2nd Source - C111 Chapter 6 Advanced Loss Adjusting

Chapter 6 – Investigative Issues in Property Losses

Relationship Management in First Party Losses

-        The loss adjuster should understand the insured's frame of mind shortly after a loss.  The insured could be:

·         feeling traumatized and vulnerable

·         displaying strange and unpredictable behaviour

·         exhibiting emotional outbursts

·         embarrassed about the initial outbursts

·         worried about their business's ability to survive a loss

-        The loss adjuster should show empathy and concern when initially speaking with the insured; the loss adjuster should show a caring attitude, and a willingness to listen patiently within a professional relationship

-        The loss adjuster to provide some sort of stability should instruct the insured on the process of how the claim will proceed and advise the insured of tasks to do in order for the insured to do something concrete; this will help the insured to start moving forward after the loss, be therapeutic, and ultimately it is the insured's responsibility under the policy

-        Labelle v. Guardian Insurance Company of Canada  - punitive damages were assessed against the defendant (insurer) in part because the loss adjuster disregarded the insured's right and was found to be insulting and arrogant towards the insured

Miscellaneous Issues for the Property Loss Adjuster

-        A conflict of interest situation for the loss adjuster are:

·         Two separate claimants involved in one loss and both represented by the same adjuster firm

·         The loss adjuster has a relationship with the claimant which is beyond the scope of the claim;  e.g. the loss adjuster and claimant have a romantic relationship outside of the claim

·         The loss adjuster has a financial interest in the property affected by the loss;  e.g. The loss adjuster is a neighbor to the claimant and also suffered loss to his/her home as a result of the loss to the claimant's property

-        If the loss adjuster gets offers of free services or free merchandise in connection with a claim they should not be accepted;  by accepting then the loss adjuster could be accused of a conflict of interest

-        If the loss adjuster has a stake in the business that is bidding for the work then the loss adjuster should not use this company in order to avoid a conflict of interest

-        The loss adjuster should be aware of potential subrogation issues against others responsible for the loss and a possibility of the insured being sued if the insured was responsible for the loss;  the loss adjuster should be aware of the policy's responsibilities, limitations and exclusions when dealing with a claim

-        An insured may have multiple policies which may respond to a loss.  Multiple policies will affect the loss investigation by:

·         Seeing what direct and indirect damage is covered by which policy; e.g. A business suffers a fire loss and one policy will cover the damage to the property while another policy will cover the business interruption

·         Complexity may bring in other policies that were indirectly affected; e.g. The property where the business was being conducted was leased and the landlord's property policy will respond to some of the direct damage caused by the fire.  The insured's policy will respond to the tenant's improvements and betterments.  Also, if the insured is responsible for the loss there could be a possibility that the landlord and other tenants could present legal action  against the insured

·         The loss adjuster must explain to the insured how each part of the claim will be handled and also obtain the necessary information to resolve the claim;  the loss adjuster must know what are the insurer's responsibilities and what are the insured's responsibilities as outlined in each policy contract

·         The loss adjuster needs to obtain the most accurate version of the loss event and often dealing with multiple insurers due to multiple policies, the information each insurer needs may be irrelevant to another insurer

Safety Issues for Loss Adjusters

-        The site where the loss occurred could be dangerous;  e.g. Fumes may still be emanating from the fire and damage to the structure could cause integrity issues for the building

-        The loss adjuster should visit the loss site only after the authorities have declared it safe

-        The loss adjuster should use common sense, intuition and trust our senses when visiting a loss site;  e.g. the loss site is in the part of the city where the crime rate is high, common sense advises not to visit the site alone and at odd hours in the evening or in the night

-        In the cases where limitations or exclusions negatively impact the claim the insured could become angry and be verbally threatening;  the loss adjuster should consider any threat seriously and react accordingly to protect themselves in a civilized way

Good Faith Dealings

-        Triggers for Bad Faith Claims; for a finding of bad faith dealings, the insurer's conduct in investigating, assessing, or responding to the claim must be outrageously extreme;  triggers of bad faith claims have the following questions that need to be asked are:

·         Did the loss adjuster or insurer act promptly?

