Prejudgment Interest: Compensating Insureds for the Time-Value of Insurance Proceeds

PART TWO OF A FIVE-PART SERIES
by Matthew Fortin

Given that the insurer’s receipt of a sworn proof of loss prerequisite to the trigger of an insurer’s payment obligation, the question arises – what if the insurer never requests one? While in practice claims both big and small are paid every day without the insurer requesting, or the insured submitting, a proof of loss, it is nevertheless the Policy’s language which a court would rely on when determining when payment was due.

With that in mind, an adjuster can create a favorable record during the claims process to fill the void where a proof of loss is supposed to be. First, provide the insurer with documentation of the scope and extent of the insured’s damages as soon as possible. When formal proof of loss is neither requested nor received, a court trying to determine when the payment obligation was triggered will ask if and when the insurer received the substantial equivalent of a completed sworn proof of loss. Thus, in lieu of the submission of a sworn proof of loss, the insured can point to the date when the insurer had all the information it should have needed to make a determination as to its payment obligations.

Adjusters can also ask the insurer or its representative in writing what else, if anything, it needs from the insured in order to reach a claim decision; a communication that can be repeated as necessary and appropriate. By taking this initiative, you will have created a record revealing one of two outcome for any future prejudgment interest analysis. If the insurer is stirred to action to assemble the information it needs in order to arrive at a claim decision – great, but it will also mark the insurer as the reason for the delay and the insured as the catalyst for its progress. Any other response from the insurer will serve as an indication that nothing further is required from the insured in terms of what the insurer would normally obtain via a sworn proof of loss and accompanying documentation.

In this way, in lieu of a proof of loss an insured can create a favorable record of the adjustment process, establishing an early date at which the insurer had all the information it needed to reach the decision to pay the amounts eventually found due or, alternatively, that any delay in the insurer’s possessing itself of that information was its own fault.