One of the lessons from the case of treble injuries noted in yesterday’s blog, Treble damages for insurance company misconduct in North Carolina and collapse coverage confirmed, is that rejection letters from insurance companies must be correct. They should not quote irrelevant political language. Rejection letters should only quote the insurance language that the insurer relies on to reject a claim. By law in most states, the letter must accurately state the facts and the applicable policy language for denial.
The policyholder referred to in the case won the triple claims award because there was coverage and the insurer violated the rules mentioned above. The introduction of the policyholder̵7;s claim for a summary judgment is quite close to what the results of the trial and court of appeal were in the case:
Under well-established law in North Carolina, an insurance company is prohibited from conducting unfair claims settlement with its insured. Such prohibited acts include failing to provide a reasonable explanation of the basis of the insurance policy in relation to facts or applicable law for the denial of a claim, to erroneously present relevant facts or provisions in the insurance policy, and to compel the insured to bring an action to recover overdue amount according to the insurance. Any of these acts is a violation of North Carolina’s law of unfair and fraudulent trading practices.
Here, following the collapse of a winding road at DENC’s student apartment complex during a large gathering, the plaintiff immediately filed a claim on his insurance with the defendant Philadelphia Insurance Company (“Defendant” or “Philadelphia”). Subsequently, in a letter from the defendant’s head office, the defendant’s senior claims investigator expressly stated that the claim would be paid. Shortly afterwards, in another letter sent from Philadelphia’s Colorado office, another insurance adjuster, who did not inspect the property or speak to any witnesses, denied coverage. Remarkably, in its denial letter, the defendant’s Colorado adjuster did not provide an analysis of which parts of the policy justified the denial of coverage based on facts. Instead, the defendant claimed to cite a number of exemptions from coverage – which were in fact incorrect, did not exist and / or were not even part of the policy – and omitted parts of the policy that changed these exceptions to provide coverage. The defendant admitted that it denied coverage based on policy exceptions that did not even apply or were deleted in their entirety through policy recommendations. Such acts are unlawful.
… The defendant’s conduct is an impermissible attempt to confuse his insured as to the language of the insurance and obscured its contractual obligation to provide coverage for DENC’s claims. In view of the policy provided for the coverage of the breezeway collapse in question here, and that the defendant’s actions constituted various prohibited insurance settlement practices, DENC is entitled to a summary judgment of its Chapter 75 requirements, declaratory measures and breach of contract claims.
Long ago, the insurance companies’ training was that rejection letters should be to the point with applicable policy language and facts. The best rejection letters would even recite the facts and the policyholder’s position with an explanation of why the insurance company did not agree with the position. These letters exemplify what good faith means.
Most rejection letters today are long in policy language that often has nothing to do with the denial or facts in the case. They often only quote the insurance company’s side of the factual investigation. They seldom respond to the insured’s position but have an overarching meaning, “please answer if you have anything more to consider or do not agree with.” If insurance companies continue to do this in North Carolina, they can expect the same triple claims result. Some states have similar laws, and this case is a roadmap to show how wrong this common practice has become. Just because we now have computers that can copy and paste does not allow insurance companies to misleadingly copy and paste policy language that the insurer does not rely on to deny the claim.
Another common scenario found in many property insurance adjustments is when the initial adjuster undertakes to cover and partially pay. Then a desk adjuster changes the entire position of the insurance company, and the initial field adjuster is nowhere to be found. The summary judgment noted the following:
On January 15, 2018, DENC notified the defendant of the damage to Breezeway. initiate their insurance claim. On January 16, 2018, the defendant hired an independent adjuster, who inspected Breezeway the same day.
On 25 January 2018, the defendant approved coverage for DENC in a letter (“the letter of 25 January”) by stating, in the relevant part: “We have issued, or will issue payment to you, or on your behalf, for damages or damages incurred under the above claim number. ” The letter of January 25 was signed by Ms. Wilson-Williams, Senior Claims Examiner for the defendant, from Philadelphia’s home office.
The defendant was then informed that it could not replace DENC’s claim due to the expiry of the grace period.
On February 19, 2018, DENC received a letter from another adjuster of the defendant denying coverage of the claim (“Denial Letter”). Denial Letter was signed by John W. Gartling, Senior Property Claim Specialist, located at the defendant’s office in Colorado, Mr. Gartling had licenses in Wyoming and New Mexico, but not in North Carolina. He did not interview a single witness. He did not talk to any students or find out how many of them were in Breezeway. In fact, he did not even visit the Crest site.
The rejection letter did not revoke, refer to or even mention the defendant’s letter of January 25 which accepted coverage. Thus, DENC had two conflicting letters, one approving coverage and one denying coverage – neither withdrawn, revoked nor modified so far. (record quote omitted)
The desktop adjuster often does not have the full set of facts. This is one of the main complaints from many companies’ field adjusters today – people without full knowledge are overriding decisions regarding evaluation and coverage. Many bad damage decisions are made due to lack of complete information and investigation.
I include a link to the topic Philadelphia Insurance collapse approval. This collapse approval is worth studying for those involved in property insurance claims. The language is now much more frequently found and relevant than languages that existed before 2000. Much of the older “collapse” case law must be analyzed in the light of the newer language.
Philadelphia sought approval from various states for a change in its collapse language in 2013. Although I can not be sure, when I see “PI-ULT-142 (08/14)” as the form in the upper right corner, this means to me that it’s a Philadelphia form for its “ultimate cover property program”, and the date of issue for that company form is August 2014. As a tip to my really nerdy insurance colleagues, there is a wealth of information that can sometimes be found in public documents by simply searching for a form number .
Thought for the day of a Philadelphian
Either write something that is worth reading or do something that is worth writing.