·         Did the loss adjuster or insurer act competently?

·         Was the loss investigated thoroughly?

Claim File Documentation

-        The claim file must show how the loss adjuster handled the claim

-        What did the loss adjuster do in relation to the investigation to allow the insurer to make a decision on issues like coverage or on the amount of the claim?

Insured's Financial Situation

-        The loss adjuster knowing that the insured is in a financial bind should NOT present a lower settlement in order to take advantage of the situation

-        Unsubstantiated rumors should not be documented in a claims file unless there is a good reason to do so

Humour

-        Humor is not appropriate in claims file especially if it demeans the insured

-        Even if humorous remarks are not intended to demean the insured, they could be misconstrued and twisted into showing they are demeaning resulting in a bad faith lawsuit

-        The loss adjuster should remain sympathetic to the insured's interests and show respect for the insured's rights

Coverage Analysis

-        The loss adjuster should document coverage issues and his/her analysis of why coverage remains in question

-        If the loss adjuster is having trouble applying the policy language to the claim, this could be interpreted that the wordings are ambiguous

-        The loss adjuster should clearly explain how coverage is being decided;  the loss adjuster should use words that are easy to understand and his/her conduct should be transparent

-        If the loss adjuster refers a case to counsel for an opinion about coverage, the file should be documented carefully to ensure that the adjuster has approached it in an appropriate way

-        If the insurer has decided to deny a claim there must be credible evidence to support this position

File Critique

-        Internal criticism of file handling should not form any part of a claims file

-        If the insured sues the insurer and the claims file has to be produced, the judge might conclude that the adjuster acted incompetently if such notes appear in file

-        If a superior writes a critique in the file, the court may interpret this as a failure of management to step in and correct the situation;  an omission to act is also deemed negligent and could possibly lead to a bad faith lawsuit

-        Any attempt to cover up evidence would be considered bad faith dealing resulting in punishment by the courts in either aggravated damages or worse yet, punitive damages

Correspondence

-        All correspondence including any e-mails with reinsurers may be considered part of the claim file

-        Any notes the loss adjuster has used or developed in the investigation might have to be produced to the courts and only the facts of the investigation should be documented;  Personal opinions or judgments about the insured should not be in the claim file

Conversations

-        The loss adjuster should not rely on his/her memory when a discussion has occurred with the insured;  all discussions, if not recorded, should be summarized in the claim file in an objective and fact based way

-        The file should include a log of all telephone calls and other activities that were undertaken during the time the claim was being handled and also include who the conversation was with, like the insured or any other parties to the claim

-        If the loss adjuster or other party asks the insured to undertake an activity to further the investigation  of the claim, and the insured doesn't comply, this should be documented for both the activity that was requested and the lack of results

-        When an activity is requested from the insured, a reasonable deadline needs to be set for the insured to complete the task;  document any delays, extensions and/or passing of deadlines conducted by the insured

Negotiations

-        Commercial insureds who have been in business for many years are very sophisticated in their knowledge of insurance law

-        The loss adjuster should let the insured know that commercial claims are very complex and a thorough investigation is needed

-        If the investigation yields that the claim is covered, negotiations with a commercial insured are often strenuous, requiring a great deal of facts and tact to persuade the insured into a fair and reasonable settlement

Procedural Manuals

-        In a court setting the insured's counsel may ask the insurer to produce its claims manual and any hint within the insurer's operation there is a conspiracy not to pay claims would fuel the bad faith law suit

Responsibility of Expert

-        The insurer must take responsibility for hiring a particular expert

-        The insurer would not be able to defend against aggravated/punitive action because the expert was incompetent

-        The insurer should be sure that the evidence collected through a thorough investigation shows the insured to be presenting a fraudulent (arson) claim;  if the evidence is strong but there are reasonable explanations that could lead that the evidence collected is purely coincidental, the insurer should consider settling the claim

-        If an insurer denies a claim based on arson and in court the evidence is interpreted to be favorable for the insured (plaintiff) then the judge could award aggravated or punitive damages to the plaintiff; Whitten v. Pilot Insurance

