For over 30 years, I’ve assisted independent insurance agents in advocating for insureds at claim time when they are convinced that a claim has been wrongfully denied. When I speak and write about the virtue and value of independent insurance agents, I usually cite three bases for the independent agent advantage: (1) trust, (2) choice, and (3) advocacy.

Perhaps I’ll write about the first two in another article, but today I focus on the value-added sales proposition of having an advocate at claim time. Consumers and business owners that buy insurance directly from the carrier have no one to advocate on their behalf if there is a problem with a claim unless they want, and are able, to involve a public adjuster or attorney.

What prompted this article is a webinar I attended recently where agents were cautioned, perhaps in some ways discouraged, from intervening in claims. Certainly, there is a right way and a wrong way to advocate, but IF there is a reasonable and just basis for overturning a claim denial, competent and smart agents will make that attempt. If they know what they’re doing, they’re usually successful. Over the years, I’ve assisted agents literally tens of thousands of times in accomplishing just that.

The cautionary issue is the E&O exposure, but my contention is that the vast majority of E&O claims arise from denied claims, especially those that are improperly denied. Paid claims rarely result in E&O claims. In addition, an agent that works diligently to get an initial claim denial reversed greatly increases account retention and referrals. For example, the following is an advertisement an insured took out in a local newspaper lauding the work of their insurance agent:

Imagine the free PR this brought to that agency throughout the community. While claim denial reversals don’t always result in this kind of publicity, they often can generate testimonials and referrals.

(Warning: Shameless Plug Coming….)

To assist in this process, I wrote a book entitled When Words Collide: Resolving Insurance Coverage and Claims Disputes.” It’s based on my 30+ years in getting denied claims reversed. In the book, I share the principles and practices I’ve successfully employed to accomplish this. These are proven techniques I’ve used thousands of times.

According to Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 720, 723:

“While an insurance company has no obligation under the implied covenant of good faith and fair dealing to pay every claim its insured makes, the insurer cannot deny the claim ‘without fully investigating the grounds for its denial.’ . . . By the same token, denial of a claim on a basis unfounded in the facts known to the insurer, or contradicted by those facts, may be deemed unreasonable. ‘A trier of fact may find that an insurer acted unreasonably if the insurer ignores evidence available to it which supports the claim. The insurer may not just focus on those facts which justify denial of the claim.’”

So, how is the insurer exposed to evidence which supports coverage? That’s the role of an advocating agent. In Smith v. Travelers Indem. Co., 32 Cal. App. 3d 1010, 1017, 108 Cal. Rptr. 643 (Ct. App. 5th Dist. 1973), the court said, “An insurer bears a duty to defend its insured whenever it ascertains facts which give rise to the potential of liability under the policy irrespective of the source of the information.”

What are those sources of information? One is the book itself. A policyholder attorney blogged that he used the book as a tool to obtain a $5M judgment. The book also references other resources, especially the ready availability and use of case law. An insurer cannot ignore or conceal its knowledge of case law that supports coverage. For example:

“In situations where a layman might give the controlling language of the policy a more restrictive interpretation than the insurer knows the courts have given it and, as a result, the uninformed insured might be inclined to be quiescent about the disregard or non-payment of his claim and not to press it in timely fashion, the company cannot ignore its obligation. It cannot hide behind the insured’s ignorance of the law; it cannot conceal its liability. In these circumstances it has the duty to speak and disclose, and to act in accordance with its contractual undertaking.” — Bowler v. Fidelity & Cas. Co., 53 N.J. 313, 327-328, 250 A.2d 580, 588 (1969)

Do you advocate for your customers at claim time if you believe a claim has been improperly denied? If not, you are likely losing a valuable opportunity to retain a customer and generate testimonials and referrals.

For those of you who have the book and found it useful, I would appreciate a brief Amazon review. If you can spare a few minutes, click here to do a review. Thanks.

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Bill Wilson

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One of the premier insurance educators in America on form, coverage, and technical issues; Founder and director of the Big “I” Virtual University; Retired Assoc. VP of Education and Research from Independent Insurance Agents & Brokers of America. Reprint Request Information