Interacting With Insurance Representatives
by Guy E. Burnette, Jr., Esquire
Insurance is always an issue to consider in the investigation of an incendiary
fire. Arson-For-Profit remains a significant factor in the arson problem
everywhere. Insurance may be the primary motive for a case of arson or it
may only be a minor issue. But in any case where the motive for the fire
is not immediately apparent, the possibility of an insurance fraud fire
should always be considered.
There are a number of different persons involved
in the insurance process who may become a part of the investigation. Some
of the different individuals likely to be encountered include the following:
Insurance Agent - As most people know, the agent sells the insurance product.
This is the first person who is involved in the insurance process and will
have first-hand knowledge about the circumstances of obtaining insurance
on the property. There are two types of insurance agents: company agents
(or "captive" agents) and independent agents.
The company agent or "captive" agent
is employed directly by the insurance company. The agent is only authorized
to sell insurance products for that specific company. If the type policy
or coverage being requested is not available through that company, the agent
must refer the customer elsewhere.
The independent agent is truly "independent".
The independent agent sells insurance products on behalf of many different
insurance companies. When a customer comes to the independent agent for
insurance, the agent can choose among the many different insurance companies
for the best available coverage at the best price. The independent agent
is usually not considered an employee of the insurance company and is paid
on a straight commission basis for the products sold.
Broker - The insurance broker is in some ways like the independent
agent. The broker is not directly employed by any insurance company and
acts as an intermediary or "broker" of specialized insurance products.
An insurance broker typically handles the more complex insurance products
or the more difficult types of coverage to place. High risk properties or
businesses may have to be insured through a broker. Most of the insurance
business written through Lloyds of London is handled by a broker. Similarly,
brokers obtain insurance with Surplus and Excess Lines insurers who handle
the difficult to insure properties and businesses. The broker is strictly
paid on a commission basis.
Underwriters - Insurance underwriters evaluate and make the decision
to accept or reject prospective insurance business. They are the ones who
must approve any insurance coverage, even if it has been temporarily issued
under a "binder" by an authorized agent. Underwriters closely
examine the insurance application and collect other relevant information
in order to make the decision on accepting or rejecting a prospective insured.
They may be involved in decisions to terminate, cancel or non-renew coverage
after it has been in effect when information comes to their attention indicating
the property or business is not a sound insurance risk.
Loss Control/Risk Inspectors - The persons who provide loss control or risk inspection
services go to a particular property or business which is being considered
for insurance or may already be covered under a policy. It is their responsibility
to identify and evaluate safety issues and risk hazards which have the potential
of causing a loss. They are usually part of the underwriting process in
considering a property or business for coverage. Sometimes they are sent
out after the insurance has been issued to confirm the suitability of the
insured property or business. Typically, they prepare a report for the underwriter
or insurance company on their findings and include recommendations to minimize
the risk of loss. Many insurance companies share this report with their
insureds as a service to help them recognize safety and fire hazard issues.
They may be employed by the insurance company or may work independently
for various insurance companies.
Claims Adjusters - Insurance adjusters or "claims adjusters"
are responsible for handling and resolving insurance claims. When a loss
is first reported, an adjuster is assigned to the case. In most cases, the
adjuster will handle the claim from start to finish. The claims adjuster
has direct contact with the insured and usually handles all communications
on behalf of the insurance company with the insured. There are three different
types of claims adjusters who may be involved in a particular case.
Company adjusters or "in-house" claims
adjusters work directly for the insurance company and are employees of the
company. They handle only insurance claims involving the insurance company
they work with. Most company adjusters handle a specific type of claim such
as automobile, homeowner's or commercial claims. They have "settlement
authority" to resolve claims up to a specific dollar limit. Beyond
that limit, settlement approval must come from a supervisor or claims manager.
Certain company adjusters have responsibility for handling major losses
and have very large settlement authority. They are known as General Adjusters.
If the company does not have a General Adjuster to handle large losses,
the final responsibility for resolving a major claim may rest with a Claim
Superintendent or Claim Manager. This is the hierarchy of claims management.
An "independent adjuster" is much like
an independent agent. The independent adjuster handles insurance claims
for a multitude of insurance companies who may use the services of an independent
adjuster. Many small insurance companies don't employ staff adjusters and
rely upon independent adjusters to handle their routine claims. Larger insurance
companies with staff adjusters may still use independent adjusters to handle
claims when a company adjuster is not available at that time or is not located
in the region where the loss occurred. Most independent adjusters have no
settlement authority and must obtain approval directly from the insurance
The "public adjuster" is an insurance
claims adjuster representing the insured. In some states, the practice of
public insurance adjusting is prohibited. Most states allow the practice
of public adjusting under specific statutory guidelines and licensing requirements.