Privilege

-        If the insurer is sued, counsel for the insurer will usually look to avoid producing the claims file; lawyer/client and work product privilege provide some protection for the insurer

-        If the insurer is able to show it was operating in good faith while handling the claim, then in confidence the insurer can waive any privilege; however, once documents have been shared with the insured they are no longer considered privileged and have to be produced if the matter goes to court

-        It is the insured that must prove bad faith dealings and the insurer (loss adjuster) that should always work in good faith when an insured presents a loss against the insurance policy

Fire Site Investigation

-        In a large fire loss the loss adjuster can expect to find police and/or fire authorities securing the site and limiting access to only its members

-        The Fire Marshall will often prohibit site access to everyone until s/he completes the investigation;  after the Fire Marshall has completed its investigation, the site will likely be transferred back to the police or tenants depending on the situation

-        Permission to enter the insured's premises by the loss adjuster is granted under the Statutory Conditions (for almost all provinces) and QC General Conditions;
*QC General Conditions "Safeguarding and examination of property" (Item 3.6; Civil Code Article 2495) ...At the insurer's expense the insured shall permit the insurer to visit his/her premises and examine the insured's property"
*Statutory Conditions of all other provinces "Entry, Control, Abandonment"
"At the insurer's expense the insured shall permit the insurer to visit his/her premises and examine the insured's property"

-        The loss adjuster should obtain authority from the owner of the property to begin work;  in the case where the insured has leased the premises, authority should be taken from the landlord and not the insured before performing any work;  the lease agreement may govern access to the premises after a loss

-        The possible sources of information for a fire claim are:

·         interview with the person who discovered the fire

·         interview with the Fire Chief and fire fighters who were at the site when the fire was ongoing

·         interview with the neighbors about the appearance of the fire; what was the colour of the fire? What was the odour that could be observed? Were there multiple areas where the fire was observed?

·         hire a fire expert who can determine the cause of fire and if there are any special circumstances that have been observed

·         hire a locksmith or alarm expert to comment on how systems operated during the fire

·         if the property was for sale then an interview with the real-estate agent who was selling the property as to the state of the home and reason the owners were selling the property

Basis of Settlement

-        Commercial Building, Equipment and Stock Broad Form (CBESB Form), the indemnity agreement provides the insurer will indemnify the insured using the following options, whichever is less*:

·         The actual cash value (ACV) of the property at the time of the loss or damage

·         The interest of the insured in the property

·         The amount of insurance specified on the "Dec Page" in respect of the property lost or damaged

-        The stipulations to satisfy the replacement cost endorsement are:

·         Replacement to occur promptly and with due diligence

·         Replacement to take place on the same site or adjacent site (commercial only)

·         The cost of the replacement will be paid by the insurer once the work is completed

·         If the insured fails to comply with the terms and conditions of the replacement cost endorsement then the basis of settlement will revert back to the original policy terms (refer to above "*")

-        Basis of settlement for tenant's improvements and betterments under a commercial policy will be limited to:

·         When the repairs are completed with due diligence

·         Collect the amount on the repairs OR the actual cash value of the improvements as a whole, whichever is less

-        If the tenant improvements are not completed then the terms of settlement will be limited to:

·         The original cost of the damaged improvements during the unexpired term of the lease, at the time of the loss to the date the tenant improvements were to be completed or the expiration date of the lease whichever comes first

-        The formula used to determine the settlement is:
Unexpired term of the lease     X    Original Cost
Date improvement made to expiration date of lease
Example - A fire loss happens to Soryal's Beauty Shop.  The premises was leased by the insured, Soryal.  The building was reconstructed in 6 months and only then the improvements by Soryal were able to begin.  Soryal found another place to do her business while construction of the building was in process and only had 4 months left on her lease after the building was reconstructed.  The improvements would cost about $10,000 and would take 5 months to complete.  Soryal opted not to repair her improvements as she continued business at another location.  The insurer would pay:
4 months (expiration date of the lease)     X   $10,000 (original cost of repairs)
5 months (completion date for the repairs)

=  $8,000 would be paid since the expiration date of the lease was less than the completion date of the improvements

