The currently pending New Jersey Insurance Fair Conduct Act
of the bill is the creation of a private cause of action for violation of New
Jersey Unfair Claims Settlement Practices Act (“UCSPA”), explains attorney
Bill S2144, titled the New Jersey Insurance Fair Conduct Act (“IFCA”) has
passed the New Jersey Senate and is currently pending before the New Jersey
Assembly’s Financial Institutions and Insurance Committee. The bill was
referred in the summer of 2018 and whether the bill will ultimately pass during
the 2018-2019 legislative session is unclear.
The passage of the bill in the senate, however, could signal an eventual
adoption of the bill or some reasonable facsimile in the near future.
Jared Stolz, Esq. is providing his thoughts on this subject in a
new article. The complete article will be available on Mr. Stolz’ blog at https://jaredstolz.law.blog/
of the bill is the creation of a private cause of action for violation of New
Jersey Unfair Claims Settlement Practices Act (“UCSPA”). UCSPA prohibits insurers from engaging in
various deceitful practices, such as misrepresentation of facts or denial of
claim without reasonable investigation. Currently, violations of the UCSPA is
enforced by the New Jersey Department of Banking and Insurance.
current law, aggrieved insured can pursue common law cause of actions such as
bad faith delay or denial of claims for insurance benefits. Such common law remedies allow for recovery
of consequential damages but no punitive or treble damages.
of IFCA are concerned that the law may create unreasonable burden on insurers
and may ultimately end up hurting consumers through additional costs that ends
up getting passed on as higher premiums.
One criticism of the IFCA is the extremely broad definition of insurers
subject to the law. IFCA defines
“insurers” as “any individual, corporation, association, partnership or other
legal entity which issues, executes, renews or delivers an insurance policy in
this State, or which is responsible for determining claims made under this
policy.” Such a broad definition would
cover not only the insurance companies themselves, but also potentially
employees of the companies.
also concern with the strength of the remedies under the IFCA. On top of actual damages, prevailing
plaintiffs would potentially be awarded prejudgment interest, attorney’s fees,
and even treble damages. While New
Jersey legislature’s desire to curb bad faith actions by insurance companies is
understandable, such a wide scope of coverage and strong statutory remedies
will likely create a strong incentive for disappointed insured to litigate
their grievances, which may lead to increase in frivolous suits against
insurance companies. The insurance
industry has already expressed concerns over the proposed legislation. It
remains to be seen whether the IFCA will pass and if so, whether industry
concerns will be reflected in the final bill, notes Mr. Stolz.
About J. Elliott Stolz,
Elliott Stolz is an attorney in New Jersey, focusing on insurance law and
litigation. Jared E. Stolz is the managing partner of Stolz and Associates. Jared
Stolz received his undergraduate education at Drew University in Madison, New
Jersey and graduated with honors from Seton Hall University School of Law. Mr. Stolz has been the managing partner of
Stolz and Associates since 2004, specializing in providing individual and
customized attention to insurance carriers needs on substantial coverage
disputes. Mr. Stolz has nearly two
decades of experience in the insurance industry and strives to offer the
clients a combination of tried and true legal analysis along with tactic,
brought to it by today’s technology, with a focused eye on expenses. He has represented prominent clients in
numerous noteworthy cases with published opinions, and has published and given
seminar on insurance law topics.
The insurance claims adjuster must always ascertain that the
owner of the property is the person insured and that the person insured has an
interest the property. Failure to do so
could result in payment to the wrong person.
The Declarations Page:
The declaration page tells the adjuster the name of the
insured(s), the effective dates of insurance, the policy limits, the location
of the property, the different policy forms applicable, the identities of
morgagees and others with an interest, whether the policy is new or a renewal,
and deductibles and/or coinsurance provisions applicable. The adjuster must read all of the words in
the policy, keeping in mind the information, description, and limitations shown
in the declarations.
What is a “direct physical loss”?
A simple rule for determination of “direct physical loss” – was
the property damaged in some way? Is the
answer is “Yes”, there is a direct physical loss.
Processing A Claim
The first person an insured meets with when he or she suffers a
loss is the adjuster (or a Public Adjuster).
The claims adjuster will help the insured prove the loss to the insurer
and get the indemnity promised by the insurer.
The adjuster will investigate the loss, interpret the policy wording,
and apply the policy wording to the facts discovered in the investigation.
