Effectively Playing the Blame Game

One of the great impediments to finding client’s money is overcoming the paradigm that current processes are running smoothly.   Perhaps nowhere is this more evident than during discussions surrounding comparative negligence with folks in the property and casualty insurance industry.  

From my own experience while serving in various management and executive capacities for multiple top 10 insurers, I found this to be one of the single biggest opportunity areas completely within control of the any given organization. 

Let’s begin with some very basic assumptions and a quick look at the laws under which we have to operate.   There are thirteen states that are “pure comparative” jurisdictions, meaning that a party is accountable for their portion of any given accident.   Simply put, if party A is making a left turn in front of party B and it is determined that A is 75% at fault and B is 25% at fault then A will owe B 75% of their damages while B will owe A 25% of theirs.   In five other jurisdictions, “contributory negligence” applies which bars recovery for any party who is even 1% at fault.   The remaining jurisdictions are “modified comparative” with thresholds baring recovery at for parties either 50 or 51% at fault, depending on the state.  

With this brief overview it would seem that a large portion of claims involving multiple parties would have an element of comparative fault, thus reducing claim payments to those partial tortfeasors.   However, there is a vast disparity between accident facts and settlements with more claims than not being assessed at either 100% or 0%.    The former often results in overpayments while the latter often results in claim denials and ensuing litigation that cost insurers billions of dollars annually.  

So what is the solution?  At the most basic level training is the key common denominator to driving accurate outcomes.   With all of the competing priorities pushed down from above, training often can take a back seat which limits the effectiveness of front line adjusters.   I have come across adjusters who can’t explain what pure comparative means, let alone principles such as joint and several liability, assumption of risk or last clear chance.  

By getting back to basics, adjusters can be given the tools to both identify and negotiate comparative negligence settlements.   In their positions of expertise they must be able to share with customers all aspects of the law and how their actions played a role in a claim.   Contrary to many of my peers, you don’t need to spend millions of dollars to remediate this Claims 101 deficiency. 

I have had many discussions with industry leaders who insist that this is easier said than done, or more frequently that this is simply an unreasonable expectation in a day and age when shareholder demands create other priorities.   As a shareholder in several insurers it seems that return on investment would be the single biggest priority and what better way to maximize that than to positively impact the bottom line. 

Boiling this down, let’s say that an insurer pays out 100,000 property damage claims with an average paid of $3000 dollars, for a total of $300 million based upon full liability.   For every percentage of comparative negligence assessed, the insurer has the potential to add $3 million dollars back to their bottom line.   Throughout the insurance industry there is a wide variance in how effectively comparative is pursued.   The top end carriers are assessing comparative 35-40% of the time.   The laggers are assessing it less than 5%.   Certainly there is a gap between standard and non standard, but even taking this into account; one should be able to see the huge upside potential of properly educating their front line adjusters on the importance of comparative negligence.  

In addition, there is the customer consideration.   If an insurer is paying a disproportionate frequency of PD claims at 100%, they are not pursuing a potential recovery of not only their money but their insured’s deductible.  

As a participant in a number of voice of the customer studies, deductible reimbursement comes up as a frequent topic of dissatisfaction among insured’s.   This is particularly evident in claim scenarios involving turns, lane changes and parking lot accidents where intuitively it would seem that comparative fault would often apply. 

For more information about driving your organizations bottom line results and increasing comparative negligence identification, assessments and resolution, please give us a call. 

Chris Tidball is the Vice President of Business Development for  Sequoia Financial Services and a former claims executive at multiple top 10 P&C insurance carriers.   He is the author of the recently released book “Kicked to the Curb”, a contributing writer to The Subrogator Magazine and has developed several proprietary solutions for driving the right claim outcomes.   He can be reached at chris.tidball@sequoiafinancial.com or 818.409.6016.  

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