Marine Investigations

The Insurance Investigator

Marine surveyors hired by insurance companies usually end up playing a dual role. First comes the investigation, and if the loss proves to be covered, then follows an assessment of damages.

In neither case is he acting as an agent of the company, but as an independent investigator and advisor.

The insurance company is his client, but his role is not to represent the client’s interest in any way, only to perform the service requested.

When hired by an insurance company to investigate a loss, the insurance company expects him to act without prejudice to the various interests involved in the case, which may be more than one or two, as when a third party is involved.

His job is to discover the truth. As far as the investigation goes, his client is neither the company nor the insured; his client is the truth. That is his job and that is what the insurance company expects him to discover, no matter how it turns out.

The surveyor’s job is to provide the claims adjuster with the most accurate information possible by which the adjuster can come to a fair and proper decision. He should have no other motivation.

Knowledge of Insurance Contracts

Over the years there has been considerable debate over the question of whether the surveyor should be conversant with the insurance policy, its coverages and limitations.

Some say that the surveyor should go into an investigation completely blind as to coverage so that he is not influenced in any way by what he knows about it.

The other side of the argument is a bit more persuasive, for if he isn’t familiar with the coverage, he may end up failing to address certain issues simply by virtue of being unaware that they exist.

Historically, surveyors have been highly knowledgeable about policy coverages, a fact that has served their clients well.

Issues such as what constitutes latent defects, wear, tear and gradual deterioration, what constitutes inherent vice, and issues of internal versus external causation will prove critical to the investigation.

To this end, surveyors often attend seminars that expressly deal with issues of coverage, and more importantly, how the courts have interpreted a variety of cases involving these issues.

Problems can only arise when the investigator attempts to usurp the role of the claims adjuster, as when he becomes emotionally involved in the outcome and attempts to steer the outcome in one direction or the other.

If the surveyor maintains strict neutrality, as he must, his knowledge about coverage’s will have no impact on the outcome other than to insure that all aspects of the case have been covered.

Roughly 30 percent of all investigations fail to yield conclusive evidence.

One of the more critical skills an investigator develops is the wisdom to know when to terminate an investigation because it isn’t producing results; even more importantly, the ability to know when the available evidence is insufficient to support a theory of causation.

Every surveyor is faced with clients that have cost restraints and that are unwilling to spend larger sums in search of elusive evidence. When unfamiliar with a client, as with a new client, this is an issue that is best raised at the outset.

The issue of doubt normally accrues to the benefit of the insured; if one can’t prove that the cause of loss is not covered, then it is covered.

Note that this is not the same as saying that undiscovered causes are covered. Some insurance contracts are worded in such a way that coverage does not apply if a cause of loss can’t be determined.

This is all the more reason that the investigator should discuss these points with the client before proceeding.

Knowing how far you can go and how much you can spend is important to setting investigation priorities, particularly when investigations threaten to be complex and time-consuming.

In nearly all cases, the surveyor ultimately has to make a judgement as to the strength of the evidence he has collected.

For example, let’s say that a particular investigation is producing some evidence that the cause of loss is likely to lead to a denial of coverage.

His client, usually a claims supervisor, is usually not an expert and will therefore rely upon the surveyor to make a judgement as to the strength of his evidence.

No claims supervisor wants to issue a coverage denial based on weak evidence, for this is likely to initiate a legal challenge which is something that most insurance companies seek to avoid.

Thus, he or she expects the investigator to evaluate the strength of evidence and advise him accurately. For more about the strength of evidence, see Chapter Three.

In fact, the experienced surveyor will run across many instances when his client either has little or no knowledge about boats, let alone the intricacies of technical and legal issues.

In such instances the supervisor will be relying on the surveyor’s every word and he will ultimately be making coverage decisions by default, whether he intends to or not.

This places a heavy responsibility on the surveyor to make the right decisions because, if he makes the wrong one, ultimately the ungainly bird of consequence comes home to roost on his shoulder, as when his advice comes to be tested in litigation and is found to be wanting.

Subrogation

In insurance parlance, subrogation simply means that if an insurer pays a loss that is caused by a third party that is legally liable for causing those damages, the insured assigns the right to attempt to recover those damages to the insurance company; the rights of the insured are subrogated to the insurer.

Subrogation is an issue that the insurance investigator is constantly aware of and is working with because the issue of third party liability arises frequently.

The investigator handles subrogation issues exactly the same ways as he would any case that is likely to go to litigation. That is, he becomes keenly aware of the need for his conclusion as to causation be rock-solid.

However, subrogation cases are slightly different from direct litigation cases in that subrogation is most often a claim of one insurance company against another, though it may just as well be company against an individual or other business.

A very significant percentage of apparently ordinary marine insurance claims — by that I mean perhaps five or ten percent — become subrogation cases, nicknamed Subro Claims.

Once again this points out the need for all investigations to be carried out with care.

Most subro claims are not litigated but settled between insurance companies, most of which have subrogation departments.

The claim file will go from the adjuster to some person in the Subrogation Department that processes these claims against others, a person that we rarely, if ever, hear from.

That person will then have to review and process the Subro claim based almost entirely on the investigator’s report.

This, once again, points up the need for reports to be clearly and precisely written in such a way that someone who has no first hand knowledge about it can understand and make decisions based on a single reading.