COURAGE UNDER FIRE by Gerald Williams
- appeared in 'Post Magazine' on 25 November 2004

Professional indemnity claims against adjusters are on the rise, partly as a result of more expansive services increasing their exposure. Gerald Williams explains that, in an increasing litigious environment, things have never been so tough.

There was a time, when if a loss adjuster made a mistake, it would cost them a lunch with the insurance company's claims manager, or, if it was really serious, they may have waived their fee. Those were the days when insurance companies made 20% on the stock market and were not so concerned about the profitability of their underwriting.

Now, the situation is very different. Claims managers must prove their worth and cases are coming under closer scrutiny. In addition, claims departments are auditing cases going back several years to see if anything was missed or handled incorrectly.

As a result, the number of professional indemnity claims against loss adjusters has escalated. Based on my own experience as an expert witness and consultant in the claims arena, I would estimate that there are now 50 claims being pursued against adjusters each year. And this in a profession where there are only 1400 or so qualified members.

One of the cornerstones of the Chartered Institute of Loss Adjusters' royal charter is the requirement to act impartially. This means adjusters have a duty of care, not only to the instructing principals but also to the policyholders. Being liable to both sides is, perhaps, unique tothe loss adjusting profgession and, without doubt, increases its exposure. But that is only part of the problem.

In recent years, loss adjusters have taken greater responsibility when handling claims, including major commercial losses. For example, following a serious fire, a loss adjuster will often appoint surveyors, engineers and building contractors to manage or carry out reinstatement work. The prime intention is to get the business trading again with the minimum of fuss, thus minimising the claims spend, leading to a happy result for everyone - or is it?

At every stage of the process, the loss adjuster may be exposed to a claim. The chosen surveyor may miss some vital element within the design of a building or a favoured contractor could fail to complete the work in accordance with the specification. If the adjuster has assumed responsibility for the reinstatement works, or even given the impression they have, then the resultant coaim can come back to their door.

One reason loss adjusters have been so expansive in the services they offer is that they have also been under pressure to give better value for their fees. This has meant, however, that the old system - where young adjusters were apprenticed to those with more experience - is a thing of the past. Loss adjusters coming into the profession today have to earn their keep from the start. This, combined with the number of senior adjusters leaving the profession, means there are a greater number of inexperienced adjusters handling more complex losses.

At the same time, given the generally reduced levels of fees, even for major losses, these adjusters have less time to work on cases if their employers are to make any sort of return.

When set against the litigious environment in which all professionals are now operating, this can only lead to more claims being made against loss adjusters.

It is not only loss adjusters that are being sued more often - every professional has greater levels of exposure. PI premiums have soared and often now rank amont the top three items of expenditure in the professional's profit and loss account.

So what are the key areas where loss adjusters may be vulnerable? Business interruption claims are the jewel in the loss adjuster's crown. It is here that a range of skills can be brought to bear, but what happens if the work is not completed on time or if the new machinery organised by the adjuster does not work? The BI costs rise and today that can result in a PI claim being made - either by the insurer or the policy holder.

Many subsidence claims are the result of root damage where statutory time limits prescribe the period for recovery action to be pursued. If the adjusters are not aggressive enough with the handling of the claim, and overlook these statutory limitations, the insurer may be prevented from achieving a recovery. Once again, they will look to the loss adjusters for redress.

Salvage is another potentially dangerous area for adjusters. Disposal of toxic waste, asbestos, medical goods, foodstuffs and confidential data on damaged computers can all present risks to the unwary - or perhaps hard-pressed - adjuster. Completely new causes of damage, such as toxic mold in the US, with its rapid spread if uncontrolled, require similar vigilance.

Misinterpretation of the policy or incorrect quantum assessment are also obvious areas where loss adjusters can fall down if they do not pay sufficient regard to the detail.

In short, although it was never an easy option being a loss adjuster, it certainly has not become any easier in recent times.