The public adjuster is on the other side of the insurance claims process
from the company adjuster or independent adjuster. The public adjuster represents
the insured or claimant in presenting the insurance claim and obtaining
for his client the maximum possible insurance benefits. Most public adjusters
work on a contingent fee basis for a percentage share of the ultimate claim
settlement. A public adjuster must do everything possible to establish coverage
and get the claim paid, to earn a fee. They are a direct agent of the insured
- The SIU or Special Investigations Unit is a relatively recent creation
in the insurance field. The SIU representative is the designated investigator
for the insurance company assigned to questionable or suspicious claims
which may involve fraud. Most SIU representatives are directly employed
by the insurance company, but some work as independent contractors for various
insurance companies. In a number of states, insurance companies are required
by law to employ Special Investigation Units. SIU representatives are trained
investigators specializing in the investigation of insurance fraud. Many
of them come from a law enforcement background. Some insurance companies
assign an SIU representative to work with the claims adjuster, while others
turn the claim over for exclusive handling by the SIU representative when
fraud is suspected. In a case of suspected arson, the SIU representative
will usually be directing the investigation for the insurance company.
Fire Investigator/Origin and
Cause Expert - The fire investigator or
origin and cause expert is assigned by the insurance company to determine
the cause of the fire. When a fire loss is reported to the insurance company,
this is one of the first persons to respond. In most cases, the fire investigator
or origin and cause expert is an independent contractor. There are some
insurance companies who utilize in-house fire investigators, if only to
conduct a preliminary fire scene investigation before hiring an independent
fire investigator, as well. The fire investigator examines the fire scene
and makes a determination - if possible - of the fire's origin and cause.
The fire investigator will collect physical evidence for analysis, usually
sent to an independent laboratory facility. When the fire is determined
to be accidental, the fire investigator may be utilized to pursue "subrogation"
- a claim by the insurance company against the responsible party or the
manufacturer of a product which caused the fire. In arson cases, the fire
investigator is the one who has the insurance company's first-hand knowledge
of the fire's origin and cause.
Contractor/Estimator - Even though the claim may be under investigation as
an incendiary fire loss, the insurance company will hire a contractor or
estimator to determine the extent of the damages should the claim later
be paid. Some insurance companies have in-house estimators who are trained
in building damage estimation. Most insurance companies use outside firms,
some of which specialize in the business of fire damage estimation and reconstruction
for insurance claims. Many times a local contractor is used to prepare an
estimate of the damages and anticipated repair costs, generally the most
reliable measure of the actual damages.
Inventory Specialist - In complex commercial fire losses, the insurance company
may hire an inventory specialist to examine the damaged or destroyed inventory
in the business. These are trained experts who will first count or "inventory"
the personal property and equipment in the business, then provide a detailed
valuation of the damaged property and the current replacement costs for
similar property and equipment. The inventory specialist will usually prepare
a detailed report for the insurance company showing the inventory and equipment
on hand at the time of the fire, its condition and value at the time of
the fire, and the current replacement costs.
- When inventory and equipment have not been completely destroyed in a fire
or other casualty, the insurance company will often hire a salvor to "salvage"
the property. A salvor will examine and collect the inventory and equipment
at the fire scene, take steps to protect it or provide emergency restoration
services to minimize further damage and then locate a buyer for the salvaged
goods. Many times there can be significant salvage value in the property
after a fire. This is used to minimize the insurance claim which may have
to be paid, if the loss is covered.
Appraiser/Valuation Expert - In cases involving unique property or property with
special value such as artwork or collectibles, an appraiser or valuation
expert may be retained to establish the value of the property involved in
the claim. They may also be used to confirm the authenticity of property
such as artwork or antiques.
Forensic Accountant - A forensic accountant or C.P.A. may be retained to assist
in the handling of the claim. The accountant may be used to calculate the
value of the claim, particularly where there are claims for coverages such
as "business interruption" involving complex accounting formulas.
In suspected arson cases, the forensic accountant will conduct a comprehensive
evaluation of the financial records and business books of the insured to
discover if there is a financial motive. The analysis includes much more
than a simple review of the bank records and tax returns. The forensic accountant
will identify any significant trends in the financial picture during the
time leading up to the fire, note any irregular events or practices of the
business, verify the authenticity and legitimacy of the business books,
evaluate the business using established accounting tests or standards and
project the future picture the business was facing at the time the fire
occurred. If there is a financial motive behind the fire, the forensic accountant
will usually find it.
Other Experts - There may be a number of other experts involved in a
case, depending upon the facts of the particular case. An engineer - structural,
mechanical or chemical - may be needed to address an issue in the case.
A fire protection engineer may be retained to assist with the origin and
cause issues. A metallurgist may have been consulted in connection with
the fire. A security expert may be used to evaluate the security issues
of the property at the time of the fire and to determine issues of forcible
entry into the building. An alarm system expert may be used to examine the
alarm system in the building and determine its status at the time of the
fire. A document examiner may analyze written records and documents to establish
their authenticity or identify the author.
Attorney - In cases where there is suspected arson, an attorney
will probably be retained on behalf of the insurance company. The attorney
will assist in evaluating coverage issues and other legal questions. The
attorney will provide legal guidance in how the claim should be handled
during the investigation. When it is time to conduct an Examination Under
Oath, the attorney will take charge of this responsibility. When the investigation
is completed, the attorney will provide an evaluation of the case and the
legal sufficiency of any coverage defenses, such as arson. While some insurance
companies utilize in-house attorneys for these purposes, most insurance
companies hire outside counsel specializing in the handling of fire cases.
Reprinted with permission from the author.