Read the Policy
To understand a first party property
policy of insurance the adjuster must read and analyze the policy in a logical
and thorough manner. The adjuster must
know what coverage is available to the insured, the limits of the policy, and
the exclusions, conditions, and endorsements attached.
Read the Loss Notice
The loss notice is one of the most
important documents the adjuster will see.
It is the starting point of all claims.
It tells the adjuster:
When the loss occurred
The type of coverage the insured has
The type of Loss
The insured’s name, address, and telephone number
The agent’s name and address
The location of the loss
Who to contact and how to contact him or her; and
Whether there is anything to which the adjuster should give special attention.
Meet With the Insured and Witnesses
Once the adjuster has completed this
basic preparation, he or she should arrange to meet or have another adjuster
meet with the insured and witnesses. The
adjuster should explain to the insured that the policy required the insured to
prove his or her loss to the insurer.
The insurer, in order to provide the best service possible and to act in
good faith to its insureds, hires the adjusters to help the insured prove his
or her loss. The adjuster can not prove
the loss for the insured, he or she is only present to help the insured. To act in good faith the adjuster must not
do, or fail to do, anything that will deprive the insured of the benefits of
the policy of insurance.
If applicable, obtain a Recorded
Statement with regards to the cause of the loss. The adjuster needs to have answers to the
most important questions: who, what, where, why, when and how, with regard to
the policy and the loss.
Establish the Amount of the Loss and Claim
The Scope of Loss
To aid the insured in his or her
obligation to prove the loss, the adjuster must, on the first visit, establish the
insured’s exact scope of loss. This
means that the adjuster and the insured (or PA) must walk through the insured’s
house or business and agree to exactly what was damaged and destroyed as a
result of the peril insured against.
The adjuster can get this agreement
orally with a tape recorder or write it down on paper. The scope of loss must be detailed. Descriptions, including room dimensions;
materials, like moldings, flooring, wall coverings, and fixtures; and
information about special features, openings, casements, detailing moldings,
and other architectural features must be part of the scope of loss. The scope of loss must be complete.
The adjuster must never:
Take a quick look around and ask the insured
to fill out a property loss form at his convenience
the insured with blank forms, except for supplemental items learned of after
the initial scope was completed
a partial scope and attempt to do the rest later
on the expertise of the insured’s public adjuster; or
on a contractor to establish the scope
The adjuster must walk through the entire scene of the loss with the
insured and obtain an agreed scope of loss.
He or she must advise the insured that the adjuster will be retaining
experts in the valuation and repair of the type of property that is
involved. These experts will bid on the
repair and replacement from the agreed scope.
The adjuster must present the insured with a copy of the agreed scope,
and inform him that he may, if he wishes, obtain similar opinions based on the
same agreed scope.
the agreed scope, the adjuster must photograph the scene – both the
undamaged portions of the property – that is the subject of the loss. The adjuster
must take a complete photographic and written inventory of the loss scene.
The adjuster must
take photographs of everything damaged, any possible source of
Ignition of a fire,
or any other peril that may have caused the damage and those things
Not damaged. If the scene is extensive, the adjuster
should consider hiring a professional to do a video inventory of the loss
location. If the list of contents is
excessive, the adjuster should consider the services of a salvor to inventory
Each item of inventory, whether
damaged or not.
Contact must be made with the official
investigating officers, either police or fire arson investigators. Personal contact is necessary to gain more
than cursory information from a report.
The prudent adjuster cultivates a relationship with official
investigators. If the adjuster shows an
interest in their work and an inclination to help, the investigator will more
readily share information with the adjuster.
The adjuster who demands information from a police or arson investigator
will invariably be met with a refusal to comment. The adjuster should collect as many
investigation reports as are available and may purchase photographs taken by
the official agency. When an arson fire
happens, both the arson unit and the local police force will be on hand and
both will be taking pictures.
On a large fire loss, a cause and
origin expert should be brought in immediately to investigate.
The adjuster should obtain from the
insured any photographs, videotapes, or motion pictures the insured or its
employees may have made of the loss. The
adjuster must determine the actual cash value of all the property insured. If a replacement cost value endorsement
applies, the adjuster must also determine the full cost to repair or rplace the
items with like, kind and quality.
Additional Living Expenses
If additional living expenses are
involved, the adjuster must instruct the insured that the coverage is for “additional”
expenses incurred over normal expenses.