Valuing Destroyed Property

-        Most common method used to determine ACV is Replacement Cost - Depreciation

-        Another method to determine ACV is using the fair market value of the property at the time of the loss as was illustrated in the case law Canadian National Fire Insurance Company v. Colonsay Hotel; the property will be compared to other similar properties selling price at the time of the loss

-        The most unique method of determining the ACV is the income approach which is used to determine the value of the property by assessing the income that it will generate
Example - If the property was a commercial plaza the amount of rental income it would generate will determine what the value of the property is to be worth at the time of the loss.  In good condition the property would be worth more and in a disrepair state the property would likely generate less rental income and be worth less

Appraisal

-        When disputes as to the value of the property occur between claimant and the insurer, the statutory conditions in the common law provinces provide an option for appraisal process

-        The Appraisal process is an alternative dispute resolution (ADR) tool intended to be a speedy and efficient means of settling disputes over property repairs and/or values

-        For this process to occur the insured must complete and submit a proof of loss (POL) before invoking an appraisal process

-        The appraisal process is completed as follows:

·         The insurer obtains an appraisal of the damages and advises the insured of the results of the report

·         The insured disputes the insurer's report and submits a POL stating a different value for the damages

·         The insurer sends a letter to the insured advising them to get their own appraisal with their own licensed appraiser within a certain time frame (usually 7 to 14 days) to support their position;  insured complies and submits the appraisal report to the insurer's appraiser

·         Prior to the appraisers reviewing the other's report they first agree upon an umpire

·         The appraiser attempt to persuade one another of their positions and if possible come to an agreement on the matter in dispute;  if they cannot then they submit their reports to the umpire

·         The umpire upon review will decide which of the sides is most favorable OR based on the information contained in the reports comes to a final resolution that best serves the insured and insurer (often a middle ground);  the umpire will allow a controlled debate, and once s/he comes to a decision only needs one of the appraisers to agree and the matter is then considered final

·         The umpire and one other appraiser agreement makes the resolution binding on all parties

·         The only time this decision can be overruled is if one of the parties shows that the umpire had a conflict of interest, like having a stake in the business of one of the appraisers involved in the dispute or had some sort of improper relationship with one of the parties or appraisers outside of the dispute

-        Either party to the dispute can invoke the appraisal process after the insured submits the completed POL

-        If one of the parties refuses to participate in the appraisal process then the court will appoint an appraiser on their behalf the above process will be followed

-        The reports submitted by each appraiser to the umpire will usually contain the following information:

·         Appraiser's opinion regarding the value

·         Policy detains, including the underwriting file if it is relevant to the dispute

·         Repair estimates or Total loss value (depending on the situation)

·         Any analysis already comparing different estimates

·         Completed POL

·         Evidence of any payments already paid on file

·         Pics or video footage of the damages

·         Engineering reports or other expert reports that support their position

·         Summary of information that relates to the determination of the value

-        Appraisers, prior to submitting their reports to the umpire, will agree to who should submit which documents to avoid any duplication

Other Sources of Information

-        Public sources of information that can be used in the investigation outside of interview with witnesses and the insured are:

·         Professional directories

·         Newspapers

·         Magazines

·         Property records

·         Court records

·         The internet

-        City Halls carry information of public records like:

·         Ownership (o/s) of property

·         Original dates of construction

·         Permits of construction

·         Permits of renovations

·         Permit of construction related to prior losses

·         Code violations

·         Whether or not the building was suitable to be occupied

-        For commercial properties there could be permits for repair of the building filed by tenants but the owner hasn't complied with these permits;  this could be a source of deduction for the settlement of the claim

Privacy Legislation

-        Individuals have a right to know why personal information is being requested and the purpose for which it will be used

-        An individual has the right to examine personal information an organization might have on file about them

-        Personal Information Protection and Electronic Documents Act (PPEDA) balances the individual's right to privacy with an organization's need to collect, use and disclose such information for legitimate business purposes

-        The privacy officer's role is:

·         Being responsible for protecting personal information collected by the insurer of the insured

