The Claim File

by Guy E. Burnette, Jr., Esquire

The claim file is usually the most important insurance file to be reviewed by the investigator. It is a file which is created when a claim is reported and documents every aspect of the claim handling process. It should always be reviewed by the investigator in any fire investigation.

The first document found in the claim file is the initial notice of loss, usually an "accord form" which is a standardized form used by most insurance companies. In most cases, the loss is reported to the insurance agent who completes the form and sends it to the claims office of the insurance company. It is sometimes reported directly to the insurance company, particularly those insurance companies who do not utilize insurance agents to sell the policies (known as "direct writers") such as GEICO, USAA and a number of other companies. This is an extremely important document in the claim file because it contains the information initially provided by the insured when reporting the loss. The form has a number of sections for the basic information about the policy, such as:

• the named insured
• mortgagee/lienholder
• insured location
• policy term of coverage
• amount of coverage under the policy
• policy number
• the "producing agent" or "producer" responsible for the policy

This is filled in by the agent when completing the form. In addition to this basic information, the notice of loss form contains specific information about the loss as reported by the insured. This includes the date and time of the loss, the type of loss, the preliminary estimate of damage, the person reporting the loss and the time it was reported. While the form is filled in by the agent, most of this information comes directly from the insured--such as the time when the insured learned of the loss, and the time it was reported to the agent or insurance company. This may raise questions about an insured's alibi and activities at the time the fire was discovered. As a statement of the insured, it will likely be considered admissible evidence in a criminal or civil trial--even if the insured never testifies at trial--where the insured is alleged to be responsible for the fire. As such, it is a critical document in the case.

Most of the other information in the claim file follows the chronology of the claim process. Most insurance companies keep a "claim log" or "claim diary" recording every activity in the handling of the file on a daily basis. This document provides a useful chronicle of the claim history from the time it was first reported to the insurance company. As the various activities noted in the log or diary are conducted, the claim file will contain the documents and records associated with those activities. When a fire investigator is hired to determine the origin and cause of the fire, the fire investigator's report, photographs, diagrams and related documents will be in the claim file. The analytical reports of any forensic laboratories who examined evidence from the fire scene will be in the claim file. The assigned claims adjuster will usually visit the fire scene and take additional photographs for the claim file. A preliminary recorded statement of the insured is usually taken within the first few days after the fire is reported. Once again, this can contain significant information about the circumstances of the fire, the insured's activities around the time of the fire, the time and means by which the insured learned of the fire, anything significant noted by the insured at the fire scene, the insured's knowledge of any potential or actual cause of the fire, the estimated damages from the fire and other such information. As a statement of the insured, it will generally be admissible evidence at trial.

The assigned adjuster will usually prepare a preliminary estimate of the damages from an inspection of the fire scene. This is called a "scope of damages" or "scope". A licensed contractor or a contractor specializing in fire reconstruction is retained in most cases and will prepare a detailed report which is part of a claim file. Other specialists may be needed to assess the damages from the fire and their reports will be in the claim file as well. This may include structural or mechanical engineers, equipment specialists, inventory specialist who physically inventory and value the damaged property, salvors who determine if there is any property which can be salvaged from the fire and sold to reduce the loss, accountants to determine the amount of covered damages and various other experts.

The claim presented by the insured will be found in the claim file, consisting of the Sworn Proof of Loss and inventory of damaged property, together with any supporting documentation. The assigned adjuster will prepare a report analyzing the claim and will determine the "adjusted value" of the claim under the applicable coverages and limitations of the policy.

All of the correspondence to and from the insured will be in the claim file. The documents and correspondence from the insured will generally be admissible evidence in a criminal or civil trial. They may form the basis of an arson prosecution or a prosecution on related charges such as insurance fraud, mail fraud, wire fraud and the like.

When an insurance company recognizes a potential arson-for-profit claim, additional records will become part of the claim file. A forensic accountant may be utilized to evaluate the financial condition of the insured at the time of the fire and the existence of a financial motive. The report of the forensic accountant will be in the claim file. Interviews and recorded statements of various witnesses will be made part of the claim file. Records from creditors, suppliers, vendors and others will be compiled. Tax returns of the individual and/or business and related tax filings will be contained in the claim file. Bank records (including canceled checks and monthly statements), payroll records, records of the purchase of the insured property, employee rosters, liens or judgments recorded against the property, appraisals on the property (before or after the fire), mortgage records and other loan documents, shipping / receiving records and all other such documents will be found in the claim file in most cases.

If there is an issue about the adequacy of insurance coverage taken out by the insured, there may be a report on "co-insurance" which may limit the recovery of the insured when the property is found to be deliberately under-insured to minimize the premium payment. Payment histories from the mortgagee/lienholder and claim documents from the mortgagee/lienholder will be part of the file. Initial payments provided to the insured as an "advance" and any insurance settlement payments to the insured can be found in the file.

Records from the building department and other agencies establishing code violations, environmental violations, and other problems will be documented and put in the claim file. Courthouse records of any criminal or civil proceedings involving the insured or related parties will be documented in the file. Records of other insurance claims by the insured and related parties can be important information in the claim file. The property insurance loss register (PILR) and other insurance industry databases provide this information and it will be contained in the claim file. Many states now allow insurance companies investigating a claim to obtain records from other insurance companies who have previously handled claims from the insured or previously provided coverage for the insured property. Any such records directly obtained from other insurance companies will be found in the claim file.

Where a request for information from the insurance company has been made by an investigative agency under the applicable Arson Immunity Reporting Act, it will be documented in the claim file. Any information obtained from the investigating agency will usually be recorded in the claim file.

When an Examination Under Oath has been taken of the named insured or others, the transcript and exhibits will be found in the claim file. A summary and evaluation of the Examination Under Oath by the insurance company or the attorney who conducted the examination will be contained in the claim file. When the claim has been assigned to the Special Investigation Unit (SIU) most of the investigative activities will have been conducted by the SIU. There will be confidential reports on the results of the investigation found in the claim file. When the insurance company is at the completion of the investigation and must make a decision on coverage, there will be reports summarizing the investigation and evaluating coverage issues. These are sometimes submitted to a "claim committee" for a final decision and contain a complete summary of a claim and its investigation. When a decision is made to deny the claim, the formal letter of denial is found in the claim file, together with any correspondence received from the insured or its representatives / attorneys following denial of the claim.

While this list includes most of the items found in a claim file, every claim file is unique. The particular facts and circumstances of the claim will determine what is contained in the claim file. A claim file is a voluminous file of material which can include hundreds of pages of records and documents. The key to accessing this information is the applicable Arson Immunity Reporting Act in the jurisdiction. The proper use of a request under the Immunity Act will enable the investigator to obtain all of this information. Most immunity acts do not catalog all of the information which can be found in a claim file and usually contain only a limited number of common documents such as the application, policy, premium payment records, claim documents, prior claim records and claim payment records. However, most Immunity Acts are intended to allow access to almost everything in the claim file and the investigator must be aware of the full range of materials which can be found in a claim file to be sure all relevant materials are obtained and reviewed.

Reprinted with permission from the author.