Therefore, the adjuster must obtain the amounts of the insured’s normal
expenses for: mortgage payments,
electricity, gas, water, trash pick up, gardening, laundry, food, eating out,
entertainment, travel, dry cleaning, property taxes, and any other continuing
usual household expenses.
The adjuster must confirm that the
co-insurance, or reporting provisions have not been violated. He or she obtains authority to agree with the
insured as to the amount of the loss and obtains from the insured a signed
Proof of Loss of property, executed before a notary, under oath, or signed
under penalty of perjury.
The adjust should obtain a subrogation
agreement since almost every loss has a potential for subrogation, and then
issue a settlement draft in the amount agreed in the proof of loss.
The adjuster concludes with
recommendations for the pursuit of subrogation if applicable.
If the loss is extensive, the adjuster
may need to hire a salvor to perform a complete inventory for the insurer. If a structure is involved a construction
consultant or contractor could be retained to advise the adjuster and, for a
fee, to prepare a detailed scope for the benefit of the adjuster and the
There should be agreement with the
insured as to what was left after the loss and what work needs to be done. If the adjuster does not have an agreed scope
of loss at the beginning of an adjustment the loss will, invariably, be larger
when it is finally put together by the insured or the PA. AN AGREED UPON SCOPE BETWEEN THE ADJUSTER AND
THE INSURED IS CRITICAL.
With regard to personal property, the
adjuster will help the insured obtain verification of the values of the
property and descriptions. The adjuster
will develop sources that can establish values of certain classes of personal
property. The can be accomplished by way
of retail catalogs, and/or internet. The
adjuster can also find jewelers, furriers, art dealers, computer stores, and
the like who will take to adjusters on the telephone about values.
With the aid of the insured, the
adjuster must prepare as part of the agreed scope, a list of all the damaged or
destroyed personal property showing its description, age, cost, fair market
value, actual cash value, or depreciated value.
Duties of the Adjuster
The adjuster provides the service promised by the insurance
company. The adjuster is the living
embodiment of the insurance company:
this is the person the insured meets when he faces a loss and needs
help. It is the adjuster, and the help
he or she fives the insured, that is the essence of the promise made by the
insurer when the policy is issued.
Without this service insurance becomes meaningless.
The property adjuster has a duty to:
the insured prove the loss to the insurer;
the insured understand the terms and conditions of the policy; and
a thorough investigation to determine if a third person is responsible for the
loss so that subrogation can be instituted to recover, in addition to the money
paid by the insurer, the deductible or other non-covered portions of the loss.
The adjuster must also understand the methods of construction of
buildings of all types, and labor and material costs in his or her geographical
area, in order to fulfill his or her duties.
The Public Adjuster
Public adjuster is a person who, for compensation, acts on behalf
of or aids in any manner, and insured in negotiating for or effecting the
settlement of a claim or claims for loss or damage under any policy of
insurance covering real or personal property.
The contract the PA has the insured sign appoints the PA as the
agent of the insured for the purpose of making the claim and gives the PA a
lien against the proceeds. The basic
common law of the United States allows an agent to act for a principal. The PA therefore acts as agent for the insured,
the principal under the PA contract. The
PA, by assignment steps into the shoes of the insured. As the assignee of the insured the PA is
entitled to be treated with the same good faith the adjuster would give the
insured. The adjuster should meet the PA
at the loss location as soon as possible after the loss, at which time they
will both agree on the scope of the loss.
The PA should then be advised that the insurer expects the PA to present
the insured’s sworn proof of loss within 60 days after the loss.
Reasonable extensions can be granted, but the PA should be made
aware that the adjuster expects to close the file promptly and will not accept
unseemly delays. If the PA is unwilling,
or unable, to prove the loss within a reasonable time, counsel may be retained
for the purpose of examination under oath of the insured and for the purpose of
making formal demands on the insured and the PA for documents that support the
Common Mistakes and Omissions to Avoid
Establish a Complete Scope of Loss
The scope of loss is an agreement
between the property adjuster and the insured concerning the general scope of
damage caused by the fire or other casualty.
Without a complete and agreed upon scope of loss the adjuster would
enter the adjustment blind, negotiations would be difficult, and the time
needed to conclude the adjustment would increase. The scope of loss, created and agreed to as
soon as possible after the loss is discovered, is necessary to limit the rights
and obligations of both the insured and the insurer. It is a truism that the more time that passes
after a loss and before an agreed scope of loss is reached, the larger the
final claim settlement.