·         Overseeing the responsible collection and use of personal information

·         To deal with inquiries and challenges pertaining to personal information collected on insureds

·         To set controls to prevent unauthorized persons from accessing information collected by the insurer

-        Some provinces have enacted their own privacy laws and loss adjusters should be aware of these laws as they apply to adjusters and their activities

Handling Evidence

-        Quick action is needed to ensure evidence is preserved and available for the courts, if necessary

-        The expert needed for a loss will depend on the cause of loss and whether an expert is needed depending on the value of the loss

-        Loss adjusters will normally take pics of the loss themselves; the pics should be relevant to the loss

-        A ruler or some article in the picture may be needed to establish the size of the article, which is the subject of the photograph

-        Taking pics of the damage, the site location and all points of view of the damage may become necessary to sort out the claim and preserve evidence later on

-        Pics should be taken as soon as possible after the loss; most cases that go to court will often take several years and pics will help keep the focus of what the damages were close to the date of loss

-        Certain cameras have a date and time imprinting feature which is useful for documenting an insurance claim

-        Depending if the claim is complex, or worth a lot of money, or there are coverage issues, the loss adjuster may hire a professional to analyze the cause or the amount of the loss and produce a report to establish the value of the damages and the cause of loss

Statements

-        The objective of the adjuster is to set the person being interviewed at ease and document the necessary background information

-        Before the interview the adjuster should have questions prepared which is necessary to fill in the gaps that exist in the file
Example - in the case of a fire loss the loss adjuster would ask the following questions:

·         When and how did the fire occur?

·         Who called the fire dept?

·         What colour was the fire?  What was the odour of the fire?  How many points of fire were seen?

·         Where was the person, who is being interviewed when the fire occurred?

-        The adjuster, when interviewing the insured, should ask questions that establish insurable interest, any questions that relate to the policy contract, and if all terms in the contract were complied with by the insured

-        If there were prior losses suffered by the insured which were similar, the adjuster should ask the insured about these prior loss and verify the information recorded in the interview

-        For commercial losses dealing with fire, the loss adjuster will ask many questions about the insured's business;  the number of questions will depend on the size of the insured's business

-        The interview should begin with simple, direct, non-threatening questions, then follow up with open-ended questions

-        During the interview it is important to listen and allow the narrator as much time and encouragement s/he needs to reveal the facts;  the adjuster should acknowledge that s/he is listening the when the interview is taking place

-        When the statement giver provides ambiguous or vague answers the adjuster should follow up with questions that clarify what the statement giver was saying

-        The adjuster will usually have a list of questions that need to be answered, as requested by the insurer;  these questions are often boiler plate pre-printed;  however, the adjuster should ask any question that is necessary in order to clarify any ambiguity presented by the statement giver;  a loss adjuster's instincts and natural curiosity should not be substituted for a checklist of pre-printed questions, but compliment them

-        The reason it is important to obtain insured's and witnesses' statements promptly is for the following reasons:

·         Provides a map which can direct an investigation

·         Valuable and permanent record of the statement giver's recollection while the details are still fresh in the person's mind

·         Aid to memory;  if the statement giver is to testify in court it may be a long period of time from when the statement was originally given, and reviewing the statement prior to giving a sworn statement in court will help jog the person's memory

·         If the statement provided was an "alibi" statement it can be used to support the statement giver or it can uncover inconsistencies;  often a follow up statement when it comes to inconsistencies is warranted for clarification

·         Statements can also be used to damage the credibility of the statement giver should the inconsistencies arise in court testimony

-        A statement giver may refuse a signed statement, however the statement can still be used a credible record of discussion if not signed

-        After taking a statement allow the statement giver to read the statement and record any objections even if they refuse to sign it

-        If the statement provided by the statement giver is later disavowed and contradicted, then his/her credibility will be undermined

-        Many policies provide the insurer the right to an examination under oath of the insured;  when an examination under oath is undertaken, a court reporter will record the interview;  this right is only if the insurer is still in the process of investigation, once the claim is denied this right is no longer available to the insurer

Suspicious Claims

-        If a claim seems suspicious it doesn't necessarily mean the claim is fraudulent

