim go to court) Last resort due to unpredictability and cost.
Arbitration characteristics
- Arbitrator is a neutral third party.
- Arbitrator’s decision is legally binding.
- Costs less to tax payers than a court of law.
- Less formal atmosphere allows more evidence.
- Arbitrators often have more expertise than juries.
Mediation characteristics
- mediator is a neutral third party
- mediator only advises in the negotiation
- mediation decision is not legally binding
- settlement is only legally binding if both parties agree to it. (claimant can back out for a short time, but insurer cannot)
- Either party may “Walk away” (impasse)
Consequences for failure to appear at mediation
- Severe for the insurer: contempt of court and/or penalties.
- Mild for the claimant- no penalty or minor penalty.
Appraisal condition (clause) conditions
- A definite disagreement must exist prior to appraisal.
- Each side chooses an appraiser
- Both appraisers agree on an umpire
- Agreement by any two of the three is binding
- Appraisal only decides settlement amount, not whether coverage exists in the first place.
Declaratory judgement action
- Court declares the legal rights of both parties
- Court does not decide how to resolve the case
- Disputing parties then use the court’s decision to come to settlement.
Litigation
- Last resort
- Taking a claim to court can be:
- expensive
- unpredictable
- possible even after binding negotiations of previous methods
Settlement definition
When two parties in a dispute reach an agreement.
- how much will be paid
- terms and conditions of payment
When a settlement is reached, the claimant gives up her right to ____ and right to ___. As long as the insurer follows the _____.
- seek any further damages
- right to sue.
- Terms of the settlement.
Full release settlement (aka “full release of all claims and settlement agreement”)
- all damages paid at once
- most common settlement option
- insurer pays immediate, single ‘lump sum’ to claimant
- claimant signs Full Release Form that releases the insurer from additional claims.
Scheduled payment release (aka “Open-ended release” or “Rehabilitation Settlement”)
- Insurer agrees to pay ALL Compensatory Damages (special and general) up to the point of settlement.
- Insurer also pays for certain future “incidentals” related to the claim
- Most commonly used in Workers Comp claims.
Partial Release ( aka: “payment of property damage; bodily injury pending”)
- involves claims that have property damage and bodily injury
- insurer indemnifies all property damages while it awaits the proper indemnification for bodily injury.
- claimant must be in a condition in which he can understand this settlement option.
Advance payment settlement
- Used when the claimant’s damages are mostly bodily injury and the claimant is unable to work.
- Involves a series of partial payments that will be subtracted when the final settlement amount is determined
- Decreases chances of lawsuit
No release settlement (aka “walk-away” settlement
- Insurer pays the bills submitted by the claimant
- signing and cashing a check substitutes for the release form
Structured settlement
- Series of smaller payments over time
- Reserved for largest claims
- Insurer often must pay a portion up front
Full release
Insurer writes one check to cover all damages, claimant signs a full release form.
Scheduled payment release
Insurer pays all compensatory damages and agrees to pay certain future “incidentals”.
Payment of property damage, bodily injury pending
Insurer indemnifies for property damage first; then bodily injury, when the amount is available.
Advance payment
Insurer makes multiple partial payments until the final settlement is agreed upon.
No release form
Insurer cuts a check for the amount of the damages, but the claimant is not required to sign a release form.
Structured settlement
Breaks up the indemnity into a series of smaller payments.
