Skilled insurance producers and
risk managers need to understand the different
factors when educating their clients
Armed with the facts … skilled adjusters and attorneys
look at their position in the liability claim and ask themselves
a sobering question: “How bad could this go for our insured?”
By Paul Martin, CIC, CPCU
When producers sell liability policies, they often describe to the agency customer how they will respond to various incidents or accidents, and how they won’t. Of course, there are many kinds of liability policies.
Probably the most sold business liability policy in the United States is the Insurance Services Office commercial general liability policy. Its classic promise: “We will pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury and property damage to which this insurance applies.” Other types of polices have a similar insuring agreement, whether it’s the business auto coverage form, an umbrella policy, or an employment practices policy.
What stands out is the phrase, “that the insured becomes legally obligated to pay.” Pretty vague at first blush, but it is the teeth of the promise the policy is providing, and its meaning hangs on many different factors.
Whether or not an insured is legally obligated to pay damages, whatever that might be, is based upon common law applicability to torts. The laws govern the process courts go through to find a verdict and assess the damages payable if any.
The courts are the ultimate determiner of who is responsible (negligent) for what. The court finding may be made by a jury, or directly from the judge’s bench. Typically, these civil proceedings are deciding if negligence exists on various parties and to what degree, and the damages that justly respond to the injuries or damages.
Assessing the evidence
Liability claims adjusters and attorneys look to the policy language to see if the policy should respond to the specific accident or incident, but assessing, or guessing, what the court would likely do when all the evidence and testimony are considered is the goal. Collecting all of that evidence and testimony from individual people takes time, and any holes in the story can sometimes be filled with interesting finds.
For example, a claim involving a head-on collision late at night on a two-lane highway unfortunately left all the occupants in both cars either deceased or in a coma. The liability adjuster working with a crash scene investigator looked for clues that might help in understanding what happened. There were gouges in the payment that provided some clues, but a very important fact came to light when the two vehicles were examined.
The investigator went to the rear of the insured’s vehicle and removed the lens plate covering the rear lights panel. After pulling the brake bulb out of the car, the investigator looked at it against the sky and proclaimed, “Our driver was awake when they hit.” The enormous force of the collision had caused the burning filament to bend dramatically and harden in that state. It was a key piece of evidence needed to build a picture of who may or may not have been negligent.
”Divining” a court’s decision
Liability insurance adjusters and their defense attorneys try to “divine” what a court may do. So, what goes into the process?
First, an examination of possible negligence of the parties involved is considered. Negligence, as most agents understand, is when a duty is owed to others, the duty is breached, because of the breach there was damage or harm, and the breach was the proximate cause of the damage or harm. Was someone acting in an unsafe manner? Were they following the practices that a reasonable and prudent person would have at the time? Was the premises in an unsafe condition? Was something defectively made or serviced?
These questions can be answered by industry standards, state laws governing the insured’s behavior, such as a speed limit, or commonsensical determinations.
Generally, courts are looking to judge negligence in a yes or no manner, and then assign that negligence found to the various parties in percentages until 100% is reached. This process can be hard, or easy, to predict, depending upon the facts and witnesses, but there still is more to it.
Facts in a liability claim can be lots of different things. Warning signs, weather conditions, tools used, quality control data, video recording, photographs, telematics, or the condition of property before and after the accident can all be factors in a liability claim. Collecting these is an important part of processing the claim and insureds play a big role in cooperating with the adjuster.
Testimony, likewise, can come from different parties. The insured’s employees, the claimant’s employees, physicians, experts, officers of an organization, and those who were injured can all provide testimony as to the events leading up to the accident and afterward.
But these people who provide testimony are not all made alike. There are good witnesses and poor ones. There are witnesses who everyday jurors would trust or find sympathy for and others who jurors may not like.
How do attorneys tell the difference? It depends upon the individuals, their attitude, their demeanor, their appearance, or perhaps something as simple as the sound of their voice. Experienced attorneys, whether working for plaintiffs or the defense, build these judgment skills over time.
Determining the liability of various parties depends upon even more factors. One is the venue, or the courts that would have jurisdiction if the claim turned into a lawsuit. One particular county may have a reputation for finding more frequently for plaintiffs, while another could be traditionally better for the defense in liability litigation. It may even come down to the judge who is assigned to adjudicate the case.
The attorneys working on a claim, or their firm, will hopefully have experience in that particular court and with the judge. It’s worth remembering that judges are people, too, and they may have subtle biases: on points of law, particular attorneys, industries, or people.
A factor involved in venue also includes the pool of jurors. For example, many years ago, a very large lawsuit involving thousands of plaintiffs suing hundreds of different insureds was filed in a rather small rural county in Texas. One of the first things the defense attorneys asked the court for was a change in venue.
After being denied a transfer of the venue to a bigger city, the defense attorneys calculated that based upon the voter rolls in the county, one of the plaintiffs who lived in that county had a one-in-seven chance of knowing, personally, one of the jurors who would decide in their case. The odds of the jury having a relative of a plaintiff was also surprisingly high.
These kinds of considerations all go into the “guess” of how the litigation is likely to go. Even if the jury pool is large and diverse, attorneys can sometimes make predictions based simply on who got the summons. The voir dire process where the attorney examines prospective jurors for any biases can uncover an encouraging or disappointing juror pool that they feel impacts their “guessing” on how things will turn out.
Armed with the facts, the witness testimony, and the experience in the venue involved, skilled adjusters and attorneys look at their position in the liability claim and ask themselves a sobering question: “How bad could this go for our insured?” Pessimism may lead to a settlement with the plaintiff, or optimism may lead them to trial. It all depends.
Skilled insurance producers and risk managers need to understand these different factors when educating their clients.
The author
Paul Martin, CIC, CPCU, is director of academic content at The National Alliance for Insurance Education & Research headquartered in Austin, Texas. Paul works to develop, maintain, and deliver quality educational programs for the organization. Paul has over three decades in the insurance and risk management industry.
