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.
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.
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.
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
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© CPLIC 2010