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Sibling Rivalry: Adjusters, Attorneys Form Delicate Symbiosis

By Jay Gallagher

Sometimes partners, sometimes adversaries, attorneys and adjusters have a long history of mutually beneficial competition. Despite the differences between the two fields, many professionals on both sides swap jobs in mid-career.

For better or worse, insurance adjusters and attorneys are inexorably intertwined in a symbiotic relationship. Both professions can trace their roots to the same "family" - the law - but, like rival siblings, their kinship is oftentimes mercurial.

It's true that there is generally no love lost between adjusters and plaintiff's attorneys because of the adversarial nature of their duties. Surprisingly, there's even a tendency for adjusters and defense attorneys to be somewhat disdainful of each other, despite the pretext of being on the same "team."

The reasons for this are many - beyond the obvious adjuster penchant for telling stereotypical attorney jokes and the attorney's reputation for being condescending when dealing with adjusters - and they lay much deeper than you might think.

To the casual observer, there is a marked similarity between the two fields. There are legal issues that adjusters have to understand in the handling of claims. Adjusters also need to keep up to date with legislative changes, interpretations of law at the appellate level, verdicts of note and the latest trend of awards in his venue. The differences only become apparent when studying the common history of the now divergent careers and why they were bifurcated earlier this century.

But just what is it, exactly, that sets the two similar careers apart? Is there any truth to the oft-repeated adjuster lament that there's really no knowledge difference between a very experienced casualty adjuster and an attorney? On some levels, that statement might have some relevance, although for the most part it's self-serving, if not outright specious. The further you get into your claims career the more obvious it should be that the differences in the two fields are significant.

No 'pseudo-lawyer' adjusters

All too often, I've heard adjusters make ill-considered comments along the lines of, "I'm just an attorney without a law degree." Because of the many similarities between lawyers and adjusters, it's easy for new adjusters to presume, erroneously, that they are "pseudo-lawyers," with one foot in each field. This is often a dangerous assumption.

This is especially true when adjusters compare their responsibilities to those of attorneys handling insurance defense. Adjusters must handle claims and prepare files as if they were going to trial. When looking at substantive tort law, adjusters are forced to think like defense attorneys - gathering evidence, documenting damages and, to some degree, contracting law as it pertains to the policy contract.

While it's no exaggeration that adjusters who handle litigation files develop some savvy about "legal" issues, they simply don't acquire the broad base of knowledge that going to law school mandates. Some adjusters will think about civil procedure, summary judgements and other relevant legal issues, but the fact is they don't have to consider all of the issues that concern attorneys.

"The significant difference between the adjuster and the lawyer is that the lawyer is clothed in some additional authorities that the adjuster doesn't have," says William P. "Bill" Crews, a Natchitoches, La., defense attorney and former adjuster. "An attorney can, in his discussion on a claim, advise the other party that they've chosen an untenable position and, if they can't settle amicably, that litigation is the next step. The attorney can further advise as to his experience in similar cases and what the outcome has been. An adjuster just can't go that far."

Adjusters don't generally have to develop an in-depth knowledge base about topics such as evidentiary and procedural issues, criminal law, family law, wills, successions, probate, real estate or taxes. But any adjuster who stays in the business long enough will pick up a smattering of "legal training" through the preparation of claim files for trial and by handling claims that become the basis for lawsuits. There are obvious examples of the application of laws that come to mind through the adjuster's working with the policy contract, negligence statutes, damages, evidence and a host of other claim-handling issues.

There are any number of conferences and seminars devoted to legal issues that pertain to the adjustment of claims, and diligent adjusters will endeavor to learn as much about the legal aspects of the job as possible. (Often, not-so-diligent adjusters are also required to do this by their diligent bosses.)

That's not to say, however, that an adjuster can get the equivalent of a law degree through osmosis. There are many people handling claims who have law degrees and a number of attorneys who started out as adjusters, but adjusters who consider themselves "underpaid lawyers" do a huge disservice to themselves, their companies and their profession.

Aside from the educational requirements, the two professions have very different areas of responsibilities. The attorney is an advocate for the client, and, accordingly, advises the client on the client's best interests. An adjuster is a fiduciary agent, who must do what's equitable for all parties involved in a loss. If an adjuster takes on the role of advocate for an insurer, an insured or a claimant, he engages in the unauthorized practice of law.

It's precisely this "art of advocacy" that separates the two fields, according to a long-time adjuster now managing in-house counsel for a major insurer, and it's probably the advocacy role that causes the enmity between the two professions.

