The Clock is Ticking: Understanding the Time Value of a Claim and When to Go Legal

In the nuanced world of public adjusting, time is a currency that holds as much weight as the dollar. The length of time it takes to settle a claim can significantly influence not just the monetary compensation but also the overall satisfaction and well-being of the policyholder. This white paper, presented by United Claims Professionals in partnership with The Morgan Law Group, embarks on a detailed exploration of the ‘Time Value of a Claim’ – a crucial yet often overlooked aspect in the insurance claims process.

The concept of ‘time value’ in claims is not just about the financial implications of delayed settlements – it extends to the broader impact these delays have on policyholders, public adjusters, and the claims process itself. In an environment where every second counts, understanding the intricacies of time value is pivotal for public adjusters who aim to optimize claim outcomes and uphold the highest standards of client service.

This paper delves into the factors that contribute to the time value of a claim, the signs indicating when legal intervention might be beneficial, and the strategic importance of building relationships with legal counsel. Drawing from industry insights, including expert perspectives from The Morgan Law Group, we aim to provide public adjusters with a comprehensive understanding of how time impacts claims, strategies to mitigate these effects, and the collaborative role attorneys can play in this dynamic.

The Ever-Rising Cost of Time During the Claim Process

In insurance claims, the time value concept underscores the principle that a claim settled promptly holds a higher value than one that drags on indefinitely. Delays, protracted negotiations, and prolonged discussions can deteriorate a claim’s value, both in the eyes of the insurer and, most importantly, in the real-world outcome for the policyholder.

Factors That Contribute To The Time Value of a Claim Include:

1. Increasing Costs Over Time: The longer a claim remains unresolved, the more the costs associated with the damages can increase. For instance, a water-damaged property left unrepaired for months can lead to mold growth. As a result, the cost of mold remediation efforts can escalate the overall repair expenses.
2. Financial Strain on Policyholder: A delay in claim settlement can lead to significant financial hardships for the policyholder. For example, they might be forced to pay out-of-pocket for interim repairs or accommodations while waiting for the claim to be finalized, which can add to their monetary stress.
3. Financial Strain on Public Adjuster: In this business, cash is king, and adjusters can’t pay their bills on receivables. Prolonged claims can tie up an adjuster’s time, manpower, and finances, effectively draining their resources. Such drawn-out processes not only impede their capacity to manage other claims effectively but can challenge their cash flow, especially if they’re operating on contingency fees.
4. Inflation: The purchasing power of money tends to decrease over time due to inflation, which can negatively impact the policyholder’s ability to be made whole by their settlement. For example, the Bureau of Labor Statistics reports a significant 3.7% inflation rate for the trailing 12 months ending September 30, 2023. This means that if a claim settlement is delayed, it may not be enough to cover the same damages later, as inflation increases the costs.
5. Reduced Negotiation Leverage: As time progresses, insurers might perceive that the policyholder or their public adjuster is desperate to close the case, which can undermine their negotiation position. This can lead to settling for a sum much less than the claim is worth.
6. Erosion of Evidence: With time, crucial evidence required to validate a claim can be lost, damaged, or become less reliable. Witness testimonies begin to weaken as details are forgotten. All of which can weaken the policyholder’s case and make it challenging to prove the extent of the damages.
7. Emotional and Psychological Toll: An elongated claim process can take a significant emotional and psychological toll on the policyholder. The constant stress and uncertainty can have detrimental effects on their well-being. We’ll dive deeper into the extent of this in the next section.

Given these reasons, public adjusters must maintain a strong sense of urgency throughout the claims process. In addition, they need to be watchful for signs that might indicate that it’s time to escalate the situation and consider legal intervention.

The Emotional Cost of Time: Understanding the Mental Health Impact of Prolonged Claims

In addition to the financial and logistical challenges of insurance claims, a significant emotional dimension often goes unnoticed. A National Library of Medicine study reveals the profound psychological impact prolonged insurance claims can have on policyholders. This aspect underscores the importance of recognizing the time value of a claim not only in monetary terms but also in terms of mental health.

