One of the most important functions of my job is to be a sounding board and offer advice and counsel for my employees. Most have many years of experience although some have only a few years under their belt. I receive a varied batch of questions on a daily basis although many are being asked by different staff members about the same subject matter. For this reason I’m going to start addressing the most common questions here, along with my take on each.
Q. When it is appropriate or necessary to secure a Non-Waiver agreement?
A. This is an easy question to answer, but it takes much verbiage to properly explain. It pertains to insurance contract law, and can arise in any number of different circumstances. Essentially the logic behind this agreement is case law as it pertains to “estoppel”. If you aren’t familiar with this term, don’t sweat it. What it refers to is the term used by courts to determine when and where an insurance carrier can be stopped or barred from denying coverage to an insured.
This can occur for a number of reasons, but primarily when it is determined that the carrier had knowledge that either coverage would not apply to the claim circumstance, or should have known that coverage may not apply to a claim circumstance, and took actions thereafter without giving the insured proper notice that they saw lack of coverage as a serious possibility.
The courts generally view this as improper and if that is their opinion they are likely going to stop or bar the insurance carrier from denying, what may have otherwise been a perfectly good reason to deny coverage for a claim.
The method to prevent this from happening is two-fold. First, you must examine within a reasonable means, whether the claim which is being presented, is likely to be denied for coverage for a legitimate reason, and that you have some knowledge of, at that time. Once you, the claim professional, and representative of the insurance carrier, see the circumstances as one where a denial is probable or likely, you have a duty to inform the insured of this. The methods of how to inform the insured can vary, but there must be evidence that you have done your best to inform the insured that you are looking into the possibility of a lack of coverage, along with the reasons you see for this potential denial of coverage.
The logic is that if the policyholder knows there is a good chance that his policy may not pay for damages which he has, then he (or she) are unlikely to start incurring more costs in repairs, etc., that he (or she) may not recover. If you don’t notify the insured, and he (or she) does start incurring costs under the assumption that coverage exists, the the courts would likely view this insured as having been treated unfairly and may bar the carrier from their denial of the claim.
The rule of thumb is that as soon as you, the professional, start to recognize that this circumstance is probable, you should immediately present the insured with a non-waiver agreement, including some reasons therein for your coverage “concerns”.
EXAMPLE: If you are adjusting a claim for water damage to a home due to a frozen and burst water line. When you arrive and start making inquiries you learn that a.) the home is unoccupied and has been for several months, b.) the owner admits that they did not check and make sure heat was turned on during cold weather.
There are probably things you need to do before you can determine whether these issues will exclude coverage, or not, meanwhile the insured needs to know what to do about cleanup, etc. In this circumstance you need to present a Non-Waiver to the insured for signature and explain to him what issues concern you.
This form states that neither the rights of the carrier or the insured are going to be violated by you (the claim professional) in continuing in your investigation, estimating, etc., nor will the rights of the insured be compromised by their cooperating with you in your investigation, estimate, etc. Both parties retain their rights and duties going forward.
This document is your proof that you have had this discussion with the insured and that you can proceed as you normally would on the claim, without the concern of having a court rule that a later denial was improper and prohibited because you hadn’t explained to the insured that his claim may not be covered.
If the insured will not sign the Non-Waiver agreement, there are other options, although neither is ideal.
The first is to stop any further action, leave the premises, and prepare a formal Reservation of Rights letter, which spells out the same thing. This letter is then sent to the insured via certified mail, with return receipt requested. This way when the letter is delievered, you have proof the insured has been notified of the issue at hand and can then proceed as you would as if the Non-Waiver has been signed.
Another option that we engage in from time to time (with carrier client permission) is when the insured refuses to sign the Non-Waiver, we give the insured the completed unsigned Non-Waiver, and then write clearly in our notes the date and time of your discussion with the insured and that they refused to sign the form. Also, kindly inform the insured that due to the coverage circumstances, you would like to complete your job while on site, but with the understanding that you cannot answer any coverage related questions for them, since there are issues at hand, and they have refused to sign the Non-Waiver, which acknowledges your coverage concerns and that of the carrier. If the insured is okay with this, then you can complete your work on site, then after returning to your office, you can then confer with the client (your supervisor, etc) to determine if a Reservation of Rights letter is necessary at that time before proceeding.
The key point in all of this is that you have a duty to inform the insured when an issue or circumstance exists that may indicate a denial of coverage is either probable or likely to you, or should be evident to you, and that if you don’t document you have informed the insured, a denial may not be allowed. You are a professional and thus have a very high duty to recognize these coverage areas quickly when doing your job. The courts are not going to view kindly your excuse that you didn’t notice a problem, if it seems to have been something a professional would have normally recognized.
This may be confusing and circumstances may arise where you aren’t sure if a Non-Waiver is necessary or not. My advice is always, when in doubt, present the Non-Waiver.