So, in some respects, an adjuster actually is like an attorney, but without the prime duty that makes an attorney an attorney - advocacy. The adjuster is very similar to a paralegal in the scope of knowledge that's required to be proficient but with a completely different - some might say "higher" - set of duties that go along with being a fiduciary. An adjuster who is an advocate breaches the profession's fiduciary responsibility, just as an attorney who tries to do what's fair sometimes fails to look after the best interests of his client.

Two roads diverged

There was a time, however, when the two jobs were so similar that the adjustment of claims was considered to be the sole province of lawyers. An adjuster who was a layperson rather than an attorney was an exception to the rule. Many years ago, it was perfectly acceptable for a recent law school graduate to take a position with an insurance company as an adjuster, which was considered to be respectable employment for an attorney. For many, adjusting became a stepping stone to becoming an attorney. The stories of adjusters going to night school while working for an insurance carrier, or saving money so that they could quit handling claims and go to law school, are voluminous. Crews, for example, gave up his 15-year independent adjusting career to work as claims manager for a New Orleans-based firm while going to law school.

Even though I'm only in my mid-thirties, I can remember handling claims for some old-time attorneys in the mid to late '80s, who had retired from the practice of law and were handling claims to have something to do. (If there's any doubt about the cross-pollination of the two professions, consider the career path of the late Pat Magarick, adjuster, attorney, author and contributing editor to Claims, who was remembered in a September 1998 column and profiled in a December 1996 feature.)

Gradually, the adjuster-attorney relationship began to change. In the late 1930s, the American Bar Association began to recognize that there was an increasing number of non-lawyers who were handling claims. By 1938, the ABA appointed a Conference Committee on Adjusters, which, after some study, adopted a "Statement of Principles" on Jan. 8, 1939, governing what adjusters could and could not do. The statement generally confined an adjuster to claim investigation, discussion of claim merits and the settlement of claims. Adjusters were officially barred from advising claimants as to their rights, drafting or modifying releases, or engaging in any other activity that borders on the practice of law.

Though the ABA ultimately saw nothing wrong with laymen handling claims, not all attorneys agreed, as laypersons were seen as encroaching on lawyer territory and allowing them to handle claims "gave away" work that would otherwise have supported lawyers.

In Louisiana, for instance, the issue was hotly contested into the 1950s, when the legislature threatened to get involved and prohibit laypersons from handling claims, Crews says.

Crews says that part of the problem stemmed from the fact that adjusters who were also lawyers often unofficially ventured into the practice of law while handling claims. There was a general concern that a layperson adjuster might do the same, but without the benefit of the knowledge and advocacy role, thus opening up opportunities for abuse by less-than-scrupulous adjusters.

"Lawyers were very prevalent in the claims business back then," says Crews. "I had a partner in my independent claims adjusting firm who was a lawyer, and he handled his claims as if he were representing the insurance company as their attorney. I was forever having to correct his reports to edit out his dispensation of legal advice, and he was forever altering releases ex parte and, in general, practicing law. It really took an awful lot to reign him in and hold him down to simply adjusting the claim.

"That has always been, and will always be, I think, a sensitive issue," Crews adds. "Every meeting we had, this issue of adjusters practicing law came up. Often we had speakers come in from the Louisiana Bar Association who came in and spoke to us about the relationship between lawyers and insurance adjusters as it relates to the actual practice of law."

By the late '50s and early '60s, concerns over adjusters acting as lawyers helped drive the two professions further apart. The practice of attorneys handling claims began to go out of vogue and lawyers began to eschew adjusting careers as being "beneath" them. This opened the door for an increasing number of laypersons to enter the adjuster ranks, and as more and more laymen became adjusters, the number of attorneys adjusting claims dropped dramatically. By the late '70s and into the '80s, the number of attorneys handling claims were as rare as hen's teeth.

Readjusting to a new role

Fast-forward to the late '90s: With downsizing, less conspicuous consumption, a return to family values and - perhaps most crucial - an over-abundance of law school graduates, a definite trend toward an increase in the number of lawyers taking adjusting jobs materializes.

But, as with any new endeavor, adjusting is not a cake walk for former lawyers. They usually find that there are just as many headaches, problems and obstacles as in their previous jobs. The number of hours required to do the job doesn't vary that much among a defense attorney, a salaried or an independent adjuster. Rarely do those professions allow a "normal" work week.