Key Insights and Their Implications for Public Adjusters Include:

• Exacerbated Mental Health Risks with Prolonged Claims: The study sheds light on the correlation between insurance-related stress and mental health conditions, which are exacerbated in prolonged claims cases. It found that individuals experiencing severe stress due to insurance issues are at a much higher risk of developing mental health disorders. The odds of probable depression were found to be 11.08 times higher, anxiety 4.48 times higher, and PTSD 7.95 times higher compared to those with no or mild insurance-related stress.
• Psychological Morbidity in Flood-Affected Claimants: Among participants who experienced flooding and filed insurance claims, a significant prevalence of mental health issues was observed. Specifically, the prevalence of probable PTSD in this group was 25.5%, highlighting the emotional toll of navigating prolonged insurance processes.
• The Stressful Nature of Insurance-related Issues: Dealing with protracted insurance claims and disputes contributes significantly to the psychological burden on policyholders. Lengthy and complex claim processes are major stressors, leading to increased mental health problems.

This research underscores public adjusters’ critical responsibility in considering the emotional consequences of prolonged claims. Fast and effective handling of claims, reducing unnecessary delays, and maintaining empathetic communication are essential. By acknowledging the significant impact of the time value of claims on the mental health of policyholders, public adjusters can contribute significantly to mitigating the emotional distress associated with the claims process.

Recognizing the Signs: When to Refer a Client to Legal

Understanding when to transition a claim to legal counsel is crucial for public adjusters. In a recent interview with Asher Mellul, Director of Business Development at The Morgan Law Group, he shared: “The biggest thing that I try to hammer home with new public adjusters is that you want to provide the highest level of service to your client. But sometimes, the best claim you worked is the one you didn’t write but referred to an attorney.” This means recognizing where further negotiations with the insurance company may not yield additional benefits.

Being attuned to the nuances of the claims process is crucial for Public Adjusters. While insurance carriers are not adversaries, recognizing specific patterns can provide a hint as to when it might be beneficial to consider involving legal counsel. Here are some signals to be watchful of:

• Complex Cases: Due to their nature or intricacies, some claims require legal expertise to ensure a fair outcome. For example, properties damaged by hurricanes that have incurred both wind and flood damage may need legal representation from the start.
• Prolonged Delays in Responses From the Carrier: If the usual response time from the insurance carrier stretches from days into weeks or even months without clear reasons, it might indicate a potential issue. If the claim is not moving at a preferable pace, legal action could help ensure more timely responses.
• Repeated Documentation Requests: It’s standard for carriers to request additional documentation. However, if you find that the same documentation or clarifications are being requested multiple times, it may be a sign of either an internal communication issue or stalling. Either way, it might signal time to seek legal counsel.
• Adjuster Turnover: If a claim sees frequent changes in the assigned adjuster, leading to repeated “starting over” scenarios, this could be a sign that the claim might benefit from a more legally guided approach.
• Claim Denials Without Clear Rationale: Occasional disagreements on claims are standard. However, if you’re receiving denials without clear explanations, it may be time to consider a legal perspective to understand and challenge these reasons.
• Stagnant Negotiations: If you’ve presented ample evidence to support the claim, but the negotiation doesn’t seem to be progressing or is consistently returning to the same offer, it could indicate that it’s time to refer your client to legal.
• Frequent Policy Interpretation Disputes: Insurance policies can be intricate. However, legal insight might be required if there are frequent disagreements on how the policy terms are being interpreted, especially if it feels unfavorable to the policyholder.
• Feedback from the Policyholder: Sometimes, the insured might share details or express concerns that hint at potential complexities or challenges. Their perspective can often guide the need for a more structured legal approach from the onset of a claim.

