“The Independent Adjuster and the Oil Spill; Opportunity or a Trap” Guest Blog by CPLIC Risk Management- Errors and Ommissions Coverage for Adjusting Firms and Adjusters

Each year since founding ClaimSmentor, I have turned to CPLIC  for advice to share with our members on Errors and Omissions coverage for independent adjusters. We consider ourselves very fortunate to have members of this firm participate on our site. This year is especially important due to the added complications we may be facing this hurricane season with the oil in the gulf coast. I cannot thank them enough for their support providing this information for our members and all of you in the independent adjusting community. Their specialty is dealing only with Errors and Omissions (known as E & O ) coverage for the claims industry.

The following statement to their members is reprinted with permission from the Claim Professionals Liability Insurance Co., a Risk Retention Group created by independent adjusters for the risk management of independent adjusting companies.  See WWW.CPLIC.NET for more details:

Urgent Message from CPLIC Risk Managment Concerning Oil Spill in Gulf Coast. The Independent Adjuster and the Oil Spill; Opportunity or a Trap? The June 14 edition of the Wall Street Journal ran a full page ad on page A18, the back page of the first section. It outlined how BP wants claimants to file a claim, and their claims philosophy. This is prior to the meeting at the White House, in which BP put $20 billion into the hands of an independent commission. How that will affect the present operation BP is now running we do not know. All of us want more work, and we all, probably, would be willing to be involved in this claim settling process. But there are some pitfalls. At CPLIC, we have analyzed the situation, and would like to offer some insights, suggestions, and comments. Remember, this is all prior to the White House meeting. The Present Situation Our understanding is that Worley has been engaged to handle claims on behalf of BP. Crawford & Co. represents Transocean. We are not aware of how the work is being spread between the two, or if it is only BP/Worley that is processing claims at this time. How the $20 billion fund, now in play, will be handled is anybody’s guess. However, this could mean some opportunity for independents. Geographical Areas Obviously, the area covered is the Gulf Coast from Louisiana around to Florida. Considering the number of claims that are going to come out of this spill, you probably do not need to be in that area to be involved. If you are in that area, here?s a word of caution. Forecasters predict this to be the most active hurricane season since 2005, and the Gulf Coast could very well be affected. If you get a chance to be involved in the BP claims, please be judicious in resources you commit to BP. Remember that a hurricane will also stretch you, and that you have regular clients who depend on you. These situations always stretch and challenge us, but do not get so overloaded that things get out of control. When this happens, the chance of E&O claims goes up. Using resources wisely protects your deductible. Type of Claims At first blush, you would think these claims would be third party claims, and so they are. However, determining liability will not be the issue. Damages will be the issue. Many of these third party claims will handle just like business interruption claims. Make sure you use adjusters knowledgeable in this area. You may also encounter some hull claims, as well as other kinds of property damage claims. There may not be many first party claims. The pollution exclusion may see to that. There also may be trigger problems. One of our members thinks that fire or explosion may be the trigger. In the end, this may be a decision for a court. If the claims are first party, you will be working for a carrier, not BP. If there are questions of coverage, do not forget to take a non-waiver, or a reservation of rights. Those cases where you should have reserved rights, and did not, are hard cases to defend. If you are not sure, talk to your principal. If you are still not sure, or cannot get an answer from your principal, reserve your rights anyway. It is better to be safe than sorry. If there is coverage in your claim, subrogation will be in order. This leads to a potential trap. The Trap If you find your regular client base sending you work that leaves you subrogating against BP, and you are taking BP cases in addition, you may find yourself in a conflict of interest situation. Be very judicious in the work you accept. For those of you doing work for governmental entities in the Gulf area, be especially careful, particularly if your client has a shoreline. They may have cleanup costs, and ask you to handle their subrogation. Certainly, BP will be the target. You may run afoul of Public Adjuster laws. CPLIC can offer no hard and fast rule here. Be judicious, use good judgment, and err on the side of caution. What To Do At The Beginning Even if you take every precaution, you will be sued. We are dealing with a highly politically charged situation. The plaintiff’s bar will be running ads soliciting clients. We will draw some suits. How do we protect ourselves? This is the situation our insureds and CPLIC faced after Ike/Rita. First remember this is an agency situation. We all understand the principle of agency. In any contracts you sign with clients in association with this (or, if possible, any) work, make sure there is a clause under which the principal agrees to defend and indemnify you, absent a specific count of negligence against you. This is a partnership here. Make sure your client understands this. Your client wants you on his side when the yelling starts. Do not give the plaintiff?s lawyer the opportunity to separate you. Even if there is a specific count against you, your principal may still defend you, depending upon the allegation. Make sure you have your lawyer look at the hold harmless agreement in this light. If you need help in this area, contact us. Closing Comments What is written above may sound scary. It is not intended to scare. It is intended to make us wise about the opportunities out there, and to prepare us to meet them. It comes out of CPLIC’s six years of experience defending you. And there are opportunities, hopefully for many of us. As you go forward, let us know of problems you encounter in following our suggestions. If you think we are off base, or missed something, let us know. It will help us serve you better. K. M. Johns III CPCU, ARM AIM Risk Management Committee Chair Major contributors to this article were: Alan Mayfield & Bruce Mountjoy All Rights Reserved © CPLIC 2010 *******

Please view their Q & A they did for us in 2009 here. Most importantly note the recommendation that independent adjusters have their own E & O policy for their own protection:

CPLIC 2nd E & O Info

Here is also a link to our first guest in August 2008  blog post by Dale Moore and Michael Hale of CPLIC with additional FAQ:

https://dimechimes.wordpress.com/2008/02/08/errors-and-omissions-coverage-guest-bloggers-dale-moore-client-relations-director-for-cplic/

During my 50 Hour Fundamentals of Claims class, we cover Error and Omission Coverage with new adjusters. I am constantly amazed at their answers to questions on adjusters E & O coverage. Most state that they would rely on the coverage of an adjusting firm to protect them. When I question them further, it is interesting to see that I have never had one adjuster be able to tell me who the adjusting firm’s E & O policy is with, what the policy number is, how to contact the E & O carrier, what the E & O policy covers them for, if the E & O policy provides for defense costs for them if they are named individually in a lawsuit. In other words,  they are working without even knowing about their coverage.

In recent years, many carriers, especially state run insurers like Texas Windpool and Citizens Property of Insurance in their RFP 08-0016 had terms stating they did not protect adjusting firms or independent adjusters so they were basically out on their own as far as providing an Answer to a Complaint (lawsuit) which is a costly proposition. I especially disagree with this position as the majority of claims litigation issues post hurricanes Katrina and Ike involved disputes insurance consumers had due to insurance company coverage decisions on wind/ water issues, wind debris to shingle issues, and other coverage or carrier guidelines an independent adjuster is required to follow.  It is long past due that  insurers,  the government,  and now BP and the Ken Feinburg group administering the BP Escrow fund  grant independent adjusting firms  and independent adjusters a  fair and meaningful defense and indemnity agreement.

This guest blog is a great example of what ClaimSmentor is all about. It is not about what I think as a former staff adjuster and claims manager nor about my experience as a participant in the independent claims industry. It is all about bringing together a professional group of reputable resources to provide proper advice and information to the independent claims adjusting community who have a most difficult time gathering current industry information applicable to claims assignments and catastrophe operations except when they are out on assignment.

I urge anyone who does not have their own E & O policy to run not walk to CPLIC to address your questions and check on your own E & O coverage.

Thanks again from ClaimSmentor to CPLIC for allowing us permission to share their 2010 Urgent message with our members.