ew templates exist to guide adjusters here. That said, here is an attempt to fill that void, offering   action steps in place of bromides through the following nine tips on the contours of such ccoverage investigations:

1. Read the entire policy! Not to overlook the obvious -- read the policy. As some insurance specialists say, “RTFP” – “Read the Freakin’ Policy!” Not a sample, not just the Declarations page and not just the body of the document without endorsements. Claim handlers should review the whole policy and reference that in the claim file notes. If the form is post-2006, check to see if a Virus and Bacteria exclusion appears. Look at how the policy defines key terms such as “property damage.” For third-party liability claims, check how the policy defines “occurrence.” Consider too the wording of “pollution” or “communicable disease” exclusions. (Deconstructing policy forms to determine coverage -- or lack thereof --arising from Covid-19 business interruption claims will likely occupy courts for years to come. A discussion of these issues is beyond this article’s scope.) 

2. Contact the insured. An interview with, or a statement from, the insured is warranted. Insurers who deny coverage without ever having at least spoken with the policyholder are open to bad faith claims based on deficient investigation.

3. Review relevant state unfair claim settlement practices act and regulations. Although many have common features from state to state, certain jurisdictions have detailed requirements for time limits for acknowledging claims, time limits within which insurers must accept or deny, time limits for periodic policyholder updates if insurers lack sufficient information to accept or deny coverage, etc. Now is not the time to run afoul of state unfair claim practice regulations, so continuing education refreshers for claim staffs are essential.

4. Involve the intermediary. Discuss the file with the insurance agent or broker. If the adjuster is leaning toward a “no coverage” stance, rehearse this with the insurance intermediary. Determine if they have a different perspective. The adjuster is not seeking approval from the agent or broker, but pays them the courtesy of knowing the adjuster’s thinking.

An agent or broker might raise an issue or mention a fact that the adjuster should weigh before reaching a final decision. Or, the agent and broker may (perhaps reluctantly) concede that the adjuster’s coverage analysis jives with the policy. Or they may be agnostic and defer coverage decisions to the adjuster.

This consultative step is also useful by making the insurance agent or broker part of the process, paying them the courtesy of advance notice if they get an irate call from their policyholder saying, “I thought you sold me full coverage!”3 In fact, the adjuster and insurance intermediaries
may agree that the latter will provide advance notice to insureds regarding looming (non)coverage notices.

5. Scrutinize the local government’s specific shut-down orders, particularly in business interruption claims. The wording of the shut-down order may be highly relevant, to the extent it tracks or differs from policy language that grants or excludes coverage.4

6. Engage an environmental engineer to assess contamination or lack thereof. If policyholders seek coverage due to the alleged presence of the Covid-19 virus on their property constituting “damage to property,” insurers pondering denial may test to see if an insured’s property has coronavirus trace elements. The findings of such tests and samplings may inform
coverage decisions.

7. Contact the underwriter who wrote the policy, not for approval or blessing, but to see if any blind spots afflict the adjuster analyzing coverage. If an underwriter disagrees with the adjuster’s rationale, that is a red flag the adjuster should weigh. If the underwriter concurs with the adjuster’s rationale for denial, record that in claim file notes.



About the Author

Kevin Quinley CPCU, ARM, AIC, AIM, Are, RPA

is  President of Quinley Risk Associates in the

Richmond, VA area. A CLEW IG member, he

maintains an active nationwide expert witness

and claim consulting practice on issues of

claim-handling, bad faith, extracontractual

liability and

adjuster standard of care.

You can reach him at kevin@kevinquinley.com.

8. Seek outside coverage counsel’s input. This will incur expense, but not doing it may incur more expense in the long run by inviting bad faith claims that no legal opinion vetted the adjuster’s coverage analysis. This is not to say that using outside counsel is required, necessary or insurance claim industry practice to seek coverage opinions on every file. However, given the contentiousness of Covid-19 claims and the certainty of litigation, prudent adjusters will seek the advice and counsel of a coverage attorney before making final decisions. It may be an investment in due diligence and money well spent!

9. Roundtable the coverage issue. This includes a claim supervisor, perhaps a claims manager and peer-level adjusters. The old saying that “two heads are better than one” applies. This “stress tests” the adjuster’s coverage analysis. It minimizes the odds of analytical blind spots which could lead adjusters to shaky denials. This does not mean that every coverage issue warrants a roundtable, or that not convening one equals bad faith. What insurers seek is a protocol to inoculate themselves from bad faith claims, just as pharma companies scramble for a vaccine to protect citizens from coronavirus. Sound coverage investigations are not necessarily the product of robotically ticking off boxes from a checklist. However, checklists promote consistency in handling Covid-19 coverage investigations. We temper the preceding suggestions with the fact that adjusters should tailor investigations to the exigencies of each particular claim. These tips do not constitute legal advice. Nor do they suggest that omitting one (or more) of the steps automatically equals bad faith.

Managing risk is an insurer’s core competency. Embracing and adopting the preceding steps can be part of each insurer’s risk management strategy to inoculate themselves from the “bad faith virus” that Covid-19 claims may otherwise deliver.


1 https://www.naic.org/store/free/MDL-900.pdf.

2 Big Onion Tavern Group LLC et al. v. Society Insurance Company , United States District Court for the Northern District of Illinois, Eastern Division, (No. 1:20-cv-02005).

3 Like it or not, many observers predict that a wave of lawsuits targeting insurance agents and brokers for failing to procure appropriate coverage for policyholders and/or misrepresenting the nature of the coverage that the intermediary placed for the policyholder/ client. (See, for example https://www.jdsupra.com/legalnews/when-insurersdeny- claims-brokers-are-55803/.)

4 See “Language in Emergency Orders Gives Ammo to Plaintiffs in Business Interruption Suits,” Claims Journal, 5/13/20, https://www.claimsjournal.com/news/ national/2020/05/13/297037.htm.