Many attorneys are surprised to find that they have to be more accommodating as an adjuster and the experience opens their eyes to a gamut of issues not previously considered. Not the least of these issues is the lack of authorization from the court to conduct investigation and discovery. Accordingly, many attorneys who make the jump to handling claims find there's a little more difficulty to getting a claimant or witness statement than they originally thought. "As an attorney, you have the full weight of the law behind you with a subpoena or a court order when you want to preserve someone's testimony," says Barry Ward, a former attorney now handling claims for The Littleton Group's Baton Rouge, La., offices.

"As an adjuster, you have to be a lot more courteous, and you have to be a little less direct, since the witness is under no direction to cooperate with you," Ward says. "If he doesn't like your questions, he can alwaysleave or refuse to answer them, while an attorney taking a deposition knows that the witness has to cooperate with him. He's not as concerned about staying in the witness's good graces since the witness is under oath."

Ward says that he recognizes pertinent legal issues as he's investigating his claims, but says that he refrains from giving a legal opinion. "The work is virtually the same," he says. "I prepare a claim file as if it's going to trial, but I'm not the guy taking it to trial and I have to remember that I'm not representing the client in a legal capacity. So if I do point out something that I see as being relevant, I make very sure that I'm not giving an opinion, but merely educating the client that the issue could become important if the case goes to trial.

"I'm also very careful not to quote cases that I'm familiar with except to talk about general issues," Ward adds. "The specifics of strategy is best left to the attorney representing the client and not the adjuster in the field."

Ward says that the experience as an adjuster is definitely a plus for him and would serve him well if he were to ever decide to return to the law. "You get a greater feel for the work that goes into the work-up of the file and I've found that because I don't have the power of the subpoena, I have to be more skillful with my statement techniques in compelling the witness to talk about what happened," he says. "Combining subpoena powers with what I've learned in the day-to-day investigation of claims and taking statements would be a definite plus as an attorney."

Ward says that there is an added benefit when negotiating with an attorney. He often lets them assume he has no formal training and only mentions his law degree after they've tried to take an untenable position. "I was amazed at some of the stuff I've heard from lawyers," Ward says. "I definitely catch the same attitude from attorneys that ever other adjuster does. At times, it's rather frustrating. But, it's funny, actually, to watch their reaction if I'm catching an attitude from one of them and I decide to let them know that I've practiced law."

The benefit of prior experience is not a one-way street in the cross-over from attorney to adjuster or vice versa. Crews says that his years as an independent adjuster have served him well. "I have absolutely no question that it significantly benefitted me to have been a claims adjuster before going to law school," he says. "I was fortunate in that I handled multi-line claims ... but the greatest benefit was in tort law, where I had handled so many tort cases, knowing generally, broadly speaking, the operating law that applied. I thought it was tremendously beneficial to the law endeavor."

Crews also says that besides the advocacy role, what primarily separates the two fields is the power that an attorney, as an officer of the court, has when handling a lawsuit, plus the other tools available through organizations such as the National Defense Institute, the ABA and other entities that aren't readily available for adjusters.

"[The attorney] has at his disposal a lot more things than the adjuster has - but that the adjuster probably should have - but beyond that, in the mechanics of handling a law case and a adjuster's file, there's just not a whole lot of difference from opening a file, concluding the file by way of settlement or compromise, than there is in adjusting," Crews says.

A question of ethics

And, regrettably, with that small difference, there has been a very similar decline in standards within both professions in recent years, according to Crews.

"To be honest with you, the standards of both professions, professionally, ethically and even morally, back in the '50s and '60s, is quite a contrast to what it is today," Crews says. "And the change has been for the worse." Crews was very involved in the formation of the Louisiana Claims Federation and was its first president. The now-defunct federation once oversaw the creation of an adjuster code of conduct, similar to the ABA's Statement of Principles. "In my earlier days," he says, "I was awfully proud of the standards of the adjusting world because I thought we had really top-line folks in that business. Now, we've lowered that just like we have [in] law. "You have good claimsmen handling files that are more competent than many attorneys, and you have adjusters who don't warrant the confidence that they've been given to handle claims," says Crews. "You have incompetence in both fields. As long as you have human factors involved, you're always going to have this."

Despite the divergent nature of the two professions, however, there's much that adjusters and attorneys can learn from each other to help raise the professional and ethical standards of both fields. The job of claim handling can only benefit from prudent adjusters endeavoring to gain as much understanding about the law as possible, and from diligent attorneys examining what a front-line adjuster does to gain more insight into how events will unfold in a court of law.

Jay Gallagher is branch manager for The Littleton Group's Shreveport, La., office.


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