-        The actions of the insured after the loss are as important as the action taken during and before the loss;  the actions taken after the loss may allow a glimpse into the insured's frame of mind

-        Small clues should not be overlooked and any suspicion into the actions of the insured should lead the adjuster to investigate more thoroughly

-        Arson fraud, like any fraud, can be motivated by circumstances, and for commercial insured's, asking questions which allow the adjuster to better understand the business operation and status at the time of the loss will provide clues as to why an insured would commit to the action of arson

-        If a mortgage clause is attached to the policy, the insurer might still be obligated to pay the mortgagee for its interest in the property;  the reason the insurer may choose to do this is to assume the position of the mortgagee and:

·         foreclose on the property

·         sell the property in order to recoup part of the loss

·         attempt to subrogate the loss payment made to the mortgagee from the insured, especially if the insured has somehow breached a policy condition

-        If the claim is paid and later discovered to have been fraudulent, insurers can take the action to have the claimants reimburse the insurance money paid on the claim

-        Restitution is available to the insurer if a claim is shown to be fraudulent and the insured/claimant is convicted of fraud by the criminal courts

-        The insurer, in the situation of restitution can request from the insured/claimant to repay funds:

·         obtained by fraud

·         cost of the investigation

·         general and punitive damages

-        The loss adjuster's actions when they have enough evidence to allege arson fraud will not fuel a defamation suit against them or the insurer, even if the court finds the insured/claimant not guilty of arson;  the adjuster should be prepared for the insured/claimant to threaten defamation lawsuit against them and the insurer

Proof of Loss (POL)

-        Advance payments to the insured when a serious loss has occurred is not a basis of an estoppel if later in the course of the investigation the claim is to be discovered fraudulent; however, before making an advance payment the loss adjuster should be reasonably certain that no condition exists that would vitiate the claim

-        When an insurer rejects a POL the insurer cannot later rely on the contents of the POL as the basis to deny the claim;  the insurer has an obligation to the insured when rejecting the POL, and must:

·         show the insured what was deficient in the POL

·         to request the necessary actions/docs to correct the situation

·         to send a letter to the insured outlining details needed in order to properly document the claim so it can be considered for payment

-        If the loss adjuster accepted the POL without notifying the insured that it was deficient, and later denied the claim because the POL was incomplete, the court would grant relief for the insured due to imperfect compliance, as it was the duty of the insurer (loss adjuster) to give the insured opportunity to furnish a POL with all the necessary details before paying the claim

-        Whelan v. Beothic General Insurance - permit the statutory conditions to empower the insurer to invalidate a claim where the insured commits any fraud or makes willfully false statement with respect to the information furnished in the completed and submitted POL by the insured

-        The insured is permitted to exaggerate on the value of the claim, and this exaggeration is not considered to be a fraudulent act; it is considered part of the negotiation process

-        However, exaggeration that cross the bounds that are considered reasonable may constitute as fraud.
Example - The insured owned a small clothing boutique, suffered a fire loss and claimed $100,000 in stock was destroyed.  After the loss adjuster completed the investigation, only $22,500 of stock was present in the store and destroyed due to the fire.  The insurer denied the claim based on the exaggeration of the amount was unreasonable.

-        Time frames for payment of claims will be determined by the Statutory Conditions (common law) or General Conditions (CCQ).  Once an insured submits a signed and completed POL, the insurer must pay the amount within 60 days or provide a reason for rejection.  If the insurer doesn't provide a reason for rejection or any type of communication, after the 60 day mark has expired, the insured can launch a law-suite against the insurer demanding payment based on default judgement

-        In the case where multiple insureds are affected by the loss and only one of the insured commits fraud, the courts have deemed that the policy was not clear as to what should happen in such a case and the innocent insured was granted relief;  the insurer had to pay the innocent insured;  however, there were court cases in similar circumstances where the judge ruled all parties to a fraud are unable to recover under the policy and there is no such thing as an innocent insured if fraud is committed by any one of the multiple insureds

