The insurer has a duty to indemnify the policyholder within a reasonable time following a claim. When called upon to intervene, the claims adjuster must assess the loss, establish the circumstances of the event, and submit a recommendation regarding the claim, but has a limited time in which to do so.
On November 12 in Bécancour, the 6th edition of the Congrès sur la détection des fraudes en assurance (Conference on Insurance Fraud Detection), organized by Fraudeexpert.ca (Groupe Arson), was held. The Insurance Portal was able to attend. The event primarily brought together fire investigators, but other major-loss specialists were also present.
Guy Bérubé was one of the presenters. Bérubé recently retired as a claims adjuster, a profession he practised for more than 25 years, after having worked as an electrician for 17 years. He also served as a loss prevention specialist for insurers. He became a specialist in fire investigations and holds the position of vice-president of the Quebec section of the International Association of Arson Investigators.
According to him, the level of expertise required for fire investigation is the same as that required of police investigators. “We do exactly the same work. It’s just that the end result is not the same. The police officer must establish proof beyond a reasonable doubt that a criminal act has occurred,” he says.
In matters of civil liability, the court requires proof on a balance of probabilities. “But judges want more, because a 51% probability is no longer sufficient in their eyes. These days, denying a home insurance claim amounts to a sentence of at least a million dollars for the insured. It’s worse than a criminal conviction with a prison sentence,” he says.
That is why he does not take his role lightly and does not reach a conclusion of fraud without having conducted a rigorous investigation. “I try to reach the same degree of certainty as a police officer, because courts want solid evidence before determining that fraud has occurred,” Bérubé underlined.
An independent adjuster who suspects the possibility of fraud may be tempted to push the investigation further in order to look good to the insurer and obtain additional mandates, Bérubé says.
Contradictory reports
Expert opinions commissioned from engineers or other specialists can be erroneous when it comes time to determine the cause of a loss. Bérubé cites the example of a fire that occurred at a facility of Société Élisabeth Fry du Québec, a transition centre for women following their release from prison.
It was his first file as a claims adjuster, and he contradicted the engineer’s conclusion that the source was electrical in origin. “I did not share that opinion. Two days later, the client removed the file from me,” he recalls.
After that episode, he decided to take his fire investigator training. At the time, the firefighters and police officers attending the training did not speak to one another. “So, imagine the treatment I received as a claims adjuster.” Bérubé is very proud to have persevered despite the difficulties, as the training enabled him to develop his career as an independent adjuster.
A claims adjuster who learns the trade of fire investigator is not wasting time, Bérubé continues. The techniques he uses are the same ones that will serve him in analyzing a claim following a cargo theft, a residential break-in, water damage in a commercial building, or a boating accident.
Over the course of his career, Bérubé notably developed his skills in forensic photography, which helps him build very comprehensive files.
Good faith
In contract law, the good faith of the parties is presumed, Bérubé notes. According to him, the claims adjuster must avoid beginning a mandate with the preconceived notion that one of the parties is acting in bad faith.
At underwriting, questions must be asked by the insurer if it wishes to properly assess the risk, and answers must be provided by the insured. “If the insured has a criminal record and does not disclose it, in the event of a claim there is a good chance that the policy will be declared null,” he notes. However, the insurer cannot reproach the insured for having concealed information if the question was not asked at underwriting.
Once the insurance policy is in force, the parties are bound by the same obligation to declare all circumstances that may change the nature of the risk to be insured. He gives the example of a retired mechanic who decides to use the garage attached to his home to perform small repairs on his own account. “It’s possible that the home insurer does not wish to insure a mechanical workshop. If there is a fire and the cause of the loss is related to that activity, the insured will have problems,” he explains.
Following a loss, the circumstances surrounding the event must also be reported in good faith so that the value of the loss can be properly established. For example, a merchant may be tempted to recover the amount of his deductible by exaggerating the loss resulting from the interruption of his operations following the loss.
In their dealings with the insured, insurer representatives also have an obligation to behave with respect and neutrality, according to Bérubé. The claims adjuster must avoid adopting an intimidating behaviour in order to extract a confession, or forming a false impression of the insured before speaking with them. His role is to assess the legitimacy of the claim.