Calculate Actual Cash Value
If the policy provides for replacement
cost less depreciation cost, the adjuster must compute the actual cash value
because almost all replacement cost policies require actual reconstruction
before replacement cost can be paid.
Paying replacement cost before actual reconstruction is complete places
an unbearable burden on the insured who will be sorely tempted to perpetrate a
fraud. Paying the actual cash value
early allows the insured to fund the rebuilding so he or she can collect the
full replacement when it is due.
If the policy only provides limits up
to the actual cash value, the adjuster must take depreciation into account or
otherwise compute an actual cash value loss.
Actual Cash Value is the replacement cost less physical depreciation.
Do Not Confuse Theft or Mysterious
Disappearance with “Lost,”
“Missing”, or “Mislaid”
Although theft and mysterious
disappearance are often named perils, merely mislaying or losing something is
not a covered peril. The adjuster must
establish the efficient proximate cause of the loss.
Determine if Coverage Has Been Suspended
Coverage for vandalism is suspended by
vacancy or unoccupancy in many policies.
Coverage can also be suspended for various other reasons including a
lapse in coverage due to temporary cancellation for non-payment, or the
temporary failure of a warranted security device. The adjuster, as an investigator, must
determine facts, regardless of the size of the loss. Failure to do so is a breach of duty of the
adjuster to the insurer and the insured.
Properly Interpret Coverage
If an exclusion applies it should be
applied to both large and small losses.
In small losses adjusters sometimes ignore policy conditions and
exclusions. If the exclusion is not
applied, the excluded loss that is paid may come back as a large loss a month
later and the insured can rightfully claim a waiver of the exclusion.
Accumulated cigarette burns to
furniture or fixtures are not a “fire” loss.
Poor housekeeping or maintenance is not “fire” nor is it “vandalism”.
Insurance is designed to protect against the unusual, unexpected, and
accidental loss. Multiple cigarette
burns, usually caused by carelessly setting cigarettes down on pieces of
furniture are not fortuitous losses but rather losses that were expected from
the standpoint of the insured.
Apply the Deductible
Premiums are computed based upon the
fact that the first few dollars of a loss will be paid by the insured. If the adjuster fails to acknowledge the
deductible and apply it to the final loss, the purpose of the deductible is
lost. Deductibles were created to avoid
paying for small losses and as a means to keep premiums low.
Determine the Purpose for Which the
Property is Used
“Business or Professional” property
cannot be claimed under personal coverages, over the policy limit listed in the
policy. Regardless of the size of the
loss, the adjuster must inquire as to the purpose for which the property is
used. Failure to inquire could provide a
windfall to an insured for which he or she did not pay a premium.
Apply the Co-insurance Clause, if
Most first party commercial property
policies contain co-insurance that require an insured to maintain insurance
equal to the value of the subject property.
If the insured fails to do so he or she becomes co-insurer with the
insurance company based on the proportion the true value bears to the amount of
insurance. The failure of the insured to
pay an appropriate premium is unjust to the insurer if the co-insurance clause
is not property applies. If a loss is
small, the temptation to close the file quickly could cause the adjuster to
fail to determine the values at risk and therefore fail to detect that the
insured has not complied with the co-insurance clause. This failure could be very expensive to both
the insured and the insurer in the event of a later large loss since the
insured could then claim that the insurer waived its right to apply the
The adjuster must establish obligation
with respect to improvements and betterments to leased property. Every lease of real property should include a
provision that determines who has the ownership of, and takes the risk of loss
with regard to, improvement and betterments placed by the tenant. The adjuster must determine if there is other
coverage referred to in the lease provision or if some party other than the
insured has agreed to accept the risk of loss.
The adjuster must establish these obligations on every adjustment,
regardless of the amount of the loss.
The adjuster must ask the insured
about prior losses. Almost every
application or insurance inquires about prior losses or claims. If the adjuster does not ask, the adjuster
will never learn whether the insured truthfully responded to the questions
posed at the application stage of the insurance. If the insurer has prior losses and concealed
this information from the insurer, a defense to the entire claim may
exist. If the adjuster does not ask, a
material misrepresentation that may have been sufficient to support a recission
of the policy, or to declare the policy void.
If, at a later date, a second claim is
presented, the insurer can be found to have waived its right to rescind or
declare void because it know, or should have known, of the defense at the time
the first claims was adjusted. Losses
can occur without a claim being filed. Insured’s are not obligated to inform their
insurer about all the losses, whether they resulted in a claim or not.