The Benefits of Referring a Claim to Legal Counsel

While public adjusters are skilled in understanding insurance policies and advocating for their clients, there comes a time when introducing legal expertise early can make a significant difference in the outcome of a claim. And since we should all have the policyholders’ best interests in mind, it’s essential to understand the significance of those benefits for all parties involved. These benefits include:

• Legal Precision: Attorneys bring a depth of understanding of the legal nuances that can significantly influence a claim, from interpreting policy language to recognizing potential statutory violations.
• Authority Perception: The presence of legal counsel often indicates a heightened level of seriousness and can encourage insurance companies to be more forthcoming and cooperative.
• Alternate Dispute Resolution: Lawyers are adept at exploring alternative solutions, such as mediation or arbitration, which can lead to quicker and often more favorable resolutions. After all, no parties, not even the insurance carriers, wish to end up in litigation.
• Access To Experts: Depending on the nature of a claim, some claims require a public adjuster to bring in an expert, such as an engineer. On the topic of financing expert involvement, Asher Mellul from The Morgan Law Group explains, “Attorneys can, in some cases, even cover the costs for experts if they’re necessary. For example, if a claim requires an engineer, an attorney can often come in and not only cover those costs, which is important and huge for the insured and for the public adjuster, but they can also get better pricing because they do a lot more volume.” This assistance can be especially crucial for new adjusters in the industry who may not have the resources to hire experts independently.
• The Improved Time Value of a Claim: Leveraging an attorney’s legal expertise and a public adjuster’s detailed claim knowledge ensures swifter and more favorable resolutions. This combined effort streamlines the process, mitigating delays and ensuring the policyholder’s claim maintains its optimum value over time.

It’s important to note that involving legal counsel doesn’t mean sidelining the public adjuster. In fact, the most successful outcomes often arise from a collaborative approach where the public adjuster and attorney work in tandem. While the attorney brings legal expertise, the public adjuster brings an intimate understanding of the claim’s details, the client’s needs, and the history of interactions with the insurance company. Together, this creates a formidable team advocating for the policyholder’s best interests.

The Role of Legal Expertise in Enhancing Public Adjuster Effectiveness

The role of legal expertise in the claims process can’t be understated. Asher Mellul of The Morgan Law Group explains this well: “The partnership between public adjusters and attorneys goes beyond mere collaboration on claims; it bolsters the knowledge and credibility of adjusters in handling various scenarios they encounter. Most of the time, the questions public adjusters have are both important and complex, yet can often be answered in less than three minutes because they’re questions we’ve encountered numerous times across different states and markets. Our ability to promptly provide answers or conduct research when necessary is foundational to our credibility in the industry. This rapid response and research capability is critical, considering that a significant portion of claims, upwards of 30%, may end up in litigation. Public adjusters rely on attorneys to have a deep understanding of their business and the law, as these insights directly influence decisions that can have profound implications, including those affecting their licenses.”

Mellul’s observations underscore the importance of public adjusters having access to seasoned legal counsel who can answer their queries quickly and accurately. This accessibility not only aids in the immediate resolution of issues but also helps public adjusters make well-informed decisions crucial in the claims process. As Mellul notes, “This is how credibility is earned in our industry – being able to answer questions accurately and promptly. It’s about ensuring that 30% of your business, which might end up in litigation, is in the hands of a company that understands your business, knows the law, and operates in this realm every single day.”

The Benefits of Building an Attorney Relationship Now

Creating a strong relationship between public adjusters and attorneys well before any legal needs is an important strategy to consider as well. Such proactive relationship-building offers numerous benefits:

