Insurance Claims in Alabama: Five Important Things for Claimants to Know
Many times persons or businesses who find themselves having to present an Insurance Claim in Alabama are frustrated by the insurance claims process. In Alabama our laws and regulations favor the insurance companies and most claimants are not aware of the following information when submitting an insurance claim. [The following material is an excerpt from our 12 page Guide for Insurance Claims. A link to that entire resource is attached.]
1. Burden of Proof: The first and most important thing to remember about any insurance claim is that the person or business making the claim (the claimant) carries the burden of proof related to that claim. The person who is handling the claim on behalf of the insurance company (the adjuster) does not have to "disprove" the legitimacy of the claim. The adjusters job is simply to determine if the claimant has presented adequate proof of a covered loss with proper supporting documents or material to pay the benefits being claimed. It is important to understand and realize, the adjuster has an obligation to the insurance company to only pay benefits that are legally owed under the policy. The claim files of adjusters are periodically audited to make sure they are not paying more benefits than required by the terms of the policies and that claims are properly documented before making a payment. In some instances, insurance companies even pay bonuses to adjusters and/or agents based upon claim pay-outs, or more specifically, the lack thereof.
2. Adversarial Process: As nice and friendly as you think the insurance company will be to you in the claims process; understand, Alabama law defines the insurance claim process as an "adversarial proceeding." This does not necessarily mean the insurance company is going to be mean and nasty to you during the claim process, rather it simply means you have to recognize that your objectives and the insurance company’s objectives are not the same when it comes to an insurance claim. You would prefer they pay the claim and they would prefer not to pay the claim. Because the claim process is defined by law as an adversarial process, insurance companies are granted a certain amount of latitude in how they handle and adjust an insurance claim, even if it works to the detriment of the claimant. Specifically: 1) there is no obligation for an adjuster to "help" you better present your claim, 2) the adjuster does not have any obligation to tell you about critical time lines or time limitations related to your claim, 3) the adjuster does not have to tell you about other possible coverages available to you for the loss, and 4) the adjuster often can not give you advice or suggestions on how to best coordinate multiple coverages related to a loss. Simply put, because it is an adversarial process, you can not expect the insurance company to tell you how to effectively and timely present your claim or provide you with any helpful information . Because this process is considered "adversarial" a claimant does not have a right to justifiably rely on anything an adjuster says about the terms and conditions of the policy and/or the merits of the claim! [See, Apkan v. Farmers Insurance Exchange, Inc. 961 So.2d 865 (Ala. Civ. App. 2007): Insurance adjuster has no duty to help or assist claimant. In fact, adjuster’s duty is to protect the insurance company. Southern Bakeries Inc. v. Knipp, 852 So. 2d 712 (Ala. 2002): If a party owes no legal duty of disclosure to another, then material facts can be suppressed with out recourse for failure to disclose.]
3. No Reliance on Agent’s Oral Representations: As difficult as this is for most of us to believe, Alabama law has held that insurance customers do not have a right to justifiably rely on an oral representation made to them by the agent concerning the terms or conditions of the policy. This means if the agent tells you some event or loss will be a "covered loss" and the policy says it is not, the policy language will control and the loss may not be covered despite what the agent may have said. See Foremost Insurance Company v. Parham, 693 So.2d 409 (Ala.1997).
4. Clauses and Exclusions: Another legal reality that insurance customers have a hard time accepting is that Alabama law considers insurance policies to be "mutual contracts." See Wolfe v. ALFA, 880 So. 2d 1163, 1169 (Ala Civ App 2003). What this means is our laws consider the customer and the insurance company to be "equals" in the negotiating process. Because of this legal concept (some call it a legal fairy tale) unfavorable and/or sometimes down right unconscionable clauses that work against the claimant are upheld on the basis that the customer got what he or she "bargained for" when "negotiating" for the purchase of the policy. Some of these type detrimental clauses include "commercial" arbitration clauses, forum and venue selection clauses, appeal protocol and procedure clauses, strict compliance clauses, cooperation clauses, indemnity clauses and many more often buried in the fine print of the policy. This also means well crafted exclusions for covered losses can be included, and upheld as valid, under the guise of a "negotiated" contract. One outrageous example of this is an exclusion for property damage losses currently found in some Alabama issued policies. It is an exclusion for "a loss to a covered property caused, or contributed to, by negligent construction."
5. Notification of Claim: No matter what type of claim is being presented, it is always the responsibility of the insured individual and/or business and/or claimant to properly notify the insurance company of the claim or even the potential claim. All insurance policies have guidelines and procedures for notification of a claim and/or a "covered loss." If these procedures are not followed, they can provide the insurance company with a legally recognized excuse to not pay the claim. Upon being notified of a claim or of a potential claim, many insurance companies will send out "claim forms" to the claimant. If the company does not provide "claim forms" it would be wise to verify the notice of claim in writing to verify that "timely notice" of the claim has been provided.