Previous Unrepaired Damage
The adjuster must determine whether
the claim is for previous, unrepaired damage.
The adjuster must investigate to find out if there is charred wood
behind new drywall, grass growing in cracks, accumulations of dust where the
television allegedly stood before it was stolen, etc. that reveal old damage or
losses that precede the effective of the policy.
Determine if the Insured Reported the
Theft to the Police
Failure or refusal by the insured to
report a theft loss to the police is a breach of a policy condition that would
deprive the insurer of its rights of subrogation. It would also deprive the insurer of it s
salvage rights if the policy recover the stolen property and they have no
record of the articles or to whom they should be returned. The insured may not have reported to the
policy to avoid prosecution for filing a false police report. The most prevalent fraudulent claims are
small claims. A small fraudulent claim
can be defeated if the adjuster insists that the insured fulfill the policy
requirement and report the loss to the police.
Every policy of insurance includes an equitable
right of salvage, even if it is not written.
The insurer, by paying the insured for the loss of the insured’s
property, becomes the equitable owner of that property and should be able to
sell it to reduce the amount of the net claim paid. Allowing the insured to reap the benefit of
the salvage provides the insured with a windfall for which he or she has not
paid the premium. Protection of the
salvage is extremely important in the adjuster of a large loss. Salvage recovery can reduce the total amount
of the loss considerably.
The adjuster who is so involved in the
adjustment of a loss that he or she fails to identify subrogation possibilities
is costing the insurer money.
Subrogation possibilities in almost every loss if the adjuster has an
inquisitive mind. Small subrogation
claims are easier to collect than large ones and can make a considerable
difference to the insurer. Consider that
subrogation collected on only 100 $1,000 claims will generate $100,000 for the
Complete a Thorough Investigation
There is no excuse, regardless of the
size of the loss, for failing to complete a thorough investigation. Most insurance frauds are small and consist
of inflation of the depreciation or value of the item that is the subject of
the claim. It is not unusual for a black
and white television to be reported stolen as a color television so the insured
can obtain the extra dollars necessary to pay the deductible amount. Thorough investigation may discover this
inflated claim. A thorough investigation
will also make it possible for the adjuster to pay the honest insured every
dollar of indemnity to which the insured is entitled.
Do Not Over-or-Under Investigate
Adjusters tend to over-investigate
small claims and, when faced with a large, complex claim, try to make it simple
by not completing a thorough investigation.
If the claim is large, and an engineer, fire cause expert, private
investigator, and attorney are needed to assist the adjuster in completing the
investigation, they should be retained.
However, it may not be necessary to retain a private investigator and an
expert to investigate a $1,000 claim. An
under-investigated large loss may save money on the expense side but will
usually cost more on the indemnity side.
An adjuster should not spend the same amount of time investigating a
$1,000 claim as a $100,000 claim. Claims
judgment includes a reasonable use of the time available. Regardless of the size of the claim, a
thorough investigation is required.
However, it takes less time to thoroughly investigate a small claim.
Exercise Claims Judgment
The adjuster must determine if the
facts recited by the insured as repeated in the adjuster’s report are
credible. The adjuster must evaluate the
insured to determine if his or her demeanor (like body language) coupled with
the statements of fact are believable.
If the statements of the insured do not appear credible or the physical
evidence does not support the insured’s rendition of the facts, a thorough
investigation will either prove or disprove the insured’s statements. Every statement of fact should, if possible,
be corroborated. Some adjusters, when
faced with what they consider a “small loss” will close the file quickly as
possible and ignore incredible facts, overvalued property, or facts that would
take the claim outside coverage.
Fraudulent claims or claims that are excluded are not necessarily large.
Provide Prompt Service
The insured required prompt
service. Failure to provide prompt
service in a loss will make it impossible to complete a thorough investigation,
to obtain a complete scope of loss, and to verify whether subrogation or
salvage exists. An insured with a small
claim requires the same prompt service as an insured with a large claim.
Clarify the Final Details of the Loss
An adjuster must ensure that the
payment draft or check is issued to proper parties. Each named insured, mortgagee, or lien holder
must be named on the draft or check. The
check must protect the interest of the insured’s public adjuster or attorney
and the insured’s contractor. Every
person with an interest in the money paid to indemnify the insured should be
named on the payment unless they specifically, and in writing, ask that they
not be named.