• Expertise and Advice: The fact that public adjusters can gain access to experts who can take on-demand calls without a retainer is perhaps one of the greatest benefits of building an attorney relationship early. Mellul expands on this to say: “The art of adjusting a loss also involves providing the carrier with the right and indisputable evidence to pay this claim pre-suit because nobody wants to deal with litigation or go to trial. So, having the right experts is important. If a public adjuster has a relationship with a law firm like ours at The Morgan Law Group, they’d have the added benefit of being able to access our pool of experts who can be available for on-demand phone calls from the PA if they have questions about a case or questions about a policy. Having access to attorneys without having to actually retain them is great. And that’s something that we offer all of our public adjusters. I get calls from PAs around the country all the time and appreciate that they’re asking questions earlier rather than later.”
• Efficient Case Handoff: When adjusters and attorneys already understand each other’s working styles and expectations, transitioning a case for legal intervention becomes smoother and more efficient.
• Trust and Expedited Communication: Establishing trust beforehand means that both parties can communicate more openly and effectively when a case is referred. This trust is essential in situations where time-sensitive decisions are required.
• Understanding of Unique Strengths: Early relationship building allows each party to appreciate the other’s unique strengths and expertise. This understanding enables more strategic use of each other’s skills in a claim’s resolution.
• Improved Client Outcomes: When adjusters and attorneys collaborate well, clients benefit from a more cohesive and strategic approach to their claims.
• Knowledge Sharing: Regular interactions between adjusters and attorneys can lead to a mutually beneficial exchange of knowledge, keeping both parties updated on the latest industry trends, legal developments, and best practices.
• Streamlined Legal Processes: An established relationship can lead to quicker legal processes, as less time is spent on formalities and more on the substantive aspects of the case.
• Advocacy and Strategy Alignment: Early collaboration allows for a unified approach in advocacy and strategy, particularly when dealing with complex or contentious claims. The collaboration between attorneys and public adjusters can significantly enhance the claim process. As The Morgan Law Group notes, “An attorney doesn’t just have to come in at the end of a claim when the result isn’t what’s needed to make the policyholder whole. An attorney can come in at the beginning and work in concert with the public adjuster to resolve the claim.” This approach can be beneficial even in complex cases where legal input from the outset might help navigate intricate issues.

In the broader context of the industry, organizations like ours here at United Claims Professionals underscore the value of such connections by providing platforms for networking and professional development between members from diverse backgrounds within the claims industry. These resources can be instrumental in initiating and nurturing these vital professional relationships.

Preparing to Refer a Case to an Attorney

When preparing to refer a case to an attorney, public adjusters must ensure comprehensive and meticulous documentation for a smooth and effective legal transition. This thoroughness in preparation is not just a procedural step but a critical element in safeguarding the interests of the policyholder.

• Complete Case Documentation: This includes all relevant paperwork, claim files, correspondence with the insurance company, and any gathered evidence. As emphasized by Asher Mellul of The Morgan Law Group, “Every public adjuster needs to document their losses and prepare it like it’s going to litigation from the start.” This approach addresses a common oversight Mellul notes: “The most common thing I hear from a public adjuster is all my files are ready for litigation, but they’re not.” Ensuring that each document is detailed and organized as if it were headed to court can make a significant difference in the legal process.
• Policyholder Information: Provide a detailed account of the policyholder’s situation, including their policy details and the history of the claim. This comprehensive profile aids attorneys in understanding the client’s perspective and the nuances of their case.
• Claim Assessment and Challenges: Include a summary of the claim, highlighting key issues, the adjuster’s assessment, and any specific challenges encountered during the process. This overview gives attorneys a clear picture of the claim’s current status and the efforts made by the adjuster.
• Legal Queries and Concerns: Prepare to discuss any particular legal questions or issues that have arisen and may require specialized legal input or interpretation. This preparation helps attorneys promptly address specific legal aspects of the claim.
• Timeline and Critical Dates: Note important milestones and dates within the claim’s history, including deadlines or upcoming critical events. A well-documented timeline is essential for legal counsel to understand the progression of the claim and to plan accordingly.

Thorough preparation in these key areas not only facilitates a more efficient engagement with legal counsel but also exemplifies the dedication of public adjusters to protecting and advancing their clients’ interests.

Final Thoughts About The Time Value of a Claim

As we come to the end of our discussion on the importance of the time value of claims and the critical role of legal intervention, it is evident that understanding these dynamics is crucial for the success of public adjusters and the satisfaction of policyholders. The insights shared, especially those from The Morgan Law Group, highlight the need for strategic partnerships and timely actions in the claims process.

We encourage public adjusters to reflect on their current practices, consider the benefits of early legal collaboration, and explore further resources to enhance their expertise. For those looking to deepen their understanding or seek guidance, United Claims Professionals remains a dedicated partner in your professional journey.

Thank you for engaging with this white paper. We hope it serves as a valuable resource in your continued efforts to advocate for fair and efficient claim settlements. For further information, discussions, or assistance, feel free to contact us. Together, let’s work towards a more informed, efficient, and equitable future in the claims industry.