The Legal Side of Property Adjusting: What You Need to Know

As a property insurance adjuster, your job isn’t only assessing damage; you also have to navigate the legal landscape that surrounds property claims. 

Understanding the legal aspects of property adjusting is crucial to ensure you’re handling claims properly and avoiding legal pitfalls. Here’s a guide to help you understand the legal side of your work and how to stay on the right side of the law.

1. Understanding the Insurance Contract

Every property insurance claim is based on a policy, which is essentially a contract between the insurer and the policyholder. As an adjuster, you need to understand the terms of this contract inside and out. The policy outlines what is covered, what’s excluded, and the steps the policyholder needs to follow to file a claim.

If you miss a policy detail, like an exclusion or a specific coverage limit, it could lead to mistakes in your claim assessment. For example, if a certain type of damage isn’t covered in the policy, you’ll need to communicate that to the policyholder clearly and accurately. Misinterpreting the policy can lead to legal disputes, both for you and for the insurance company.

2. Good Faith and Fair Dealing

As an adjuster, you’re legally required to act in “good faith” and deal fairly with the policyholder. This means you must handle every claim honestly and with integrity. If you fail to do this, it could lead to accusations of bad faith, which are serious legal issues.

For example, if a claim looks legitimate, but there’s some dispute about coverage, you have a responsibility to fully investigate it. Rushing through claims or ignoring important evidence can lead to problems down the road. Upholding good faith means treating the policyholder fairly, following the correct processes, and not undervaluing or unfairly denying claims.

3. State-Specific Laws and Regulations

Property insurance laws aren’t the same everywhere. Each state has its own rules about how insurance claims should be handled, and as an adjuster, it’s essential to know the regulations that apply where you’re working. Some states have strict timelines for how quickly claims must be processed, and if those deadlines aren’t met, it could result in penalties for the insurer, and potentially for you.

Staying on top of state laws ensures that you can handle claims efficiently and avoid unnecessary legal issues. You’ll also know when to escalate a claim or seek legal advice if things get complicated.

4. Subrogation: What It Is and Why It Matters

Subrogation is the legal process that allows an insurer to recover money from a third party that caused damage to the policyholder’s property. If you’re dealing with a claim where another party might be at fault, subrogation might come into play.

As an adjuster, you’ll need to understand when subrogation is applicable and how to gather the right evidence. Failing to handle subrogation properly can lead to the insurer losing out on recovery costs and could also open the door to legal trouble. Working closely with your insurer’s legal team can help you navigate these situations.

5. Dealing with Litigation

Sometimes, claims turn into lawsuits. If a policyholder disagrees with your assessment or feels they’ve been treated unfairly, they might take legal action. In these cases, adjusters can be called to testify in court. It’s important to keep detailed and accurate records of your work, as you might need to present your findings as evidence in a legal setting.

Proper documentation and communication are key. If you can demonstrate that you followed the correct procedures and made informed decisions, you’ll be in a much better position if you have to testify in court.

The legal side of property adjusting isn’t always straightforward, but understanding the basics can help you do your job effectively and avoid legal issues. Be familiar with the policy you’re working with, act in good faith, stay informed about state-specific laws, understand subrogation, and be ready to handle litigation if needed. By paying attention to these legal aspects, you can ensure that every claim is processed fairly and in compliance with the law.