5 Deposition Pitfalls for Claims Adjusters Involved in Coverage Cases

An adjuster’s deposition, if relevant and well-prepared, can provide the backbone of a strong defense, assuming defense counsel and the adjuster can avoid some deposition traps. A few of the common pitfalls to avoid are described below.

Pitfall #1: Is The Adjuster’s Deposition Relevant or Necessary?

The first question should be whether the adjuster’s deposition has any valid purpose. A policyholder’s attorney may request the deposition of the claims adjuster in a coverage case even though many insurance coverage cases do not merit an adjuster’s deposition. In many states, the duty to defend pertains to a question of law, specifically whether the complaint gives rise to a duty to defend.

Many states adhere to the “four corners” rule that allows the judge to compare the insurance policy to the “four corners” of the complaint to determine whether there is any duty to defend. There is little reason for an adjuster to testify in that regard because any such testimony likely would be irrelevant or inadmissible. An adjuster should ask defense counsel if the deposition is necessary or appropriate in such circumstances.

The same could be said for the duty to indemnify. Usually the parties have investigated the relevant facts in the underlying case, which may have reached trial or settlement. There may be trial testimony or, if the case settled, depositions and written discovery that provide the relevant facts. If the facts are undisputed, then there may be little that an adjuster’s deposition may add to the case.

Attorneys tend to allege an insurer’s “bad faith” as a means to depose the adjuster because improper claims handling is a central component of such cases. If the adjuster did not properly handle the claim or committed some egregious act, then the adjuster’s actions may provide fodder for the bad faith case. But if there is no coverage, then the adjuster’s actions may not matter. Even if the adjuster mishandled the claim and committed “bad faith,” such actions arguably would not “cause” damages if there was no coverage in the first instance. An argument may exist, depending on the jurisdiction, that there is no need for an adjuster’s deposition until coverage has been determined.

Pitfall #2: Lack of Preparation

Assuming the deposition proceeds, opposing counsel may inquire about the actions or decisions of other persons within the company who may have touched the claims file. An adjuster may know his or her own actions with respect to the file, but perhaps is not familiar with those of the initial intake personnel or a prior adjuster.

An opposing attorney may try to “trap” an adjuster by asking questions that elicit one approach even though a co-worker may have taken another. Imagine that an adjuster admits to always obtaining certain information from the insured and even mentions that it may be company policy to do so. Then the attorney provides an email from a different adjuster contradicting that testimony. Such contradictions, even if irrelevant, seriously challenge the adjuster’s competence and truthfulness.

The solution is to know the file intimately. A good deposition follows good preparation.

Prepare an outline or timeline of the events that transpired and be comfortable with it. Review all prior testimony in the case and be prepared to tackle any inconsistencies. The adjuster should be fully prepared to handle questions pertaining to the entire file, including actions taken by others in the company. All emails, documents and policies should be reviewed. Remove and redact any discussions with counsel.

Defense counsel and the adjuster should work together to develop a common theme at the deposition. Even if the file was not handled perfectly, which is common, a good theme and timeline can preempt potential problems. If there was an error somewhere along the chain, be prepared to explain it and directly address it.

Pitfall #3: Claims Manual

Another common deposition trap is for opposing counsel to ask questions about the claims manual. Often prior discovery requests have sought the claims manual or guidelines and, if all goes well, defense counsel has addressed the issue. But sometimes the issue surfaces for the first time at deposition.

Insurers may be required by state regulations to maintain insurance policies and procedures. Often adjusters fail to produce any policies or state that it is “within their discretion and training” about how to handle a claim. Beware of such actions. Company guidelines now may be available on the internet or on the company’s external website. Sometimes the company’s marketers post or provide copies of policies or make statements that may contradict an adjuster’s usual practice. Read the website and check with counsel about any policies.

Prepared attorneys now search the internet and many court websites to check various company procedures or practices. A case in New York may involve the same insurer and New York attorneys may have attached company policies and procedures that become relevant to an adjuster handling an Ohio case. Defense counsel should check the various databases for such inconsistencies, but an adjuster is well-advised to discuss the matter with general or in-house counsel to see if any internal policies or procedures have been produced in other cases nationwide.

Pitfall #4: Insurance Regulations

Another common pitfall arises from benign questions that surreptitiously invoke insurance regulations. Common questions pertain to documents that the company is required to keep, but an adjuster may not know that regulation or have taken the time to comply with it.

One example may be a question pertaining to other bad faith complaints against the insurer in the last five years. Perhaps a regulation requires the company to maintain those records and the adjuster responds to questions by stating that the company does not have such records. The adjuster has admitted to violation of a regulation, which may not even be true.

Be familiar with any insurance regulations in the relevant state. Ask defense counsel.

For example, if the case involves cancellation of an insurance policy, review any state insurance regulations as to the proper method of cancellation and any necessary documents that the company must retain. Or if the case concerns bad faith, then review any regulations or statutes as to unfair insurance practices.

Pitfall #5: The Video Deposition

Opposing attorneys often prefer to videotape the adjuster’s deposition because it adds tension to the deposition. An adjuster is well-advised to ask defense counsel prior to the deposition if there will be video.

Preparation is key. The adjuster will have to be prepared in the same manner as trial. Dress should be professional. The other general trial rules apply, such as maintaining eye contact, remaining calm, correctly enunciating words and providing slow, complete answers.

Jurors may dislike insurers from the start so any slight adjuster error reinforces this view. An adjuster who appears forthright, calm, confident and engaged can save a case.