Before asserting that a statement made by the insured is false and that the insured is acting in bad faith, the adjuster must conduct a detailed and complete investigation. Bérubé has acted as a counter-expert in several files, and he has sometimes observed that a contradiction of little importance in context is enough for the claims adjuster to declare that the insured has lied. “Before the court, you need solid evidence, not assumptions,” he says.
The insured’s obligations, not prejudices
A participant in the audience gave the example of a property owner whose insurer requires him to verify that the businesses leasing premises from him have a civil liability insurance policy. A case arises where the tenant responsible for a loss did not have a valid policy because premiums were not being paid. The insurer refuses to cover the property owner’s loss.
“In such a case, I think we are dealing with an insurer that is not acting in good faith. The owner does not have an obligation to constantly verify whether his tenants are insured,” notes Bérubé. If the tenant does not meet their obligation to maintain insurance coverage, it is the tenant who must be held responsible, not the owner.
If the claims adjuster is mandated on the basis of suspicions of fraud, this can create an unfavourable bias against the insured. “This tunnel vision leads to asking questions to validate the initial hypothesis. You steer the interview to obtain the answer you are looking for instead of letting the person tell their story,” he says.
“Impartiality is part of the Code of Ethics,” he adds. The reverse is also true, as a favourable prejudice toward “the insured who seems like a good person” can also colour the adjuster’s judgment.
During the claims process, tensions may arise due to interpersonal relationships. The adjuster may be the target of threats from the insured or their entourage. The professional may apprehend having to testify before the court. “If your file is well put together, you have no reason to be stressed about that. But if you’ve cut corners, you may end up looking foolish in front of the judge,” Bérubé points out.
The adjuster may also be threatened with a complaint to regulatory bodies. Insureds have the right to complain, and Bérubé encourages them to do so. “I was the subject of a complaint made to the Lloyd’s ombudsman. I told him, ‘Give me two weeks, and I will explain why the insured has not yet received their indemnity.’ I obtained confessions from the perpetrators of the wrongdoing, the file was settled, and the complaint went no further,” he recounts.
An exercise
Bérubé’s presentation continued with the collaboration of Sabrina Ouellet, a claims adjuster with Sedgwick Canada. It involved an exercise in which participants had to react to the enumeration of facts in a claims file. They were asked to determine whether the loss was covered or not.
The claim relates to a BMW utility vehicle. Manufactured in 2013 and purchased in 2019 by the consumer, its engine had already been replaced under warranty by the dealership.
The vehicle ended up in a lake in eastern Quebec following a mishap that occurred in June 2020, in the early months of the COVID-19 pandemic. At that time, the vehicle had been used by a friend of the insured for two weeks.
At underwriting, the insured had declared a criminal record, with the most recent offence dating back to 2010. In addition, at age 21, he had lost his driver’s licence due to unpaid fines. The claims adjuster notes that the third party who had custody of the vehicle at the time of the loss had also had trouble with the law.
Over the course of duly recorded exchanges with the insurer’s representatives, the versions of events submitted by the insured, his friend, and the latter’s spouse reveal numerous contradictions on various elements: the reason the third party needed a vehicle, the use of a second vehicle to go into the forest, the number of children who took part in the outing, the duration of the trip to the lake and the time the two vehicles set out, the outside temperature, the lighting provided by the moon, the circumstances surrounding the vehicle’s slide from the boat ramp into the body of water, the approximate time calls took place between the individuals involved, the content of the conversations, the behaviour of first responders, etc.
The insured’s and witnesses’ cellular records are requested and obtained. Questions are asked of the dealership to verify the existence of a mechanism that engages the parking brake as soon as a door is opened. The tow operator and the diver are also questioned about the method used to bring the vehicle back to shore, as the windows and sunroof are not closed in the photos in the file. By digging deeper into the information and recording the answers provided, the claims file gains substance. New interviews are conducted in order to resolve the contradictions.
According to Bérubé, the adjuster must conduct his own investigation independently of the work done by police services. Cooperation with the police is appropriate, if only to avoid paying a claim when charges are about to be laid before the courts. However, “the adjuster cannot delay a decision on the settlement of the file on the pretext that the police investigation is ongoing,” he insists.
Settling a file means paying the claim or refusing to do so. “The adjuster makes his recommendation, but in the end, it is the insurer who decides whether or not to pay the indemnity. If the matter has to go before the court, the adjuster can demonstrate what he is asserting with the facts he has gathered. It will then be up to the judge to resolve the dispute,” Bérubé adds.