The adjuster must obtain authorization
from the insured to pay repairmen or to include their names on the settlement
draft. Repairmen are not parties to the
insurance contract. They can only be named
on a settlement check or draft if the insured has signed an authorization asking
the insurer to name them.
Establish Whether the Property was
The adjuster is part of the
underwriting function. Since the
adjuster sees the property at the time of the loss, he or she is the best
source of information that an insurer has concerning the insured and the
File Questionable Risk Reports
If the adjuster sees a serious danger
of future losses when the property is inspected it is the adjuster’s duty to
report what was observed to the underwriter so that the danger can be evaluated
and avoided. For example, an adjuster
visiting an insured’s home concerning a water leak learns that the insured
keeps five vicious dogs who attempted to remove the adjuster’s leg at the
ankle. A questionable risk report should
be filed to advise the underwriter of the danger of liability claims in the
future. Likewise, if the adjuster is
investigating a slip and fall on the insured’s property and sees that the roof
is deteriorated and bound to leak in the next rain he or she should file a
questionable risk report to advise the underwriters of the potential risk of
Obtain the Proof of Loss
The adjuster must advise the insured of
his or her obligations under the policy, including the obligation to submit a sworn
proof of loss within 60 days of the date of the loss. The proof of loss is a key document that
should be obtained and executed under oath by all insured on every loss. A proof of loss is the sworn statement of the
insured required by the conditions of the policy of insurance. It sets forth the insured’s knowledge and
belief as to the date, time, and cause of the loss; the encumbrances on the
property, the persons with an interest in the property; the value of the
property; the amount of loss; and the amount of claim.
Adjusting the Commercial Loss
The building and personal property coverage form is the simplest
form available for use in insuring specified building and contents. It insures the insured against the risks of
loss to the building from the perils that the insured chooses from those
specified in the causes of loss form.
The adjustment of a commercial loss is performed in the same
manner as any other property loss. The
difference is one of tone rather than substance. Adjusters who usually deal with a business
entity, and its officers or employees, rather than an individual find claims
handling is easier. The adjuster has
knowledge of the business and the people who operate the business. Familiarity and a good working relationship
over a period of months or years benefits both the insured and the insurer.
A fire can be devastating for a business if it is not rapidly put
back to work after a loss. The adjuster
must recognize this fact and act quickly to complete a fair and thorough investigation. To adjust the commercial property loss the
adjuster must be familiar with the coverages.
An adjuster must always be absolutely certain which endorsement apply to
the insured. The adjuster reviews the
loss notice and re-reviews the coverages to ascertain which coverages apply to
the type of loss reported. He or she
makes immediate contact with the insured so that he or she may inspect the
If there is a potential loss of earnings it is important to
collect as much business documentation as possible so the history of the
business can help to determine the amount of loss. Loss of earnings vary greatly. It is important that the terms and conditions
are explained to the insured and that the adjuster should collect documents for
analysis, possibly by a forensic account, including:
years of profit and loss statements and balance sheets
account statements and canceled checks;
continue, leases, contracts, and any
other relevant business documents; and
business information is kept on computers, the software used and a backup copy
on a disk.
Adjusting Condominium/Unit Owners Losses
When determining coverage on a unit owners policy, coverage is
determined by reviewing the associations’ bylaws/master deed and referring to
the unit description (unit owner) and the description of the common elements
At present time, a majority of Mercer’s association policies are
written under the MMP107 (Single Entity Endorsement) or the MMP108 (Bare Walls
Endorsement). If the policy contains
either one of these endorsements, then the endorsement over-rides the
description of the common elements, when adjusting a Condominium Association
Reservation of Rights/Non-Waiver Agreement
If, at any time in the investigation, it appears that the loss is
suspicious, that the co-insurance clause may come into effect, that there may
be a penalty under the reporting form, or that a condition or warranty in the
policy may have been violated by the insured, the adjuster must immediately ask
the insured to sign a non-waiver agreement.
This is a mutual agreement between the insured and the insurer that
nothing done in the investigation of the claim will act to change the positions
of the parties or waive any of the rights either party has under the
contract. If the insured refuses, the
investigation must be stopped until the adjuster can deliver a reservation of
rights letter to the insured. The investigation
continues pursuant to the reservation of rights. The non-waiver agreement and the reservation
of rights letter are equally effective for maintaining the status quo while the
investigation is being conducted; however, the non-waiver is preferred because
it is a mutual agreement between the insured and that insurer while the
reservation of rights is a unilateral statement to the insurer.