Defence Against Arson Insurance Fraud

-        NFPA = National Fire Protection Association

-        NFPA developed a guide to help improve fire investigation processes and the quality of information gathered in investigations

-        NFPA advocates the use of scientific evidence where empirical data is gathered and analyzed to form a hypothesis that can be tested

-        The three (3) classification types for origins, according to NFPA are:

                          I.            Incendiary - purposely caused by arson or some deliberate act; e.g. the man set his car on fire using gasoline and matches

                       II.            Accidental - caused by fortuitous means; e.g. the fire started due to lose wires in a electrical socket which sparked causing the appliance to catch on fire

                    III.            Unknown Origin - cause of the fire is unidentified; e.g. the fire originated in the kitchen but the Fire Marshall is unsure of how the fire started.  The cause of fire is still under investigation

-        Motive on the part of the insured is an important issue that must be proven in order to successfully defend a claim of arson leading to the denial of the claim and conviction of insurance fraud

-        The motive for fire can be uncovered by asking the following questions:

·         How will the insured profit from the arson?

·         Has the insured made a personal guarantee to the bank for a large loan? Is the bank putting a great deal of pressure on the insured to come up with the cash or declare bankruptcy?

·         Does the insured hold an undesirable lease or contract?

·         Is the insured's business failing?  Does the fire allow the insured to leave the business because it can't sell do to its current failing status?

·         Has the supplier for the insured declared bankruptcy and the insured is unable to meet the demands of customers because there is no more stock to sell?

·         Has the insured moved irreplaceable records of expensive equipment just prior to the loss?

-        Another motive  that may be possible for arson is the poor condition of the premises before the loss;  dry rot, termite damage or some serious defect has rendered the building inhabitable and as such is difficult to dispose of or difficult to maintain

-        The adjuster may need to hire a forensic accountant to investigate the financial position of the insured prior to the loss to uncover the motive for the arson

-        Motive is not the only aspect of proving arson;  the adjuster must also prove that the fire was set and that the insured had opportunity

-        The opportunity of the insured could be through an accomplice, either through friendship or hired to commit the arson;  the criminal investigation by the authorities will be very helpful at trial in a civil proceeding, if the insurer decides to deny the claim based on arson fraud

-        The opportunity of the insured must be clear and should show that it would be unlikely any other person would have the motive and opportunity to set the fire except the insured

-        The adjuster should investigate if the insured has had prior loses in order to show a history frequent insurance claims

Polygraph Testing

-        This is a controversial practice that is not widely used and has limited acceptance

-        The reason that this practice is not widely accepted is that psychologists have stated there is no specific "lie response"; there is no agreement in the scientific or legal circles as to the reliability of the polygraph test results

-        Researches on polygraph have stated that any test showing deception on the part of the participant may also be a "false positive";  i.e. a truthful person may be judged to be lying

-        If the insured is asked to submit to a polygraph test then there is no law that forces the insured to partake in this request;  the insured submits to the polygraph voluntarily

-        The stages in a polygraph test are:

·         Pre-test interview

·         Collection of data

·         Analysis of the data

-        The theory of the polygraph is based on that controlled questions are asked which the participant would not lie to;  their physiological responses are recorded and considered to be "truthful data";  once a question is asked which causes the participant to lie, the physiological response will be different to those of the truthful questions and therefore "prove" the participant is providing a deceptive response

-        The polygraph examiner analyzes the results and renders an opinion as to whether or not answers are truthful;  the polygraph examiner's subjective opinion and the skill of the examiner is an important element in the process

Public Adjusters

-        Solicit insureds for the opportunity to represent their interests when a loss of a certain magnitude occurs

-        Public adjusters role in a claims process are:

·         prepare and present contents and building claims to insurers

·         prepare an agency agreement to be signed by the insured

·         charge a certain % fee based on the amount of the claim; smaller % to the building and a larger % to the contents; %s range from 5% to 8%

·         be licensed in the province where they operate in order to conduct business

·         at the insured's request be a loss payee on any settlement funds

·         obtain the best results possible on behalf of the insured for the claim presented

-        New York, USA does not allow a public adjuster to charge more than 12.5% on a fee for a claim